Great Earnings Call Info Sources

Just wanted to share a few sources that I've been using pretty frequently lately for good information on earnings releases and earnings calls.

If you're like me, it's hard to make time to listen to the conference calls of all the companies you own -- or even just the quarterly earnings calls. A financial information website that I recently encountered for the first time, 123Jump.com, publishes exerpts from earnings calls and the key takeaways from the calls, as well as all the important earnings data releases. They don't cover all companies, certainly, but they cover a lot of the ones I'm interested in.

There's no substitute for listening to the calls yourself, of course, but if you're researching a company and want to see what the issues are that have come up on their recent calls, this is a great place to go and look into that quickly and efficiently.

Another source for a lot of this information is the Seeking Alpha network of sector and country blogs -- they run the China Stock Blog, Internet Stock Blog, Biotech Stock Blog, etc., and often include excerpts from analyst reports as well as transcripts or quotes from conference calls for many of the companies they cover.

The problem with diversification is that it's hard to keep a close eye on every company you own while also doing detailed research for the additional companies you're interested in buying. These two sources, among others, help to flesh out the numbers that you can get from Yahoo Finance or the superlative charting, data and screening info at ADVFN, and the commentary and writeups you can get from the Motley Fool site and newsletters and the various business magazines.

I read them all, as much as I can ... just thought I'd share in case you're looking for something to do this weekend!

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Gooooooooooooolllll (GOL)

With apologies to Andres Cantor, who will once again reach prominence among the non-soccer faithful with the coming World Cup, I scored a little GOL this morning.

Gol Linhas Aereas Inteligentes is the full name of the company -- and it is one of the more apt names, in translation it is basically "Gol: Intelligent Airline."

It's hard to argue that any airline is more intelligent than Gol right now, or more well-suited to the current environment.

For those who didn't see what I wrote when I first mentioned Gol the other day, it is basically an amalgam of JetBlue, Southwest Airlines, RyanAir and the other successful low cost airlines -- but it's in Brazil. They are basically taking the best features of many of these budget airlines that have revolutionized western air travel and combining them into one service that is dramatically changing air travel in the largest country in South America (and soon, I hope, across all of Latin America).

Gol is still quite small and an upstart in it's home country -- they operate about 400 daily flights and have a market share of around 30% at the moment, but it's a great story. The airline was founded by the Oliveira family, which owns and operates a large intercity bus system in Brazil, and this is clearly a family that understands how to build and run a business to move a large population.

You can read quite a bit about Gol in the financial press -- there was a good article in Forbes at the end of October that's certainly worth reviewing, and there are others as well. They've definitely started to catch the world's attention with their world-beating returns, and the number of US analysts on their earnings conference call has gotten significant.

Here are the things that I like most about Gol:

They're following an established strategy, albeit one that hasn't been tried in many countries, in basically mimicking the successful low cost airlines with good service, low frills, and great prices.

They're changing the marketplace -- not content to just operate a business to serve existing customers, which in Brazil might have been profitable given the significant amount of business travel, they're bringing in people who've never flown before, putting them on their first airplane, and building a big customer base. Like the "Southwest Effect" before them, they're calling this the "Gol Effect" -- it's now cheap enough for lower and middle income Brazilians to fly when they never would have considered it before. One of the great things they're doing is flying a lot of cheap overnight flights -- using planes that would be otherwise sitting on a runway and selling much cheaper flights for those unfriendly hours, thereby bringing still more fliers into the market.

They have massive insider ownership. Regardless of their actual night flights, this is not a "fly by night" company that will try to take advantage of the hot environment for Brazilian stocks, then disappear. The founding family's company owns roughly 75% of the shares and they're trying to build a business that will stand the test of time and revolutionize South American travel.

