Some people think that earnings have become irrelevant. And looking at individual companies irrelevant as well. To be sure, while I don't believe that is true, for the time being it is de facto the case. Investors are not going to care about earnings or capitalize companies appropriately until the macro problems are well in hand. And every day that goes by offers new evidence that Governments, for now at least, still have little control over the debt crisis. Even those in Government that implicitly realize this and understand the magnitude of the global meltdown do not have the means to stop the destruction. Thus, the markets are doing what Governments cannot do - systematically wiping out debt by forcing debtors to sell assets or if unable to do so, walk away.

So, before we can declare the beginning of the end...not the end, but the beginning of the end - of this bear market, several things have to happen:

Horsehead (ZINC) produces zinc metal and zinc oxide from recycled metal. The company and its predecessors have been around for a long time but emerged in a new restructured form via an IPO priced at around $18 one year ago. After a brief excursion to the mid-20's, the stock has mostly drifted lower since then. Most recently, after second quarter earnings, it got slammed particularly hard to its current level of just under $8. This looks like a severe overreaction based on my understanding of the company. To be sure, I am not a metals analyst, but a generalist. So this analysis will take a look at the financials and try to put some context on the share price.

The main reason for the lower stock price is lower prices for zinc, traded on the LME. While inventories on the LME are low, there seems to be ample supply. And the price of zinc stayed low for most of the 1990's, around 50 to 60 cents/lb, before soaring to over $2.00 in 2006. With the U.S. in recessionary conditions and lots of discussion that global economies are also headed for recession, it is easy to see the sudden emergence of gloom for all commodities.

Old news now, but Skechers (SKX) second quarter was less than stellar. It was sort of a replay of the December '07 quarter, weak top line and a miss on the bottom line. Gross margin looked great, but G&A expenses deleveraged the sales line. A positive swing in interest expense and other income boosted the eps comp by 2 cents, while a lower tax rate also modestly detracted from earnings quality. Inventories rose 31%, so shoppers better show up in Q3 or that may become a burden.

The midpoints of management guidance for the September quarter are revenues, up 9.5%, and earnings per share, up 15%. That suggests positive operating leverage, which was exceptionally good in the March quarter, will return. To be fair, the Street does not seem to do a great job of modeling earnings for the company, with the Sept '07 quarter 21% ahead of the Street, December 10% below, March 17% ahead, and then June '08 9% below consensus. Such a pattern suggests simply ignoring expectations and focusing on the trend of growth and quality of earnings. SKX has an easy comparison for the full year 2008 and coupled with compelling valuation, makes it a stock worth examining.

This is a short update of my analysis posted on June 19, 2008.

With Benchmark (BHE) trading down 22% intraday on July 24^th, the Q2 earnings report qualifies as a “blowup”.

With MEMC Electronic (WFR) getting hammered yesterday on disappointing earnings (see conference call transcript), investors are faced with the always difficult assessment of what to do with the stock. I make no claim to deep expertise on WFR, but here are some general comments on the quarter, the valuation and the stock market reaction.

Top line was about $10mm below the low end of management’s April 24^th guidance. Operational issues were the cause. Some analysts are concerned because this is the 2^nd quarter of such issues. Thus, the tendency is to extrapolate. But that is a human flaw. For a complex manufacturing process, operational problems are either indicative of poor process controls, or they are simply random events. Engineering types who follow the stock can perhaps answer this question. For now, let’s give the company the benefit of the doubt and call it random events, non-recurring glitches.

Franklin Templeton (BEN) has given back a lot of ground in recent months. Naturally asset managers decline when the overall market falls. But BEN has significantly lagged T. Rowe Price (TROW) and Blackrock (BLK). These two peers are up slightly over the last 12 months, while BEN is down over 30%. And the disparity in valuations is likewise wide, with BEN at 13.1X FY 2008, compared to 22X for TROW and 19.8X for BLK.

The immediate cause of the sell off in BEN was disappointing earnings last quarter. Yet in looking at the details, the quarter was not a disaster. Operating profit rose 4%, and the decline in eps was driven to a large extent by a tough comp on the investment income line. Average assets under management [AUM] rose 8%, and period end AUM was up 3%, to just under $600 billion. Net asset flows (sales minus redemptions) were slightly negative, but only by $6 billion. The mix of AUM deteriorated somewhat, from 60% equities last year to 56% at 3/31/08. Still, BEN has a well diversified product mix which should lend stability to operations.

Benchmark Electronics (BHE) was mentioned as a buy idea by a value fund manager last week on CNBC. This article will provide a general analysis of the stock.

Benchmark is a contract manufacturing company. This industry provides outsourced manufacturing and logistics for many large technology companies such as Hewlett Packard (HPQ), Cisco (CSCO), etc. BHE's two largest customers are Sun Micro (JAVA) and EMC (EMC).

Historically in a sector bear market, all the stocks decline together as investors fail to differentiate good from bad. Recently some signs of inefficiency have begun to creep into the bear market in regional bank stocks. The "good" are seen as bullet proof, while the bad have become unanchored from all valuation support as news flow has driven the share prices lower.

I started thinking about this several weeks ago when renowned value investor Michael Price commented in regard to Wachovia (WB) that he was not interested until the stock approached or hit tangible book value. The stock was around 24 at the time, I believe, but tangible book as of 3/31/08 balance sheet is only $13.61. WB proceeded to trade relentlessly lower and hit a low of $17.34, which is a pretty vicious decline for a stock which had already been hammered by almost 56% from its 12-month high.

Weyerhaeuser (WY) was founded as a timber/lumber enterprise. In the 1970s or thereabouts, many wood products (lumber/plywood) producers diversified as a form of integration into paper and packaging products. The reason was lumber mills produced waste material (chips, etc) which could be used in making paper pulp. Thus, WY added paper, as did Georgia Pacific, while International Paper (IP) went the other way by getting into the wood products business.

Now WY is unwinding that diversification and returning to its roots. Just guessing at the strategic rationale: the paper business is very capital intensive, does not grow much if at all, is energy intensive as well, and has pollution control costs. Also, the industry despite consolidation remains very competitive.