Another update on Polypore (PPO) after the company’s conference call today

Polypore International (PPO) just finished an investor conference call.

You’ll remember the stock fell 30% on Monday, January 31, when the combination of a short recommendation from Axiom Capital and news that Polypore customer LG Chem would start making battery separator membranes itself—instead of buying them from Polypore, the market assumed—created panic selling. More than 26 million shares traded hands that day, way above the daily average of 960,000 shares.

Since then the stock has rebounded to $46.53 a share (as of 1 p.m. New York time on February 3) from the January 31 close at $38.08. That’s still way below the $56.38 close on January 27. (The stock is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ )

So what did Polypore have to say today? (For instructions on how to listen to the replay go to http://investor.polypore.net/releasedetail.cfm?ReleaseID=646084 )

The call began with a discussion of the market for separator membranes in lithium batteries, moved to a technical discussion of the differences between wet and dry separators, and then finished with a few details about what it sells to LG Chem and what that Korean company is actually planning to manufacture.

I found it a reasonably good refutation of the math that put the Axiom short recommendation and the LG Chem news together to get panic selling. Read more

I hate it when this happens. A high-profile short names a stock as his/her pick for the next big short. And then we get just enough bad news to leverage that pick into panic selling.

That’s pretty much what happened yesterday, January 31, to shares of Polypore International (PPO), a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ The shares finished down almost 30% today (a drop of $16.26 a share) on volume of more than 26 million shares. Average daily volume for Polypore is about 960,000 shares.

The story of this rout begins on Monday, January 30 with a call by Gordon Johnson, an analyst at Axiom Capital. to short Polypore. The target price for the stock, then trading at $54.34, was an eye-popping $26 a share. Johnson and Axiom had previously been very vocal on shorting thin-film solar panel producer First Solar (FSLR). That call has been very profitable in the global collapse of solar stocks. Online news sources such as TheStreet.com picked up Axiom’s call. The Street’s story was headlined “The next great alternative energy short is…”

I understand the basis of Axiom’s call—although I disagree profoundly. Read more

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

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