They have huge advantages over comparable US airlines in cost control. I admit, one of the things that scared me away from Gol at first was the admonition to "never buy an airline" -- it's true, in the US with the incredibly competitive market and bankruptcies everywhere it's very risky to buy even the new breed airlines. But Gol is different. Price controls from the government through Petrobras allow them to have much lower fuel costs than most of the rest of the world. A dramatically different operating environment allows them to provide world class service at developing world salaries without nearly the legacy costs of their competitors -- so their pilots, for example, make about $35,000 a year versus over $200K at Southwest. And unlike the bankrupt Varig, the flagship airline in Brazil, they don't have the same kind of legacy costs as the US carriers. That means they can operate at a profit even while charging rock bottom ticket prices -- right now, the operating margin for Gol is 37%, which blows every other airline I've ever heard of away.

Gol CFO Richard Lark gave a Presentation last night at an airline conference. (slides from the presentation are here if you don't want the audio) -- well worth reviewing, and perhaps the best overview to look at if you dont' want to go back and review all the presentations they've given recently. If you do want to see or hear some of the other presentations they've given, such as the last quarterly report, it's all available at the Investor Relations website, which unlike some other Brazilian companies (even giant Petrobras) is very friendly to US investors and easy to navigate.

If you read any of the aviation magazines or trade journals, you'll see that everyone is oohing and ahhing over Gol -- they're the new standard bearer, taking the torch from Southwest, Jet Blue and Ryanair and building new markets for air travel through low prices, solid service, and aggressive cost cutting and management.

With investing in Gol I'm aware that I'm taking on currency risk with the recently appreciating Real, as well as political risk with the leadership scandals and just the general emerging market risks that we take on when we invest outside the established western investor world. I think it's worth it for this company, and I look forward to seeing Gol flights traversing the continent to our South (and getting into North America, too, with their likely franchised entry into the competitive low cost Mexico air market next year).

So I picked up a few shares this morning -- Bought GOL today, December 9 at $48.02 (and yes, as I type this it has already fallen a bit further. I'll be keeping an eye on it to fill out my position).

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What to buy -- Brazil? (GOL, ERJ, PBRA)

Well, thanks to the Provide Commerce buyout and to the fact that I haven't deployed any new money in a little while, I've got a cash pile that I want to invest somewhere. Where's the best place?

I've been thinking about a lot of different approaches to take with my next investment decision lately -- could be a big blue chipper to ease some of the volatility in my portfolio, and my favorites at the moment in that area are Microsoft and Citigroup. Not that exciting, but I think both are currently undervalued -- the main thing holding me back is that I don't much like investing in megacap companies as a general rule.

And I've also been thinking about leveraging my personal knowledge to look for opportunities where I might know more about the company than most. I work in higher education, and two companies that stand out there are Blackboard, especially after their acquisition of WebCT, their biggest competitor, and Reed Elsevier, the dominant scholarly publisher and owner of Lexis Nexis, among other properties. I think both are well-run companies, though I hate being an Elsevier customer, and both will grow, but I haven't looked in detail at their valuations yet.

But today I'm thinking mostly about Brazil, where a few stocks of interest lie.

I held Petrobras (PBRA) and saw a great return from it last year, and I still think it's a great, undervalued company and a great play on South American privatization, growth, and industrialization. Add in the fact that they pay a nice dividend and have significant expertise in far offshore deep water drilling, which most experts believe will become more and more critical as the "easier to find oil" onshore and near shore is tapped out, and Petrobras is my favorite oil company right now. I already made a lot of money from owning them during last year's bull run in oil, however, and I wonder whether I want to take a specific position in energy right now.

The other two Brazilian companies I like are Embraer (ERJ), which is, I believe, the third or fourth largest airplane manufacturer in the world, and Gol (GOL), which is quickly becoming the dominant South American discount airline.

Embraer I've written about before when I put it on my wish list a few months ago. I could have gotten a better price then, but it still looks like a great play on the move toward smaller and more efficient jetliners that I believe is coming. Lots of Embraer jets are already in use in the US, and I think they'll be well positioned to fill in if and when the large planes become economically unfeasible for some routes or in some market conditions (ie, with very high oil prices). The one thing I'm looking out for right now is a possible pullback, as their order book for 2006 is reportedly quite light compared to this year. If we return to the prices we saw earlier this year when ERJ was seemingly quite undiscovered, it will be very tempting to make a buy.

