Buy Home Inns and Hotels Management (HMIN)

In my March 6 post http://jubakpicks.com/2012/03/06/next-stop-in-the-traveling-global-financial-casino-china/ I suggested waiting until Home Inns and Hotels Management (HMIN) reported fourth quarter earnings on March 8 because the company might well disappoint.

Sure enough it did and the stock is trading today, as of 1:15 p.m. New York time, 14.2% below its March 5 price. (I’m adding it to my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ today.)

What was the Chinese lodging company’s big sin? Not revenue. Revenue for the quarter came in at $208 million, above the consensus estimate of $191 million, and up 64% from the fourth quarter of 2010.

The sin lay in earnings. Read more

Can we just go back to the good old days? The days when stocks went up every year? When we all talked “buy and hold?” When a 200-point drop in a day in the Dow Jones Industrial Average was unusual? When the challenge of investing in stocks was finding good, well-managed companies rather than predicting the direction of the dollar or when Greece would default?

Not a chance.

We have, in fact, entered a new era. It’s not the “New Normal” forecast in 2010 and it’s actually even more dangerous than the new “Paranormal” sketched this January by Bill Gross of PIMCO. This era is characterized by extreme swings between radically opposed fears and hopes. We’d better get used to it. Remember 2011? The year before the current rally? That’s the new era in a nutshell, I’m afraid.

And we’d better come up with strategies for investing through this period. The current reality is, after all, the only one we’ve got. I’m going to start this post by depressing all of us with the size of the challenge ahead. And then I’m going to give you five ways to change your investing ways that can, I hope, make this era less painful and more profitable.

Remember the “New Normal?” Read more

Not so long ago—in my long, long February 21 post http://jubakpicks.com/2012/02/21/its-been-a-stunning-rally-but-where-do-we-go-from-here-my-thoughts-on-fine-tuning-a-strategy-for-2012/ –I said that for the first half of 2012 earnings growth would come under pressure as companies found demand strong enough to push up the cost of raw materials but not so strong that they would be able to pass all those increases through to customers. Keep an eye out for companies facing that problem, I advised, and when you find one in your portfolio sell it.

Which is why I’m selling DuPont (DD) out of my 12-18 month Jubak’s Picks portfolio today. (I still like the longer-term picture for DuPont so I’m keeping it in my Jubak Picks 50 portfolio—especially since the rules of that portfolio only allow selling once a year in January.)

There are lots and lots of reasons to like DuPont for the long term—its seed business and its enzyme business to name just two sources of long-term growth. And with natural gas, a major feedstock for many chemicals, stuck in a very long-lasting slump, DuPont doesn’t face rising raw materials costs for many of its products.

Except for titanium dioxide. And that’s a huge problem. Read more

Update Cummins (CMI)

So much for any worries about that quarter.

Today, February 2, before the market opened in New York, Cummins (CMI) announced fourth quarter earnings of $2.56 a share (excluding non-recurring items). Cummins is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/

That was a 55.4% increase from earnings of $1.84 in the fourth quarter of 2010. The earnings results beat Wall Street estimates by 29 cents a share. (Much of this beat—18 cents—came from a favorable change in the company’s tax rate. But n 11 cents a share surprise isn’t shabby.)

Revenue climbed 19% from the fourth quarter of 2010 to $4.92 billion (versus the Wall Street projection of $4.73 billion.)

For 2012 the company guided analysts to expect revenue growth of 10% or better ($19.85 billion versus the consensus of $19.69 billion) and an EBIT margin (earnings before interest and taxes) of 14.5% to 15%. That works out to 2012 earnings of $9.80 to $10.20 a share versus the Wall Street consensus of $9.81.

Not that every one of Cummins’ business units killed during the quarter. Read more

Update Cummins (CMI)

All those warnings about weakness in the fourth quarter are starting to sound like a pattern. At least I starting to see investors and analysts leap to work building a pattern.

Be careful, though, the warnings are coming from very different directions, which should make it hard to draw larger conclusions about market sectors and the global economy.

Let’s take the October 25 poster child for fourth quarter warnings, Cummins (CMI). (Cummins is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/)

That day Cummins announced third quarter earnings of $2.35 a share, beating the Wall Street consensus by 11 cents a share. Read more