Despite our index ambivalence, we are still having a pretty good year with names like Whirlpool (WHR) [Strong Buy], Harsco (HSC) [Strong Buy], and Schering Plough (SGP) [Market Perform] up substantially. And last week another one of our holdings came to life when Chesapeake Energy (CHK) [Strong Buy] reported its quarterly numbers. As with Schering Plough, we have used Chesapeake’s convertible preferred in the investment account, because we like dividends. Consistent with our re-balancing strategy, however, we are selling partial positions in these names to keep their portfolio weightings in-line with the portfolio’s original objectives. For example, if you bought 1000 shares of Chesapeake’s convert around $90, where it was yielding 5%, the idea of selling 300 or 400 shares at $103 makes portfolio sense to us.
Two other of our investment account companies reported last week. Covanta (CVA) [Outperform] reported an in-line quarter, yet revenues were better than anticipated. Covanta’s story continues to hinge on free cash flow generation and the earnings leverage it provides for debt paydowns and/or numerous, likely-more-accretive growth opportunities, both domestically and abroad. One that has not worked for us has been Intermec (IN) [Outperform], which reported a really ugly quarter last week, yet the shares didn’t really go down in price. We take that as a pretty positive sign, and continue to invest and trade accordingly.