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January 2011

Recs

5

Harley Yahoos for Beans and Bags

January 24, 2011 – Comments (1) | RELATED TICKERS: HOG , YHOO , SBUX

The earnings merry-go-round continues this week with several fan favorites set to announce. Look for analyst upgrades for many of the companies announcing earnings, after they "shatter" analyst's expectations, as well as lots of hype about how America's economy is improving.

Basis

At Wax Ink, our valuation work is based on audited or annual financial information as taken from a company's most recent SEC Form 10-K filing. Unaudited, or quarterly financial information as taken from a company's SEC Form 10-Q filing, is not used unless otherwise noted.

Caveats

Admittedly, we provide investors with information in a bit of an irreverent style. We do that so the data won't appear to be as boring as it really is.

In addition, we support our valuation considerations, with our Raw Value Worksheets. Each listed company has an associated worksheet which can be viewed, printed, or downloaded by clicking on the associated link.

This Week's Earnings Darlings

Coach, Inc. - (NYSE: COH) The company sells handbags, accessories, and other worthless stuff that consumers believe they cannot live without. The stock closed recently at $53.00, with Resistance at $55.06 and Support at $44.46. Should the stock price fall below resistance, the next stopping point would be at the 52 week low of $32.96.

Our Reasonable Value Estimate for the stock at this time is $40.00, with a Buy Target of $23.50, a First Sell Target of $46.00, and a Close Target of $48.50.00, based on a 5 year hold.

Analysts are anticipating earnings of $0.97, a 29% year over year increase.

Yahoo, Inc. - (Nasdaq: YHOO) The company provides on-line properties and services to users; and marketing services to advertisers, and prays that Google will send it some business. The stock closed recently at $15.97, with Resistance at $16.56 and Support at $15.50.

Our Reasonable Value Estimate for the stock at this time is $25.00, with a Buy Target of $15.00, a First Sell Target of $29.00, and a Close Target of $31.00, based on a 5 year hold.

Consensus earnings are listed at $(0.22) compared to year ago earnings over the same period of $(0.22).

Starbucks Corporation - (Nasdaq: SBUX) The company purchases and roasts whole coffee beans. In addition, the company brews coffee in it's retail outlets and then sells the brewed coffee to chumps like us for $5 a cup. The stock closed recently at $33.20, with Resistance at $33.72 and Support at $32.02.

Our Reasonable Value Estimate for the stock at this time is $30.00, with a Buy Target of $18.00, a First Sell Target of $35.50, and a Close Target of $37.00, based on a 5 year hold.

The garrulous gabbers of CNBC think earnings should come in at $0.39 compared to year ago earnings over the same period of $0.33.

Harley-Davidson, Inc. - (NYSE: HOG) The company produces and sells heavyweight motorcycles that for a while, every accountant, lawyer, and dentist, believed they needed to own so they could ride up and down the same 6 miles of highway in an attempt to say "look at me". The stock closed recently at $35.99, with Resistance at $37.22 and Support at $33.95.

Our Reasonable Value Estimate for the stock at this time is $35.00, with a Buy Target of $21.00, a First Sell Target of $41.00, and a Close Target of $43.00, based on a 5 year hold.

Talking head earnings estimates for the company are listed at $0.87 compared to year ago earnings over the same period of $0.91.

Final Thoughts

Eventually, the spin coming from Wall Street, the White House, and The Wall Street Journal, about the economy, the markets, and the weather, may actually come true.

Personally we don't believe it will, but the law of averages being what they are, not to mention computerized trading platforms, well who knows. It could happen.

Until it does, we want to remind everyone of two things. First, companies are buying iPads, and second, Oprah Winfrey has a family secret. Now if that isn't groundbreaking investing news, we don't know what it is.


Wax

Disclaimer

We have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. We receive no compensation to write about any specific stock, sector or them  [more]

Recs

5

Tuba Ted Buys an Apple

January 17, 2011 – Comments (1) | RELATED TICKERS: AAPL , GOOGL , NFLX

Earnings reports continue this week, with several notable companies reporting. We call them notable for a couple of reasons.

First they are notable, at least to us, because their current price levels far exceed their ability to create viable investments returns. In other words, they are just to expensive.

The other thing that makes them notable is that investors are simply unable to resist owning them. They tell their co-workers they own them just so they can watch their reactions.

