By Larry Gellar
With big ETFs like DIA, QQQ, and SPY down over 2% Friday, Sept. 2, investors were scrambling to find stocks not being punished by U.S. economic concerns. Here are 5 stocks that defied the odds and went up on Friday:
Finisar Corp. (FNSR) was up nearly 9% on Friday, as the stock beat expectations for its Q1 earnings. Revenues were in line with estimates though, so the earnings beat was due to decreased costs. This caught the attention of at least one brokerage firm, which upgraded the company as a result. Finisar’s revenue estimates for the current quarter were also better than expected, although earnings should be about where analysts projected them. Many analysts have also confirmed the stock as a buy, noting its growth potential and improving margins. In particular, the company’s business in China should start to do better.
Other companies that Finisar competes with are Avago Technologies (AVGO), JDS Uniphase (JDSU), and Opnext (OPXT). Finisar is about in the middle for price-to-earnings ratio, although OPXT has actually had negative trailing-twelve-month earnings. Price/earnings-to-growth for FNSR is low at 0.72. Margins as well as year-over-year quarterly revenue growth are about average for FNSR. As for cash flows, FNSR brought in $107.74 million for the 12 months ended April 30. Further issuance of stock is one way the company has brought in cash, despite losing a good chunk of it due to investing activities.
Eastman Kodak Company (EK) was up over 4% Friday, including significant action in after-hours trading. Although nothing official has been announced yet, rumors abound that the company is about to sell a number of its highly coveted patents. (Note that Eastman Kodak is already in a couple of big legal battles to collect royalties for these patents). Some investors are even speculating that Apple (AAPL), Hewlett-Packard (HPQ), or Samsung (GM:SSNLF) will buy the company outright. With a market cap of under $1 billion, the company is much cheaper than it was when the stock traded at over $90 per share.
Eastman Kodak has also been in the news for the Easyshare Touch M5370 it’s going to allow HSN to sell exclusively. Many consumers have been impressed with this product, which allows users to take high-quality pictures and record high-quality video. These days, Eastman Kodak’s two biggest competitors are probably Canon (CAJ) and Sony (SNE). Eastman Kodak’s price-to-sales ratio is significantly cheaper than these two other companies, most likely due to the fact that the company has been struggling to turn a profit. Trailing-twelve-month income is -$1.06 billion. Margins are pretty poor, with operating margin at -5.29% and gross margin at 18.51%.
Liz Claiborne (LIZ) was up over 9% in Friday’s regular trading hours but fell a bit after that. The big news here was Liz Claiborne’s sale of Mexx to a private equity group. This will help reduce LIZ’s debt, and the company will still have a small stake in the underperforming division. Considering LIZ hasn’t turned a profit since 2006, this was a wise move to try to get the company back on track. The company has also been involved in a host of cost-cutting moves (described here), including the shutting down of distribution centers in the U.S. in favor of having Li & Fung Ltd. distribute the company’s products from now on. LIZ also sold a variety of trademarks to Elizabeth Arden, including the one for its Curve perfume.
LIZ’s trailing-twelve-month earnings is -$259.49 million, giving the stock a negative price-to-earnings and price/earnings-to-growth, but price-to-sales is still interesting. That number is 0.20, lower than competitors like Benetton Group (OTC:BNGPY), The Jones Group (JNY) and Ralph Lauren (RL). Gross margin is actually pretty good at 51.41%, but operating margin is a dismal -3.28%. As for cash flows, $2.34 million came in for 2010, and $3.97 million came in for the first half of 2011.
Electronic Arts Inc. (ERTS) was up during Friday’s regular trading hours, but just barely. The stock has a number of technical indicators on the rise now, described here. Importantly, recent trends in options trading and short interest could send ERTS higher. As far as actual company developments go, investors have a lot to be excited about. Sims Social is giving Zynga a run for its money in the Facebook market, and the latest version of Madden is expected to have strong sales. Electronic Arts also announced that it would release a free version of Tetris for the mobile operating system Android, and we expect that this will increase EA’s exposure to an even higher level. In fact, the company already has a free version of Scrabble out for Android.
Not all is rosy for the video game maker though, as trailing-twelve-month income is -$151 million. Electronic Arts’ price-to-sales is about average for this industry at 1.92. Note that competitors like Activision Blizzard (ATVI) and Take-Two Interactive (TTWO) have price to sales ratios of 2.77 and 1.01 respectively. ERTS’s gross margin beats both of those companies at 59.79%, although operating margin is weak at -0.61%. Cash flows have been mixed with $306 million coming in for the fiscal year ended March 31, but $406 million flowed out in the 3 months after that.
Southern Company (SO) was up a bit on Friday, as the safety of a public utility may have caught some investors’ attention. In fact, a dividend yield of 4.6% is one thing that SO shareholders love. As a big player in the Southeast United States, SO has some serious growth potential. The company also does more than just electricity, which is a bonus. Additionally, unlike many other utilities, Southern is using organic growth to improve the business. There has also been talk at Southern about moving away from coal, and the company seems well-prepared to make such a transition.
Note that with a beta of 0.28, SO is an extremely defensive stock. Similar companies to Southern include CenterPoint (CNP), Entergy (ETR), and NextEra (NEE). With a price-to-earnings ratio of 17.51 and price-to-sales ratio of 2, Southern is the most expensive using both of those measures. Price/earnings to growth is more reasonable at 2.69. Operating margin at 22.24% is strong and gross margin of 36.65% is also pretty good. Cash flows have been negative though: $243 million streamed out in 2010, and $10 million streamed out in the first half of 2011. Keep in mind that capital expenditures have played a big role in this.