Turnaround continues at China stock pick Home Inns and Hotels

Home Inns and Hotels Management (HMIN) announced first quarter earnings today, May 13, of 4 cents a share (excluding one-time items). That was 9 cents a share better than the 5 cents a share loss projected by Wall Street analysts. Revenue climbed 11.7% year over year to $225.8 million, well above the $219.2 million consensus.

The quarter continued the turnaround that was visible in the company’s fourth quarter results.

The company saw a slight drop in RevPAR (revenue per available room) to $131 in the quarter from $132 in the first quarter of 2012. But revenue grew as occupancy rates climbed to 83.6% in the quarter from 80.7% in the first quarter of 2012.

The big story, though, continues to be the improvement at the Motel 168 chain the company acquired in 2011. For the quarter RevPAR for Motel 168 improved 4.5% year over year and the occupancy rate climbed to 76.7% from 70.4%.

In its guidance the company affirmed its target to open 360 to 380 new hotels in 2013, including 80 to 90 leased-and-operated hotels and 270 to 300 franchised-and-managed hotels. Total revenue in 2013, the company projected, would fall between 6.6 billion and 6.8 billion renminbi. That would be equal to growth of 14.4% to 17.9% for 2013 over 2012.

As of May 13, I’m raising my target price on the New York traded shares of this Chinese hotel company to $37 a share from my current target of $34. Home Inns and Hotels Management is a member of my Jubak’s Picks http://jubakpicks.com/the-jubak-picks/ 12-18 month portfolio.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , I liquidated all my individual stock holdings and put the money into the fund. The fund did own shares of Home Inns and Hotels Management as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

Precision Castparts rewards growth investors who stuck with this stock pick

Growth investors who never lost faith in Precision Castparts (PP) finally got their reward. Growth is back, the company said in its May 9 earnings report for the quarter that ended in March.

And those investors got their reward. The stock, which closed at $192.02 on May 8, jumped to $209.97 at the close on May 10.

Precision Castparts is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/  As of today, May 10, I’m raising my target price to $238 a share from my prior target of $208.

Growth investors have been so willing to stick with these shares because 1) the company’s long-term record is so good—earnings growth of 35% a year on average over the last 10 years—that the recent slump—4.22% a year over the last three years—is a clear aberration; and 2) because the slowdown in growth came as a result of key customers—Boeing (BA)—experiencing severe but temporary problems—and of key markets—the market for gas turbines in power production—going through severe cyclical slumps.

The key to the stock’s bounce over the last two days wasn’t earnings for the March quarter—although reporting earnings of $2.82—7 cents a share better than Wall Street estimates—certainly does help.

The key was the company’s description of a recovery in its end markets that let CEO Mark Donegan confidently say that Precision Castparts was on track to grow earnings per share to $15.50 to $16.50 by the year that ends in March 2016 from earnings of $9.76 for the fiscal year that ended in March 2013.

That doesn’t seem very pie in the sky when one of your biggest customers for everything from fasteners to forged parts has been Boeing. Precision Castparts said that Boeing’s build rate on its 787 Dreamliner will move from five a month now to 10 a month by the end of 2013. In 2014 and 2015 Boeing’s build rate for its workhorse 737 will step up again and the company also expects growth from Airbus’s A350 program. In 2015 and 2016 growth should step up again as the Airbus continues to increase A350 production and Boeing ramps up new programs to add more fuel efficiency to revamped versions of it current aircraft. In the quarter just finished Precision Castparts saw aerospace revenue climb 32% year over year.

Revenue growth in the company’s oil and gas, and general industrial segments lagged—but only in comparison to aerospace at 14% year over year and 25% year over year, respectively. Revenue growth like that in a market where growth has been so hard to find is likely to find a reception audience of investors.

And it looks like the company is going to generate increasing margins for the remaining quarters in calendar 2013. Read more

Yen breaks below 100 to the dollar barrier–rally in Japanese stocks to continue

The Japanese yen has broken through the 100 yen to the dollar barrier. Rather convincingly too. The dollar was up 1.6% against the yen as of 3 p.m. New York time.

I’d assume there are a lot of positions and programs in action at this level so we might get a wash of buying as computers decide to close short positions or a wave of selling as traders figure that it’s now safe to go even shorter on the yen.

But whatever the short-term backing and filling, I think the barrier has finally fallen and the next stop is around 105 yen to the dollar. (Remember that because this exchange ratio is quoted as yen to the dollar, a higher number means the yen is weaker. It’s just the reverse with the euro where a higher number means it takes more dollars to buy a euro.)

The catalyst today seems to have been the better than expected report on initial claims for unemployment. For the week ended May 4, 323,000 workers filed an initial claim. That compares to 327,000 in the week before and the 336,000 consensus projection from economists surveyed by Briefing.com. Traders put this unexpectedly positive report together with what the market saw as a positive April jobs report and decided that the U.S. economy was stronger than expected.

And they began to buy dollars and sell yen—and euros too.

What are the effects of this? Read more

Cooking the books on China’s exports–the growth isn’t what it seems

This morning’s export numbers from China are even fishier than usual.

Officially China’s exports rose 14.7% in April, easily beating the 9.2% increase expected by economists surveyed by Bloomberg, the General Administration of Customs reported today, May 8. Imports climbed 16.8% in April against expectations for a 13% gain. Chinese and Asian stock markets were up on the news with the biggest gains coming in shares of exporters across the region.

At the same time the report shows a 0.1% drop in exports to the United States and a 6.4% decline in exports to the European Union.

So how did exports climb 14.7% when China’s two biggest export markets showed decreases? Read more

Is Warren Buffett out to buy DaVita? The odds just went up

DaVita HealthCare Partners’ (DVA) solid beat on first quarter earnings last night was over-shadowed this morning by reports of a standstill agreement with Warren Buffett’s Berkshire Hathaway (BRK/A) that traders see as raising the odds of an acquisition.

DaVita, a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/  , is up 8% as of 1:30 p.m. New York time on the combined news. I had calculated a $149 a share target price for DaVita when I added it to the portfolio on April 5. As of May 8, I’m leaving the target price at that level.

First, earnings. The company reported earnings of $1.84 a share (excluding one-time items) versus Wall Street expectations for $1.80 a share. Revenue climbed to $2.83 billion against the $2.79 billion analyst consensus. The company raised its guidance for 2013 operating income to $1.8 billion to $1.90 billion from prior guidance of $1.75 billion to $1.9 billion.

Second, the standstill. Read more