The Great Earnings Roller Coaster Is Here Again: AAPL, BKE, PCP, VALE

The technicals started to break down three weeks ago. Now the "panic" has begun to set in (nightmares of early March - do we revisit those lows?) Now, everyone has decided what was great in early June is surely going bankrupt. We're seeing a run to Treasuries (oh, those wonderful safe yields. Would anyone really like to hold 20 year Treasuries to maturity at those rates?).

Away from gold (it's delation fears again).

And the dreaded VIX is back!

Before you throw out everything out the window, earning's season is here and it's not going to be all bad. In fact, in many instances, quite good.

To name a few:

1. Precision Castparts (PCP). Sits in a dog of a sector and yet despite that has performed superbly as a company. It has expanded its margins come what may. Boeing (BA) strike - no problem, great earnings. "Great Recession" - takes market share. Its weaker competitors -- AA (the engineering and products division), LDSH, HAYN -- had miserable quarters with operating margins in the gutter (12.3%, 3.1%, -38% respectively). PCP put together a 24.67% operating margin. Same businesses, same economy, totally different management. Reminiscent of Apple vs Dell or Google vs Yahoo.

2. The Buckle (BKE). Hides in the retail sector. The stock was "discovered" briefly for about a month with glowing articles in the Wall Street Journal, etc. and then forgotten. Yet, the facts are the facts. When retailers lost business month after month with same store sales down 7 to 25%, BKE consistently has maintained double digit same store sale's increases as far back as I can remember. The thing keeps adding stores, manages inventory, and it hasn't even touched the Northeast (except for one western N.Y. store). No one has heard of BKE in the Northeast. Has any one on Wall Street ever been inside a store? The fast money exited the stock. Look forward to good things here: in two quarters, probably another dividend bump and next year, who knows, another special $3 dividend. But, the fast boys are leaving; they didn't know why they were in and now they're bailing. A very nice long story for any one with more than a two second time horizon.

3. Apple (AAPL). I can't believe I'm saying it. EPS are not going to be so hot. But who cares? EPS doesn't matter. IPhones with their 24 month subscription accounting will barely create a blip on the EPS monitor and that's where the growth of AAPL is. All those iPhone sales get turned into cash anyway. You'll see it in the non-GAAP earnings and Apple's Fort Knox cash generation. We've also started to see non-GAAP earnings forecasts out of the analysts which is a good sign although they're all way too low. That's a nice trend; after all, the non-GAAP earnings are the key, forget the GAAP ones. Apple: building a technological and banking ($) empire in a depression. Can it be done? Right before your eyes.

4. Vale (VALE). All that iron that went to China. China hired every Cape out there and strip mined Brazil. Sure, that's pausing (briefly). After all, you couldn't fit any more iron in the Chinese ports without changing the Earth's magnetic fields. But it happened this quarter. 55 million tons imported for May alone and Vale gets a 26.3% share of that. The ADRs should get a nice boost from the strengthened real. And the "left for dead" nickel market has come back. Vale is putting its capex into logistics (short for Capes to haul its ore to Asia), another plus for the company. (And, don't laugh, I meant what I said about iron and the magnetic fields; we saw that very thing with global warming. Man changed the weather patterns, so it's now so hot in the Northeast that we haven't seen a snow flake in 5 years - I wish Congress would move quickly on cap and trade, don't you? It's once again been the hottest driest Spring Summer on record.)

So, PCP, BKE, AAPL, and VALE, to name a few. Guys, the market is going down. They're tossing everything out. And, it's going to get ugly. But those quarterly reports are going to be rather good. The ugliness is not going to last. The sellers will soon be buying. My guess is the sellers are drooling to buy the same shares at lower prices. The hot money is just moving again. I would buy these names as the carnage slows because their long stories are extraordinary. After all, in the end, the fundamentals really do matter.

Comments

[Ted Hurlbut:]

The fundamentals do matter, and there's a lot that a lot of retailers, large and small, can learn from The Buckle.

Jul 08 09:54 PM