A few of my all-time favorite stocks are reporting Tuesday: Colfax (CFX) and Xylem (XYL).
I long for Colfax's earnings release. It always has something for everyone. You can see the Colfax Business System in full display, with the dream to become the next Danaher (DHR). This excited the momentum crowd for too long as the stock reached a peak of near $80 in 2014. Since then, the company hasn't been able to string together any growth and has been wrought with restructuring charges and management changes. The story will return to some future grace once the emerging market dog stops wagging Colfax's tail, but that time is not now. I'll be watching for progress on margins in its ESAB global welding segment and observing any market share shifts in its energy-related businesses at its Howden subsidiaries.
Xylem, on the other hand, has solid secular growth and a coherent margin expansion story. This is a compounder, with solid positions in the global water infrastructure market. The stock looks a bit stretched for new money, but I'd hold what I own.
Big 5 Sporting Goods (BGFV) is reporting. I have no view of the quarter, but really want to get this out there. I'm of two minds. Sports Authority is closing all 450 stores nationwide. Amazon is crushing it. Big 5 is getting slaughtered, too. But remember when Circuit City went under? Everyone, I mean everyone, went to Best Buy (BBY). Will the same be true of BGFV and its much bigger brother Dick's Sporting Goods (DKS)? Time will tell. But sad am I driving in between metropolitan areas with vacant strip malls hugging the road, hands out begging for the next big Bezos thing to drive by and save them. Flea Markets? Oh yeah, Etsy (ETSY) is reporting, too.
Some small-caps in industrial technology are reporting today. KEMET (KEM), Vishay Intertechnology (VSH), Maxwell Technology (MXWL) and CTS (CTS). I like Vishay's balance sheet. I like Maxwell's secular growth story in ultra-capacitor power sources, but hate its Chinese mass transit exposure. CTS is an acquisition candidate if I've ever seen one and KEMET is still figuring out how to get its tantalum out of the Congo. Always a delicious dog's breakfast!
Will be watching the earnings for Cummins (CMI) and Emerson (EMR), as well as Westlake (WLK), Valero (VLO), Pfizer (PFE) and Vulcan Materials (VMC). I can't imagine anything exciting will happen at Cummins and Emerson as everything has been so heavily previewed over the past two weeks. Valero's margins are wide and that's exactly the time you consider trimming some. Vulcan is riding the non-residential fervor and pricing seems tight in concrete for the moment.
I'm watching Pfizer because I want to buy some for my kids in their dividend reinvestment plan for long-term compounding of that dividend. Not sure I'll get my entry this week, but may nibble anyway.
And last but not least, Westlake is in a proxy battle to acquire Axiall (AXLL), which is reporting on Thursday. For Axiall to stave off the super-smart Chao clan from here, it better put up some fine a-- numbers. Westlake will be too classy to comment ahead of time.
May 2, 2015 | 06:45 AM ET
Earnings on Deck for Monday, May 2, 2016
Expect cheers, tears, and too much volatility.
Many mid and small-cap stocks take center stage for first-quarter earnings reports this week. As usual, there will be cheers, tears, and too much volatility. Every Sunday during earnings season I prepare my scorecard for the coming week. I also look to my farm team and observe any extremes. With my risk/reward ranges set, I could be set into action. Here are a few I will be observing today.
Texas Roadhouse (TXRH) and Beacon Roofing Supply (BECN) report after the close. TXRI and BECN are in the nosebleeds at the moment from a valuation perspective; looking at the drubbing Buffalo Wild Wings (BWLD) and Owens Corning (OC) took last week, I would probably take the short side of both of these. If I were long, I'd certainly trim. You did well. Life's too short.
Cognex Corporation (CGNX) also reports today. This company has a cash hoard the size of one of Freeport's (FCX) copper mines, and I am very surprised that activists haven't taken notice yet. The company's superior margins and long-term organic growth profile are attractive, but it's still tough to buy at greater than 30x earnings with down earnings expected this year. There is a dearth of larger customers causing a near-term comparison issue for top line growth, and the investment community is likely looking into 2017 and 2018 for any glimmer of acceleration. That light that you see at the end of the tunnel could be a train coming at you. But goodness, that cash pile... and those Cognoids...
