Buy Polypore International (PPO)

I’m adding shares of Polypore International (PPO) to my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ today.

Shares of Polypore International got hammered by the scare about the danger of fire in the batteries of General Motors’s (GM) Chevy Volt.

That’s totally understandable. Ion exchange membranes for lithium batteries used in portable electronics and electric-drive vehicles make up about 24% of the company’s sales over the last four quarters. (Separators for traditional lead batteries make up about 50% of sales.) And separators for electric cars are by far the biggest opportunity ahead of Polypore International. The company estimates that an increase in the electric car share of the global vehicles market to 5% from less than 3% today would double the demand for ion exchange membranes for lithium batteries.

Anything that threatens to slow that growth rate is therefore a big deal for Polypore International. And the news at the end of November that the National Highway Traffic Safety Administration had launched an investigation into battery fires in the Chevy Volt certainly qualified as big news. Shares of Polypore International, which hadn’t exactly been tearing up the track anyway, fell from $51.95 on November 28 to a low of $43.18 on January 4, 2012.

But in recent days the shares have rallied back to $52.32 as of 2:00 p.m. New York time today, January 12, and in the process have moved back above their 50-day moving average. Next resistance is at $52.85 (the 200-day moving average) and then $55 (the gap in late November.)

So what’s happened to turn the shares around? Read more

I’ve often said that you can’t judge a portfolio until you see how it does in both a roaring bull and a raging bear.

Did the market gods have to give me my wish?

My long-term portfolio, the Jubak Picks 50, has done just fine in bull markets. Based on my book The Jubak Picks and started on December 30, 2008, the portfolio http://jubakpicks.com/jubak-picks-50/ gained 57.8% in the bull year of 2009. (You’ll remember that the stock market bottomed in March 2009.) And it did okay in 2010, too, gaining 20.1% that year. In those each of those two years the portfolio beat the Standard & Poor’s 500 Stock Index hands down: The S&P 500 gained 26.5% in 2009 and 15.01% in 2010.

Then came the bear market test of 2011. The portfolio lost 18.59% last year. That’s against a 2.11% gain for the S&P 500.

For the three years, the Jubak Picks 50 was up 54.3%. That’s against a gain of 48.5% for the S&P 500.

That’s an extra 5.8% for the Jubak Picks 50 over the S&P 500. (Yes, the actual advantage would be lower since the Jubak Picks 50 incurs trading costs that an S&P 500 index wouldn’t. But I’m only doing 10 trades a year so, in these days of $10 trades (or less), we’re not talking about a lot of commissions costs.)

Is this a good or a bad result? Read more

Bond yields drop for Italy and Spain but Greece moves ever closer to leaving the euro

Spain and Italy stepped back from the brink today but Greece moved closer to the edge. (Which, of course, means that Spain and Italy moved closer to the edge too, I think.)

Just another day at the office in the euro debt crisis.

Good news first. Spain sold twice as many bonds at auction today than it had targeted and at a much-improved rate. The country sold $13 billion in bonds and the three-year note priced to yield 3.384%.  At the December auction the notes priced to yield 5.187%. (Just for reference and so we don’t get carried away a five-year U.S. Treasury yields 0.82%.)

Italy did even better on the yield front at its auction. The country sold $15 billion in bills. The yield on the one-year bill was just 2.735%. On December 12 the bills of this maturity were priced to yield 5.952%.

After the auction the yield on Spain’s benchmark 10-year bond dropped 0.2 percentage points to 5.13% and the yield on the 10-year Italian bond dropped 0.35 percentage points to 6.63%. That pulled both countries further back from the 7% yield that suggests a bailout is just around the corner.

I’d suggest that this is quite probably a temporary respite since both Spain and Italy are slipping into a recession (if they aren’t already in one) that will add to their budget deficits and undo much of the progress toward reducing those deficits that they have made in the last week or so.

But still temporary or not, Italy and Spain are seeing progress. Greece, on the other hand, is in danger of seeing even its precarious current stability unravel. Read more

Inflation at the consumer level fell to a 15-month low in December, China’s National Bureau of Statistics announced today. Inflation at the producer level fell to the lowest rate in two years.

The path to another cut by the People’s Bank of China in the now bank reserve requirement before the Lunar New Year holiday is now wide open. In December China’s central bank reduced its record-high reserve requirement ratio for the first time since 2008.

Consumer prices rose in December at 4.1% annual rate. That was down from a 4.2% rate in November and just slightly above the 4% median estimate from 26 economists surveyed by Bloomberg. For all of 2011 inflation grew at a 5.4% rate, well above the government’s target of 4%.

I think we’re still months away from an actual cut to interest rates though. The Lunar New Year holiday usually produces a brief tick upward in inflation due to increased consumer spending (and reduced industrial production) before the holiday. Weather has produced some disruption to food supplies and that pushed food prices up at an annual rate of 9.1% in December.

The timing of any interest rate cuts—and any decision on the number of cuts in bank reserve requirements—will be heavily influenced by the growth rate for China’s economy in the fourth quarter. Economists now expect that government data set to be released on January 17 will show that the economy’s growth rate slowed to 8.7% in the fourth quarter. That would continue a pattern of declining growth in 2011 that has seen annual growth slip from 9.7% in the first quarter to 9.5% in the second quarter to 9.1% in the third quarter as the Beijing government fought to slow the economy to reduce the inflation rate.

A reading of 8.7% for the fourth quarter would keep China on track to a bottom near 8% in the second quarter of 2012 and probably wouldn’t cause the People’s Bank of China to consider speeding up the first interest rate cuts from, I speculate here, June or July.

Anything much below 8.7%, though, will get the bank’s attention.

Sell Coach (COH)

Bad news for the entire luxury retail sector from Tiffany & Co. (TIF) yesterday in the company’s update of holiday sales.

I’d look to cut my short-term exposure to the sector—and that includes shares of companies such as Coach (COH) that aren’t luxury retailers in the United States but are in their fastest growing market, China.

As of today January 11, I’m selling Coach out of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ with a gain of 80.47% since I added to that portfolio on November 20, 2009.

At Tiffany same-store sales in the first two months of the fourth quarter—adjusted for currency—fell by 4% in Europe and grew by a meager 2% in North America. That compares to 6% growth in Europe and 15% in North America in the third quarter.

Disappointing but nothing unexpected in sales numbers from these two regions. Sales growth had been expected to slow and sales in Europe had been expected to decline.

The surprise, and the reason I’d lighten up on the whole sector right now, came from Asia. Read more