Much like with fertilizer, coal, natural gas, mining, I've built a basket of a various global infrastructure companies for the fund. In any one quarter I don't know which one will outperform the other, so hence the basket - I like all of them for the long run. That said, I am most amused by this group because these are companies that rely on very long term, large scale projects yet they are either in favor or out of favor due to the most recent earnings report (90 day period). For example, in August my top 2 positions were McDermott (MDR) and Foster Wheeler (FWLT). Like everything, they were hammered in August during the selloff but then once the sell off abated - they rallied hard. Later in the fall, Foster Wheeler had a good quarter and its stock rocketed, McDermott had a good quarter (in my eyes) but not good enough and then it's stock got punished. And people ran into some other names in the sector i.e. Chicago Bridge & Iron (CBI) or Shaw Group (SGR) while ignoring Fluor (FLR). Then in the most recent earnings round, Foster Wheeler (FWLT) was not up to the "standards" of the lemming nation and it got sold off hard [Feb 26: Adding to Foster Wheeler on Earnings Miss] even though NOTHING has changed in the long run (in fact things are getting better) but with our focus on the next 90 days and nothing else, it was punished. And people have been running into previously ignored Fluor and McDermott of late (best charts of the group) while punishing (up until 4 days ago) Chicago Bridge & Iron and Shaw Group. So a complete and utter reversal of attitude towards each company every 90 days based on what the stocks did in their most recent quarter; even though this business is built on multi year, massive projects. It is one part sort of sad, and one part amusing to see this behavior by investors, but if nothing else predictable. Anyhow, I take a basket approach because all their long term stories are excellent, but they get bashed around month by month on nothing else but the most recent numbers.
With that said, Shaw Group (SGR) has been one of the week ones the past few months, and has never regained its 50 day/200 day moving averages. It made an attempt each of the past 4 days but failed. Hence I had not rebuilt the position thinking those "in the know" knew what was coming (not that the market is skewed towards insiders or anything). Today they report solid results but lagged analysts estimates and we have a 4% sell off in the name. Did anything change in the long run? Not one iota, but until the chart condition improves this is the type of name that will just drift around. And once again, we have a chart that "told us" something was amiss - I'd say this works out about 3/4 of the time, and in the stock market anything that works to 75% accuracy is something I treasure.
- Shaw Group Inc. said Wednesday it swung to a profit in the fiscal second-quarter, as revenue rose led by sales in segments that make pipe fittings, and design and build power plants. However, Shaw missed Wall Street expectations as a one-time charge cut into one segment's profit.
- The engineering, construction and environmental contractor earned $8.9 million, or 11 cents per share, compared with a year-ago loss of $61.5 million, or 77 cents per share. Excluding the company's Westinghouse segment, which took a $40.6 million non-cash, pretax foreign exchange loss in the quarter, net income was $37.3 million, or 44 cents per share. Revenue leaped 37 percent to $1.65 billion, from $1.21 billion
- Analysts, who typically exclude one-time items, expected profit of 54 cents per share on revenue of $1.7 billion, on average, according to a poll by Thomson Financial.
- The company attributed the revenue jump to growth in its fabrication and manufacturing segment, as it continues expansion plans. Also, Shaw said its fossil and nuclear segment was helped by progress on air quality control and coal-fired power plant projects.
Long all names mentioned in fund; no personal positions