Never mind that the word notable has really become the words not able, as in not able to make a penny owning these stocks because they over paid for them. That's just a mere formality. No sir they own the big Kahunas and that's that.

In the past when we have mentioned that an investment in these notable stocks may not be a wise choice, mainly because of their high prices, it was as if we had desecrated the Wall Street Bull.

Not surprisingly when we have been less than enthusiastic about the prices being paid for some of these companies, we discover new found authorities that will argue almost vehemently that our valuations are ridiculously conservative, while offering nothing to support their valuation positions.

It seems that last time some flap developed it was over our valuation of Netflix, Inc. (Nasdaq: NFLX) What surprised us the most was the number of number of comments we received from the newsletter analysts.

We aren't exactly sure why, but the newsletter analysts remind us of television evangelists. While the information the produce may indeed be of some benefit to the true believer, the greater benefit it seems to us, is for the producer of the information.

At any rate, since we do not produce a newsletter, we were a bit surprised when the newsletter analysts also commented that we were clueless boobs that had no idea what we were talking about.

After all these were notable companies and as such, worthy of investment. We tried to point out that we were valuing the entire business, not just the company's most recent earnings, and that at current price levels we felt they were quite a poor investment, but the newsletter evangelists were not real interested in what we had to say.

Finally we decided that although we didn't produce a newsletter, we did produce an investment worksheet, which from a risk capital perspective was probably more valuable than a newsletter, something we will never know since most people that loose money with an investment never want to admit that their only research was to read a newsletter, or ask a cabbie.

Basis

At Wax Ink, our valuation work is based on audited or annual financial information as taken from a company's most recent SEC Form 10-K filing. Unaudited, or quarterly financial information as taken from a company's SEC Form 10-Q filing, is not used unless otherwise noted.

This Week's Notable Companies

Fastenal Company - (Nasdaq: FAST) The company sells industrial and commercial construction supplies at wholesale from approximately 2400 stores located throughout North America, Europe, and Asia. The stock closed recently at $59.89, with Resistance at $61.53 and Support at $56.76.

Our Reasonable Value Estimate for the stock at this time is $34.00, with a Buy Target of $20.50, a First Sell Target of $40.00, and a Close Target of $42.00, based on a 5 year hold.

Consensus earnings scheduled to be announced on Tuesday are listed at $0.45 compared to year ago earnings over the same period of $0.30.

***

Apple, Inc. - (Nasdaq: AAPL) The company designs, manufactures and markets a range of personal computers, mobile communication and media devices, and portable digital music players. The company also develops and markets software. The stock closed recently at $348.48, with Resistance at $348.48 and Support at $320.84.

Our Reasonable Value Estimate for the stock at this time is $100.00, with a Buy Target of $60.00, a First Sell Target of $117.00, and a Close Target of $123.00, based on a 5 year hold.

Consensus earnings scheduled to be announced on Tuesday are listed at $5.31 compared to year ago earnings over the same period of $3.67.

***

Amphenol Corporation - (NYSE: APH) The company is a designer, manufacturer and marketer of electrical, electronic and fiber optic connectors, interconnect systems, and coaxial and high-speed specialty cable. The stock closed recently at $52.56, with Resistance at $54.07 and Support at $52.08.

Our Reasonable Value Estimate for the stock at this time is $36.26, with a Buy Target of $22.00, a First Sell Target of $42.50, and a Close Target of $45.00, based on a 5 year hold.

Consensus earnings scheduled to be announced on Wednesday are listed at $0.73 compared to year ago earnings over the same period of $0.52.

***

Google, Inc. - (Nasdaq: GOOG) The company maintains an index of Websites and other on-line content, and makes this information freely available through its search engine to anyone with an Internet connection, generating revenue primarily through advertising. The stock closed recently at $624.18, with Resistance at $630.85 and Support at $598.70.

Our Reasonable Value Estimate for the stock at this time is $126.00, with a Buy Target of $75.00, a First Sell Target of $147.00, and a Close Target of $155.00, based on a 5 year hold.

Consensus earnings scheduled to be announced on Thursday are listed at $8.06 compared to year ago earnings over the same period of $6.79.

Final Thoughts

Our goal continues to be what it has always been, to provide reasonable valuation information for the average working class investor in hopes that they will use the information to create a baseline for their own investment research.

What we are not interested in becoming are investment pundits, soothsayers, scuba divers, or tuba players on parade, just as we are not interested in becoming mango farmers, learning to speak a foreign language, putting lipstick on a pig, or that Brittany Spears' doesn't wear underwear.

