Sunday, May 18, 2008

Earnings of Interest this Week

Yahoo Finance was a bit slow in reporting earnings dates last week so this might not be a comprehensive list. We are done with the bulk of mainstream American companies this earnings season, but this week will be dominated by Chinese fare (solar and gaming) along with dry bulk shipping. These are the names I'll be watching to learn how the real economy (not government reported economy) is faring; especially the consumer this week with a slew of retail names.

Just a note - Trina Solar (TSL) is set to report this week but has not filed a date yet - according to Investor Relations email to me, they will announce their date Monday (China time!) i.e. hopefully by this evening.

Dry bulk shippers Dryships (DRYS) and Excel Maritime Carriers (EXM) report; both of which I've owned in the past, but only a small amount of the former at this point. They have had enormous runs; simply breathtaking and my contrarian view is this is setting up very similar to fertilizer a few weeks ago - huge runs into earnings, huge expectations and a propensity for a selloff "buy the rumor, sell the news" type of reaction. With that said, the Baltic Exchange Dry Index which these stocks seem to trade in lockstep with, is booming.

In Chinese gaming we have The9 (NCTY) and recent fund addition Perfect World (PWRD). Competitor Giant Interactive (GA) reported a so - so report Friday so there is some risk here with buying a bunch of Perfect World right ahead of earnings but from my readings, and reasons I outlined in my purchase [May 15: Bookkeeping: New Position Started in Perfect World] I believe we could have a nice upside surprise. If I'm wrong, that is ok too - we'll take the short term hit as I believe this is a sector that should have some very nice secular growth ahead of it. Thankfully, I'm never wrong (cough).

On the retail side Lowe's (LOW) reports; this is yet another candidate of the "expectations are so low and hey housing will be rounding in 6 months" so you never know the outcome. This is actually a quality retailer, but again - it's one of the best houses on a very shady block.

For kicks I'll probably mock the report over at Pacific Ethanol (PEIX) - with what I envision happening to corn prices later this year, I'd use any pop to short this type of name. But the darn thing is $3 nowadays, down from $9 on Jan 1, so maybe that ship has passed.

Solar cell maker China Sunergy (CSUN) reports on this day, and normally I'd write - this is exactly the type of name where expectations are so low we could see a huge move, but with the stock up nearly 80% ($8 to $14+) in 2 weeks maybe the move already happened. But have you seen Solarfun (SOLF) lately? Yee haw. Sadly Trina Solar (TSL) is the best value of the bunch but has yet to get its obnoxious solar move upward moment yet.

Big computer maker Hewlett Packard (HPQ) reports, fresh off their announcement of purchase agreement of EDS.

The other part of the pair of home improvement retailers, Home Depot (HD) reports. Frankly I'm surprised these stocks have not rebounded more on the "everything is fine, in 6 months housing will be booming, and there is little stress in the economy - buy stocks" thinking.

Russian telecom player Mobile Telesystems (MBT); I like Vimpel a bit better [Mar 30: Time to Enter Vimpel Communications (VIP)?] but I just have concerns worldwide with telecom as competition seems to creep up very fast.

Saks (SKS), which burst out of resistance the past few sessions as part of the "those rebate checks + everything will be fine in 6 months as the economy booms in the 2nd half" trade, reports as well. While Saks is a bit more insulated by catering to the top 10-20%, I still think it's much too hopeful to be piling into these names - but then again I don't see a housing recovery until 2010+ and those stocks are still doing well.

Now a very interesting name to me is Target (TGT) - I watch this one closely because its not as low as the "pooring of America" dream play, Walmart (WMT) - so it's audience tells me a lot more about the economy than most other retailers. Target is not exactly Tiffany (TIF) but it was considered a step up over Walmart so this report will be one to watch from an economic macro point of view.

Organic food distributor United Natural Foods (UNFI) is also of interest - while it's in a different part of the supply chain than Whole Foods (WFMI) - we'll see how "healthy" distressed American consumers will be eating about 6-12 months from now in what I foresee as a deteriorating economy. Agflation is hitting even junk food, not to mention the healthy stuff.

BJs Wholesale (BJS) - a "pooring of America" beneficiary. When I start seeing stocks like this (and Walmart) sell off - THAT is when I'll say the economy will be recovering "in 6 months".

Limited Brands (LTD) - another company I only follow for the nice pictures on TV when they talk about it. Victoria's Secret is not the first place to go when one is struggling with the costs of life. Another name I'll be interested in - when I see it put a real sustained move up, then I'll know the US consumer is coming back to health. (NTES) - another Chinese gaming company

PetSmart (PETM) - we'll know things are bad if we start seeing sustained issues here - for many people their pets are like kids; so if they cut back spending on this category in their budget you know they are truly stressed.

Solarfun (SOLF) reports premarket so this might mark the end (or near end) of this leg of solar mania, with a blow off top (or sell the news) reaction.

2 retail names that have been doing well on the clothing side - Aeropostale (ARO) and Buckle (BKE) - excellent charts and these seem to be winning business from the American Eagles (AEO) and Abercrombies (ANF). However, with high stock prices and high expectations comes a lot more risk around earnings period.

An old tech holding in the fund, Blue Coat Systems (BCSI) - I still like this name, but the stock just was acting like death warmed over. As any concern on the economy perked up, this group of stocks would sell off on risk of corporate cut backs, but apparently we are now entering a new era of "everything will be fine" soon so why have the stocks not recovered all those losses? Hmm... maybe Kool Aid does not permeate all surface areas.

Dicks Sporting Goods (DKS) - while this is a Wall Street favorite this is exactly the type of product that a poorer America will have to cut back spending on. Maybe not this earnings period but over the next year, much of the growth in this name will be new store expansion; but I could see same store sales beginning to deteriorate the higher food and energy prices go.

So instead of going out and playing golf or sports that actually require exhaling at a fast rate, we will continue to sit on our behinds and play video games from Gamespot (GME). And instead of eating healthy, we'll be eating cheap - such as SPAM from our friends at Hormel (HRL). Speaking of which, we have large chicken producer Sanderson Farms (SAFM) - expect more outrage about corn ethanol and we're constantly looking for "production" cuts (which have already begun to play out) which will lead to higher prices in time.

Suntech Power (STP) - the granddaddy of Chinese solar and former fund holding reports; I have a lot of caution going into this report. While size/scale will benefit the name in the long run - it might cause duress in the near term due to the polysilicon shortages. That said, the stock has NOT moved while the rest of the sector has taken off; which you could read in 2 polar opposite ways. #1 the stock price is "telling you" something bad is coming or #2 any good news should send this stock on a rocketship ride since expectations are quite low. I'm leaning to #1, but see no reason to risk money when there are much easier short term stories in the space.

What Tiffany (TIF) is to the upper 10%, Zale (ZLC) is to the rest of us. So this name should be pressured in the year(s) to come under a "pooring of America" scenario.

Nothing of interest

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