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

Bye-bye A123–a short-term trade maybe but I’m dropping the stock from my watch list

It’s time to remove A123 Systems (AONE) from Jim’s Watch List. A short-term trade, maybe, on hopes that projected second half revenue will materialize. But long-term the company, a developer and manufacturer of lithium-ion batteries for electric cars and the smart utility grid, has a serious chicken-and-an-egg problem: No matter how good the company’s battery technology may be, the electric car market has been much slower than expected in getting off the ground—and without that market A123 Systems just doesn’t have enough customers to sell to.

A123 Systems went public in 2009.  Investors immediately bid up the stock believing that the company had revolutionary technology and that rising oil prices would lead consumers to adopt electric cars. The stock opened at $13.50 and quickly ran up to $28 a share. But two years later it sits below $5.

The problems at A123? Read more

Update Maxwell Technologies (MXWL)

So how do you miss earnings estimates by 36 cents a share, reporting as Maxwell Technologies (MXL) did on February 18 after the stock market closed a loss of 39 cents a share for the fourth quarter, and yet miss revenue projections of $28.8 million by just $800,000? (Revenue actually grew by 22.3% from the fourth quarter of 2008.)

Part of the reason is that Maxwell had a large number of non-cash losses (including a big set-aside against the results of an investigation into a former sales agent in China) and gains this quarter. Using GAAP accounting (Generally Accepted Accounting Principles) the company lost 39 cents a share in the period. Excluding those non-cash gains and losses, the company broke even for the quarter. Wall Street had projected a loss of 3 cents a share.

But more importantly for long-term investors, the quarter’s results reflect that Maxwell is still essentially two companies. Read more

Update Johnson Controls (JCI)

Shares of Johnson Controls (JCI) were up more than 2% yesterday, February 3, on news that Wal-Mart (WMT) had named Johnson Controls as its sole source provider for its U.S. stores for automotive, marine, motor sport, and lawn and garden batteries Goldman Sachs also upgraded the stock yesterday to neutral from sell. Read more

Are you in the right sectors of the stock market for this point in the economic recovery? (Yes, despite the stock market correction, we are still in an economic recovery.)

Solid data stretching back to 1945 argues that certain industries and sectors outperform during specific stages of any economic recovery. (The best work on this subject comes from Sam Stovall, the chief investment strategist for Standard & Poor’s Equity Research Services. His 1996 book Sector Investing is still the best resource on the subject to my mind.)

My first rule of investing is “Put every trend you can on your side.” Neglecting what we know about what sectors thrive when is in my opinion wasting an asset that could help you make bigger profits.

Stovall divides the economic cycle into four stages. Read more