Oddly enough, Gol does not use Embraer Jets. They are growing incredibly rapidly after beginning life just a few years ago as the brainchild of a Brazilian bus company, and they are copying the early moves of Southwest Airlines very closely -- they fly all Boeing 737's so far to standardize training and maintenance and keep costs lower, they are doing a great job of cost containment, and they fly direct routes to where people want to go. It's smart to follow the lead of the most successful airline in the Western Hemisphere, and in doing so they have grown their traffic rates more than 50% in the last year.

But they have also moved beyond that SWA model quickly in one significant way -- they are aiming to become not just the airline of choice for Brazil, but for international and domestic flights throughout South America. They've started nearby, with Bolivian and Argentinian flights, and recent news that they're even moving into Mexico with a franchise deal has caught some attention as well (though there's plenty of low-fare competition likely in that country, for sure).

The key for me is that Gol is growing quickly and, with the limited amount of research I've done so far on South American air travel, they've got the chance to really become a dominant force given the way they've hit the ground running. So what's the downside? Well, it seems crazy to invest in any airline given the way the US fliers have performed, and they've already grown and seen their stock appreciate very quickly -- it's trading at a PE in the low 20s, which is not cheap for a Brazilian stock. Still, I like their growth and their remarkably low cost structure, and the fact that they're not very well followed here in the US -- it's definitely worth a closer look for my portfolio.

Will let you know what else I'm considering as my tired little brain steams along -- and of course, I'll let you know if I make a decision.

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Liberty gets a bargain (PRVD)

I really like Provide Commerce (PRVD), and my thinking prior to today was that after a year or so as a public company they were just starting to get a handle on how to manage the Street's expectations and provide earnings guidance that is accurate and timely. When I wrote about them at length a few months ago, and again noted some nice appreciation they had before Thanksgiving, I had plans to see this investment through for a long time.

And I thought next year might be a very good one for the Proflowers business as growth should continue at a good clip, and that we might see an opening for the Cherry Moon Farms and Uptown Prime brands to perform well, even though I still think they'll have a rough time given their entrenched competition.

But apparently the board was not quite as optimistic abou the long term opportunities for growth. Maybe they know something I don't know about how the business is shaping up, or maybe they were pressured by their majority shareholder, Javion holdings, to make a deal ... or maybe John Malone, Liberty's head, just got lucky and pulled one over on them.

Either way, Provide Commerce seems like an odd fit for the Liberty Media empire and $33.75 seems like a lousy offering price for a company on the upswing -- a mere 10% (roughly) premium to last week's share price, though I guess you could argue that rumors of a buyout propelled some of the recent gain as well. I didn't hear any such rumors, but they're usually out there.

But as a small shareholder, my vote will be meaningless given the fact that Javion holdings has committed to this deal and this price. So I sold.

I closed out my two Provide Commerce positions today, at $33.51 and $33.54.

I don't see any reason to wait for the middle of next year to close on a deal that's a few cents higher, and I'm guessing that Javion's commitment to this deal means we're unlikely to see the board squeeze a better price out of Liberty or any other possible suitor. I had no tax reasons to wait until a year was up since both these positions are in a tax-sheltered account (and one is still slightly underwater anyway).

This does somewhat reek of John Malone trying to be Barry Diller and build a little Internet empire, but frankly, with a tiny company like this squeezed in amongst some big cable properties it's hard to see the synergy. Perhaps this is the start of another buying binge of dot.com companies, which might be good for the other small independents out there, but given Interactive Corp's middling success at turning it's portfolio into a working internet business that's larger than the sum of it's parts, I'm a little surprised that Malone is making an attempt at something so far removed from his wheelhouse.

Oh, well. I broke even on one of my positions and doubled the other one in PRVD, so it works out to be a reasonably nice short term trade of less than a year ... but I was hoping for more.

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