Over the last several weeks, the stock market has factored in to current prices all sorts of hopeful information. And as has happened in the past, many investors, afraid they are missing the next big rally, are jumping into the market with no understanding of what they are buying or what they intend these investments to do for their portfolio.

Certainly we wonder how many of the investments these folks are buying will become 10 baggers, just as we wonder if the yellow brick road really lead to Oz.

Wax  [more]

Recs

6

Alcoa, Intel and Lemmings on Parade

January 10, 2011 – Comments (2) | RELATED TICKERS: AA , INTC , SNX

For some reason, we have been getting quite a few requests for valuation worksheets that center on companies about to release earnings. Maybe just ahead of earnings is the right time to begin researching a stock, who's to know?

At Wax Ink, we seldom pay much attention to earnings announcements, basically because while important, the earnings that are announced are for the most part not audited, and therefore subject to adjustment. And because they are subject to adjustment, we simply don't believe we should use them in our valuation work.

So while we maintain a very lengthy watch list, we simply cannot maintain current investment research or stock valuations for all of the 2500+ stocks in our investment universe.

Which is why last week when we were asked to build worksheets for several companies, were pleasantly surprised to find that two of the requests were for companies we knew nothing about.

Basis

Our valuation work is based on audited financial information as taken from a company's most recent SEC Form 10-K filing. Quarterly financial information is not used unless otherwise noted.

The Companies

Alcoa, Inc. (NYSE: AA) The company manufactures aluminum products for use in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and industrial applications. Management recently announced that it was restarting three of its idled smelters, and adding 260 jobs.

The stock closed recently at $16.42 with resistance at $17.60 and support at $14.05. Our Reasonable Value Estimate for the stock at this time is $15.00, with a Buy Target of $8.50, a First Sell Target of $17.00 and a Close Target of $18.00. Earnings are slated to be announced next week with consensus earnings estimates pegged at $0.19 compared to one year ago earnings of $0.01.

Synnex Corporation (NYSE: SNX)The company is a business process services company, serving resellers, retailers and original equipment manufacturers worldwide, providing services in IT distribution, supply chain management, contract assembly and global business services. The company recently announced an agreement with Symantec Corporation (Nasdaq: SYMC) for distribution of Symantec's storage and security products in North America.

The stock closed recently at $31.82 with resistance at $32.66 and support at $30.20. Our Reasonable Value Estimate for the stock at this time is $53.00, with a Buy Target of $32.00, a First Sell Target of $63.00 and a Close Target of $66.00. Earnings are slated to be announced next week with consensus earnings estimates pegged at $0.96 compared to one year ago earnings of $0.87.

CLARCOR, Inc. (NYSE: CLC) The company is a diversified marketer and manufacturer of mobile, industrial and environmental filtration products and consumer and industrial packaging products sold in domestic and international markets. Management has recently announced an increase in its annual dividend of almost 8%, from $0.39 to $0.42.

The stock closed recently at $43.19 with resistance at $44.55 and support at $41.73. Our Reasonable Value Estimate for the stock at this time is $37.00, with a Buy Target of $23.00, a First Sell Target of $44.00 and a Close Target of $46.00. The company is scheduled to announce earnings next week. Consensus earnings estimates are $0.56, compared to one year ago earnings of $0.49.

Intel Corporation (Nasdaq: INTC) The company is a diversified designer and manufacturer of the essential technologies that serve as the foundation for the world’s computing devices. Management recently announced, well...absolutely nothing.

The stock closed recently at $20.66 with resistance at $20.80 and support at $17.60. Our Reasonable Value Estimate for the stock at this time is $31.00, with a Buy Target of $18.50, a First Sell Target of $36.50 and a Close Target of $38.50.The company is scheduled to announce earnings next week with consensus estimates at $0.53, compared to one year ago earnings of $0.40.

Final Thoughts

As we noted, of late there have been more frequent requests for worksheets just ahead of earnings announcements.

Certainly we hope that the investors and investment managers that purchase our worksheets use them wisely and as we intend them to be used, which is as a basis for additional research.

But for those that couple our value estimates with earnings estimates in hopes of making a very short-term gain, we offer something we learned about the markets a very long time ago.

While the stock PRICE may always be fairly valued, the stock VALUE may not always be fairly priced.

Wax  [more]

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