Back into Joe's Jeans again (JOEZ)

The company recently reported Q2 earnings sporting a 51% increase in sales, but suffering a 60% drop in net income as the company continues its expansion efforts. SG&A continues to climb, but as of this morning the stock is hovering in the $1.80's that I decided to get back into this company again. I had last exited this company with a 13% gain on the lack of clarity in economic conditions. This re-entry based on the assumption that management scales SG&A to some reasonable level as growth initiatives settles down, and customers pumping money into JOEZ for the second quarter will still remain employed and buying up Joe's products. This is a big assumption and inherent with risks. Risks include anemic economic growth as reported by the latest employment numbers (more people quitting looking for a job, artificially dropping the unemployment rate). A customer shifting perception to cautionary retail purchases going into the holiday seasons may back fire. Time will tell.

Jobs report tomorrow uneasy

A few days ago I let go of a few positions as there is no clarity in the economy with respect to direction. Several pundits if you would like to call them that have opinions ranging from double dip recession to slow and sluggish growth. The one observable trend that I can muster from recent developments in Europe, sluggish domestic home sales in the US, and the recent anemic report on private job growth from the ADP report is that those double digit growth rates in the S&P over the past little while have most likely cooled off. Economic growth going forward? I honestly don't know. With that, I let go of America Movil (AMX) for a small gain of 6%. The company still has long term prospects, but I'm looking to protect my portfolio and find a better entry point. Another position I let go was Herman Miller (MLHR) after holding on to this stock for almost two years. A loss of 20% Ouch. Again, a move to simply protect the portfolio. This was a rather tough choice as the company operates with good fiscal health and is under good management of Brian Walker. The company missed estimates on the most recent quarter, but apparently has a good steady pipeline of orders coming in the current quarter. I'll be keeping watch. The last stock I tried to exit was Joe's Jeans, but the strike price never hit... So fancy jeans will still stick around for a while in the portfolio.

Building stock in wirelss carriers America Movil and Turkcell Iletisim

As the market continued to raise doubts regarding the EU's bailout program of Greece the past few weeks, on Friday US Labor Department reported jobless claims rising 25,000 to 471,000. This was the first rise in the past 5 weeks and reinforced that the US recovery would be slow.

This weakness has brought down two companies that I have been following for some time. The first company is America Movil (AMX). The company's valuation finally was brought down to a level where I felt comfortable initiating a small position. The company has been busy of late, launching offers for Telmex International and Carso Global Telecom in what would be CEO Carlos Slim's mega consolidation bringing wireless and land line business under one roof. The company sports a P/E of 12.7 (ttm), profit margin of 19.3%, and Return on Assets of 16.7% (somewhat efficient)

The second company is Turkcell Iletisim (TKC), a company that has been a member of the portfolio since July of 2008. Increasing competition has really put the pressure on the company, and Greece's problems aren't helping with the possible wave of economic struggle across Europe in the years ahead. The company recently released first quarter results with revenues growing 6.9% compared to the same period a year ago. What hurt the company was the 25% drop in Net Income for the same period. The company sports a P/E of 27, and profit margin of 16.9%. I decided to add to my position as I still believe this company is poised for growth over the long haul. In the most recent quarter, you can start to see some of the results from the company's continued investments in building out its 3G network. CEO Süreyya Ciliv reported, "At the same time, thanks to our superior 3G offering in Turkey, our data revenues grew by 69.6% to TRY 92.1 million, leading to an increase in the share of mobile data and services revenues in Turkcell Turkey's revenues by 2.7 pp to 19%". The one concern I do have is the recent decision to reduce maximum prices Apr.1.2010 by Turkey's Telecommunication Authority. The company has a track record of strong management which should help them navigate these waters. Still keeping an eye out for these developments going into the 2nd and 3rd quarter.

Flash Player 9 or higher is required to view the chart
Click here to download Flash Player now

View the full NYSE:TKC chart at Wikinvest

Caution in Greece

I'm not one to jump on the fear mongering wagon, but I am cautious when their is lack of information. Late last year I had informed one of my friends to be cautious as Greece's debt problems came to light. He simply shrugged it off and told me it would be "contained". I had limited information, so I wasn't going to do some knee jerk reaction and invest more or sell off. Well... more information is coming to light now and containment may turn into contagion. The backstop and operational specifics of the EU to step in and bail out Greece still hasn't been ironed out. A good article was published today covering Greece's possible contamination. Treading lightly.

Q1 2010 Performance Up!

The first quarter of 2010 closed out a few weeks ago and things are looking steady for the portfolio. Corporate earnings are improving on a year over year basis, but unemployment is still extremely high. Commercial loans continue to sour, and sovereign debt risk in Greece still looks unclear as the EU/IMF workout an aid package of 45B euros. The big shoe to drop this past week has been the charges brought forth against Goldman Sachs. This doesn't bode well for the XLF position in the short term. The most recent addition to the portfolio was Noble Corporation (NE), a Swiss based offshore contract oil and gas drilling services company. Noble Corporation sports really attractive valuations (P/E of 6.29ttm, Return on Assets at 16.4%, and profit margins at 46.1%) especially as China's voracious demand for oil continues to rise. Even as corporate earnings continue to show improvement, I am somewhat cautious as unemployment is still high of 10.4% while regional banks continue to workout the mess they are working with now in commercial property loans.

Trading one problem for another

An article posted by AP today reports Timothy Geithner that commercial real estate loans will continue to be a problem, however a problem that can be "managed". Last June while covering Herman Miller I had spoke briefly about the brewing problems of the commercial real estate sector and its impact on Herman Miller. Since then the market has trekked its way upwards while this problem seems to have taken a back seat. I am still concerned about the losses banks are taking on with their commercial loans, but it looks like the government will be using TARP repayments help help the small and mid size regional banks stabilize against such losses, but also provide more incentive for them to lend more to small businesses. Although it feels like we're out of the woods, we're still a long road from full recovery. Still cautious.

Harley Davidson rumors

Harley Davidson has been on a roll the past few weeks on news about a possible leveraged buyout from private equity firm KKR. Harley Davidson has been a holding of the Ten Grand Chicago portfolio since July/2008. I've ridden this thing through the depths of the economic crisis to see it claw its way back up on the company's restructuring and financing moves. The company's financing arm hasn't done any favors for the health of the business, and the rising long term debt over the past 3 years from $980MM at the end of 2007 to $4.1B at the close of 2009 makes it tough for me to understand the reasoning behind any potential buyout.

Any leveraged buyout would stack more heaps of debt onto this company and put the new owners in a position for a very long crawl back to fiscal health. I love HOG's, but I'm not expecting any turnaround for a very long time, and neither should any potential suitor.

Flash Player 9 or higher is required to view the chart
Click here to download Flash Player now

View the full HOG chart at Wikinvest