The Dow, Cardinals Shine Again

 | Oct 28, 2011 | 10:45 AM EDT
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Although I'm not big on following the major market averages, I must admit that I was somewhat excited to see the Dow Jones Industrial Average finally close above 12,000. It was also nice to see the St. Louis Cardinals pull off a big postseason win on the very same day.

But the day I'm referring to is Oct. 19, 2006, not yesterday. On that day, the Dow closed above 12,000 for the first time and the Cardinals defeated the New York Mets in Game 7 of the National League Championship Series, advancing to the World Series against the Detroit Tigers.

On Thursday, the Dow reclaimed 12,000 for the first time since Aug. 1, and the Cardinals pulled off an 11th-inning walk-off win to force Game 7 of the World Series. It sounds like we've come full circle, but we'll see. (It looks like a lost half-decade, to me.)

What was even more exciting Thursday was the action in some of the smaller names that I follow. Arctic Cat (ACAT), a member of my JIMS CRAB FEST portfolio for cheapskates, hit it out of the park yesterday with its second-quarter results. Revenue grew 17% to $204.8 million, eclipsing consensus estimates of $195.4 million, while earnings of $1.15 per share easily beat the $1.08 consensus. Operating expenses declined 180 basis points. This little discretionary company appears to be hitting on most, if not all, cylinders. Sales of snowmobiles grew 25% compared with the same quarter last year, while ATV sales grew 4%. The balance sheet, which was already strong, continues to improve. The company ended the quarter with $96.6 million or about $5.31 per share in cash, and no debt. Shares were up nearly 20% yesterday.

As much as I've been in the double-dip recession camp, and despite some decent economic news Thursday, I'm still not convinced that it will be smooth sailing from here. But seeing a small discretionary name like Arctic Cat put up good numbers is a step in the right direction.

Force Protection (FRPT), a name that has been frustrating, showed some signs of life yesterday, rising more than 11% to close at $3.99 on no news -- though the stock has given some of that gain back this morning. Second-quarter results were ugly, and we'll see if the aerospace & defense company has gotten back on track, at least in the short term, when it reports third-quarter results next Wednesday. Consensus estimates call for revenue of $142.8 million and earnings of $0.03 per share. The company remains cash rich, with $150 million, or $2.17 per share, in cash and no debt at the end of the second quarter.

Force currently trades at just 1.1x net current asset value (NCAV) and 0.88x tangible book value. It has generated $0.74 in free cash flow per share in the trailing twelve months. Clearly, little is expected of Force and the company has lived up to the expectations of Mr. Market.

Have a great weekend, and enjoy Game 7!



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