Earnings season began with a dud, and the talking heads continue to discuss how the quarter is going to be a disappointment for investors. It is what it is but investors can take charge of the situation and invest in companies which are growing on both the top and bottom lines. That is what we have tried to do with our portfolio, especially with our commodities plays. There are some really good names out there providing growth exposure, from small caps to even some blue chip names - one just needs to know where to look. Today investors need to pay attention to the jobs numbers as those have the potential to move the market in a strong way (biggest data set out today).
We have economic news out today, it is as follows (data set - consensus).
Initial Claims - 370K
Continuing Claims - 3275K
Trade Balance - -$43.8B
Export Prices ex-ag. - N/A
Import Prices ex-oil - N/A
Crude Inventories - N/A
Looking at Asian markets we see markets are mostly lower:
All Ordinaries - down 0.15%
Shanghai Composite - down0.81%
Nikkei 225 - down 0.58%
NZSE 50 - down 0.12%
Seoul Composite - down 0.78%
In Europe markets are higher:
CAC 40 - up 0.35%
DAX - up 0.72%
FTSE 100 - up 0.36%
OSE - up 0.23%
OCZ Technology Group (OCZ) reported yesterday that they would have a large loss for the quarter but that they did not have their financials available due to an issue with customer rebates. Accounting issues are never a good thing, but the new CEO they hired (from their board of directors) indicates to us that the company is going to be for sale once the accounting issue is resolved. We are not playing this for a takeover, simply stating what we think the plan is moving forward. With the shares falling $1.27 (40.32%) and closing at $1.88/share yesterday, it is obvious that we were too early in our move from being a bear to a bull. It happens from time to time, but the only thing we can do is learn from our mistakes and work on improving the execution in the future. Since this is a long-term investment in the retirement account we did not sell off the small position we had.
Investors pushed shares of Sirius XM (SIRI) higher by $0.12 (4.56%) to finish at $2.75/share with volume coming in at 224.2 million shares after the company announced that they added over 100,000 more net subscribers than the Street's consensus. It was an impressive number and the share price action indicates just how much the market liked the news. The company also raised their full year estimates for net additions of subscribers and indicated that auto sales were powering results higher. This has been a great stock for investors this year, especially for those who were buying in the $1.80/share range.
True Religion (TRLG) saw shares rise by $4.70 (22.37%) and close at $25.71/share after it was revealed that the company had hired advisors to look into selling the company. Volume came in at about 15x the three month daily average. So far this year the shares have been underperformers and before the news shares were trading very near their 52-week low, but a sale would provide investors trapped here with a decent exit strategy, although we do not believe in playing takeover stories as we have stated numerous times. It will be interesting to see if there are any interested parties and at what multiples because there are quite a few retailers who have hired advisors to look into finding buyers but no takers so far.
One of our favorite restaurant plays, YUM! Brands (YUM), rewarded investors who have stuck with it as shares closed at $70.99/share after rising by $5.28 (8.04%) on volume of 18.9 million shares. The company is going to increase its overseas expansion and likes what they are seeing in China right now, contrary to what many here in the US have to say about the growth there. Taco Bell continues to be a bright spot for the company and when we drive by the locations in our area there is always a line in the drive thru no matter what time of day it is. It is mind boggling how the company has turned around the fortunes there, as we can remember a time when these same Taco Bell locations were always empty! Look for this one to continue the outperformance of the past few years on the back of international growth and more efficient capital allocation within the overall business plan.
We have noticed that shares in Arena Pharmaceuticals (ARNA) have been trending higher from the $8/share area over the past few trading sessions. Yesterday saw shares rise by $0.31 (3.45%) to close at $9.30/share and with that close we are getting very near our $10/share level where we think shares build a base. We would like to see it hold that level and then build towards $15/share into the end of the year as news flow picks up. Volume has slowed here, with 13.3 million shares trading yesterday, but the diet pill biotechs are still favorites of the day trader crowd. Look for news flow to increase and to see positive news coming out regarding the company's prospects moving forward.