Some honorable mention for some value dogs, Rayonier Advanced Materials (RYAM) and MRC Global (MRC) reporting today. Last summer, Rayonier Advanced Materials got into a scuffle with its largest customer, Eastman Chemical (EMN) as stockpiles of the cellulosic material RYAM produces are building up uncomfortably in China. It is one of those levered spinoffs (spun out of Rayonier (RYN), a timber REIT) in 2014. The company's got an axe to grind and a decent margin and free cash flow to prove it deserves to be independent. The pricing cycles are tough and the environment is competitive, although there are only a few of these folks globally that can make these fibers well. It is, however, a great trading vehicle, despite my difficulty in constructing longer-term imagination for this company's growth profile.
MRC Global (MRC), an energy equipment distributor, is in the doldrums from a cycle perspective. Rumors all over the place are calling for this company to combine with NOW Inc. (DNOW). NOW is the equipment distribution spin-out of National Oilwell Varco (NOV). I'm watching for any clues, but in the meantime, I will be counting the free cash flow as these distributors squeeze down their working capital to basically nothing.
May 2, 2016 | 06:00 AM EDT
An Introduction to My Investment Philosophy
- The savvy individual is at a material advantage in the market.
Hi, I am James Gentile (/Jen-ti-lē/). Nice to meet you. I am the latest and greatest contributor to Real Money. Watch me as I curiously meander through the stock market and life, with a patient and sometimes hawk eye for unique and money-making stock ideas
Investing is cumulative and complicated. My goal is to simplify, educate, demystify and ruminate while taking you along on a journey through investing, education and self-improvement. There will be a little narcissism, humor and philosophy as well. This is commentary from a man that has spent his adult life researching and investing in companies during perhaps one of the most volatile periods in history.
My research career began on June 5, 2000, shortly after graduating from Boston College, as a 21-year old associate analyst at T. Rowe Price during the turbulent aftermath of the technology bubble. After this terrific education in Baltimore, among some of the best investing talent in the world, I decided to return to New York to research undiscovered small- and mid-cap companies on the sell side. My reputation and career flourished in the seven years I was on the sell-side; so much so that I was fortunate enough to join a startup hedge fund in 2007 with a group of smart folks. This hedge fund was quite popular during the financial crisis as we showed positive risk-adjusted returns in both 2008 and 2009. Assets, as a result, ballooned into the billions. It was fun!
Most recently, I co-founded an investment company, Greenhouse Funds LP, with a mentor from T. Rowe Price that I met years earlier. Seeking a change of scenery and a breath of fresh air, I have taken on this project with Jim Cramer & Co., enabling me to stick with two of my bigger passions: stock picking and education. I also really enjoy yoga, baseball, cooking, scotch, literature and, most importantly, being as good a Dad as possible. I'm preparing fresh Chicken Parmigiana right now.
From me, you can expect investment and trading ideas on both the long and short side for U.S. stocks. In addition, thesis updates with risk/reward ranges and disciplined trading activity on each investment will be provided. I will keep it simple, patient and transparent. There will be no fancy options strategies, just good, old-fashioned alpha-generating stock ideas. There will also be commentary considered for my farm team, which comprises ideas that are being queued up for action when the timing feels right. From time to time, as well, there will be macro commentary along with inevitable expressions of elation, frustration, curiosity and confusion.
I will combine my cumulative knowledge of the fundamentals of many industrial, consumer, services and technology companies with simple technical analysis, money-making setups and tactical trading suggestions. My investing regular-time horizon is generally beyond a year. By short term, I intend a three-to-18 month perspective, unless articulated otherwise. I will do my best to communicate time horizons as investments are initiated and trading plans progress. From time to time, we will discuss more near-term (up to three months) opportunities as they arise. These could morph into investments over time.
After all, in its purest form, buying free cash flow growth at a good price that is allocated by good stewards in the hope for long-term compounding is our ultimate goal.
I very much believe the savvy individual is at a material advantage in the market. Group think among the herd has never been more present than in the current investing environment, in my opinion. Also, the parabolic escalation of algorithms, quants and performance-chasing is perpetuating extreme market environments. There is an illogical amount of low-conviction capital chasing after a shrinking pool of equity investments. This is good news for us. It allows for excellent opportunities to generate alpha for us, over time, and with patience.
My goals are simple: to make money, in complete transparency, with fun and productive interaction in the process. When we make a mistake, you will know why and how, in very short order. Those happen too.
Look forward to working with you all!