Update Middleby (MIDD)
Has Middleby (MIDD) finally moved off the back burner?
Middleby’s shares were up 29% from February 8 through March 5, and the relative strength on the stock has moved to 72 for the last three months from 56 over the last six months. (Relative strength measures how a stock’s price performance compares to all other stocks on the market in the period. A relative strength of 72, for example, means the stock has outperformed 72% of all stock during the period.)
The market was anticipating that orders from the commercial food service industry—everything from fast food restaurants to school lunchroom kitchens—will finally first stabilize and then turn upward in 2010.
The company’s earnings report on March 3 vindicated that anticipation.
Update Marvell Technology Group (MRVL)
After the market closed yesterday (March 4) Marvell Technology Group (MRVL) reported fourth quarter fiscal 2010 earnings of 40 cents a share (excluding items). That was 3 cents a share above the official Wall Street consensus. Revenue climbed 64% from the fourth quarter of fiscal 2009 to $843 million, just a tad above analyst consensus. Strength came in storage (sales up 5%) and networking (sales up 10%).
The best news in the current quarter, however, came on gross margins, which climbed 2.2 percentage points to hit 60%. That’s an all-time high for the chip company and is significantly above the 58.6% gross margin expected by Wall Street.
Normally the first quarter of the company’s fiscal year—the quarter that ends in April—shows a 7% to 10% seasonal decline in sales. In that context Marvell Technology Group’s guidance to Wall Street for a flat to 2% decline in that quarter counts as a sign of major continuing strength for the company. So too does the company’s increase in gross margin targets going forward to 58% to 60%. That indicates that Marvell believes the new margins are sustainable and the savings from its cost reduction program aren’t based on one-time gimmicks.
The conference call wasn’t completely sunshine and buttercups, however.
Sell Ritchie Bros. Auctioneers (RBA)
Before the stock market opened yesterday morning (March 4) Ritchie Bros. Auctioneers (RBA) reported earnings per share of 20 cents and revenue of $97.1 million. The earnings number matched Wall Street projections but revenue 1% above expectations of $95.8 million. Revenue was up 19% for the quarter from the fourth quarter of 2008.
The number to watch, though, if you want to understand what’s going on at Ritchie Bros. is gross auction proceeds. That’s the amount of money that Ritchie Bros. collects for buyers in selling their items. Ritchie Bros. earns a commission on gross auction proceeds.
Gross auction proceeds climbed 1% in the quarter from the fourth quarter of 2008 but fell 2% for all of 2009 from the 2008 level.
The problem was that while the number of items Ritchie sold grew by 12% in 2008, the average price of the equipment the company sold fell.
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.
Jubak’s Picks up 3.9% for Q4 and 21.3% for 2009
The Jubak’s Picks, my 12-18 month portfolio, returned 3.9% in the fourth quarter of 2009.
That trailed the major indexes. For the quarter the Dow Jones Industrial average climbed 7.4%, the Standard & Poor’s 500 was up 5.5%, and the NASDAQ Composite was up 6.9%.
For the year the Jubak’s Picks portfolio was up 21.3%.
That was slightly ahead of one major index, but behind the other two. For 2009 the Dow Jones Industrials were up 18.8%, the Standard & Poor’s 500 was up 23.5%, and the NASDAQ Composite rose 43.9%
The portfolio’s total return since inception on May 7, 1997 is 1997 is now 282%.
My problem all year was that I never quite trusted this rally. In retrospect I was dead wrong. The rally that began in March 2009 was (or maybe that should be “is”) one of the great recovery rallies in market history.
