Moving into the third week of December, most professional investors'
thoughts will turn to protecting gains and dressing up portfolio
holdings in order to hang on to assets under management or maybe poach
some from competitors. As private investors, we have no need to get
involved in this game. I think it’s time to stay tight, focused and
surgically alert to picking up great stocks so we can hit the ground
running in the New Year.
There are a surprising number of very interesting companies reporting this week, and it's not a time to rest on your laurels. Keep working.
Tuesday
The action kicks off with Oracle (NASDAQ: ORCL). It’s a been mixed season for the tech bellwethers with IBM reporting weakness in enterprise spending and diverging trends, with decent software numbers but weaker hardware numbers. IBM also cited a notable drop in enterprise spending in September, which spooked the market. Cisco Systems then reported a set of results that were pretty much in line, and the market loved them. However, conditions don’t appear to have gotten any better and Oracle, as it proved this time last year, can be a bit of a wild card. Given that Oracle competes with IBM in many markets, these results will be a kind of litmus test for IBM's assertion that September heralded weakness in tech.
Oracle needs to demonstrate that its cloud based acquisitions are working on track and, as ever, articulate its current competitive positioning viz a vis SAP, IBM and others across middleware,servers,data analytics and storage. IBM reported low single digit growth in middleware overall so Oracle is likely to set the tone for this segment of IT for the next quarter. It's something to look out for with Tibco reporting on Thursday too.
The other three I want to highlight are AAR Corp, which I’ve written about here in the context of the aviation industry and on a similar theme Heico is one of the best plays in the sector. Both should give good color on the state of aviation and airline spending. Another stock I like is FactSet Research Systems which is discussed here, it is a good ‘trading down’ stock (in my view) within the business information sector. It just doesn’t look cheap enough.
Wednesday
Wednesday sees five diverse companies reporting. Bed, Bath and Beyond will demonstrate if it has improved its competitive positioning and global bellwether’s FedEx’s forecasts and commentary are always interesting. It’s forecasting is better than the Federal Reserve’s! I'm intrigued to see if the move towards slower rail frieght based delivery has accelerated.
Another company that will give good perspective on the US economy is Paychex which is looking set to benefit from an improvement in small business prospects. The market will be fascinated by what Jabil Circuit (NYSE: JBL) says about the IT contracting and in particular its exposure to Apple’s iPhone. Apple is believed to be responsible for around 10% of Jabil’s sales. Jabil has invested heavily in capital expenditures in order to prepare for huge sales via manufacturing casings for the iPhone. It is usually quite tight lipped about this relationship but its hard to imagine the market wont draw its own conclusions. Another good read from Jabil will come in the form of its reporting on the solar cell industry where beleagured investors will hope to see some faint sign of a trough. Perhaps some decent commentary from Jabil will put some strength back into Apple?
And lastly, General Mills (NYSE: GIS) which is not a stock I am in love with but then again who cares what I think? The market loves yield and GIS gives you that but frankly I think the whole ‘stable high yield and who cares about growth’ attitude is going to unwind at some point. GIS is using its cash flows to buy growth in the form of acquisitions but this is building up debt. The challenge here will be to see some turnaround in its core business in the US. GIS cant rely on acquisition led growth forever.
Thursday
Speaking of the food sector I’ve long believed that ConAgra (NYSE: CAG) is the pick of the high yield food sector and has a good mix of value brands on the consumer side and a strongly performing commercial sector (Weston Lamb) with exposure to potatoes and fries. In other words, ConAgra can do well in a weak environment. I just wish I had shared the market’s enthusiasm because I got out too early here. Investors should look for continued growth in the commercial plus some stabilization on the consumer side and listen carefully to what the management says about its sales channels. One of the key issues for the food companies this year has been the shifting of sales to alternate channels (dollar, discount or even specialty food stores) and how this has affected their rout to market. ConAgra has the product range to be able to manage these shifts but it needs to keep executing.
Another stock I regret (I didn’t even buy this one) is Discover Financial Services which remains a good way to play a resumption of credit issuance in the US. And finally Tibco Software (NASDAQ: TIBX) will report some eagerly anticipated results. The company has already pre-reported but the commentary and color will be fascinating and most probably cause some volatility. Investors should look out for more information on its performance and degree of confidence in the administrative changes in its US operations. Tibco's challenge will be to reestablish investor confidence in its outlook after it previously guided far too high. Moreover investors will be looking to learn about why the company is under-performing in the US. Look out for analysts questions on the issue. If the management can make a convincing case for a successful restructuring than sentiment could turn around very quickly with Tibco
There are a surprising number of very interesting companies reporting this week, and it's not a time to rest on your laurels. Keep working.
Tuesday
The action kicks off with Oracle (NASDAQ: ORCL). It’s a been mixed season for the tech bellwethers with IBM reporting weakness in enterprise spending and diverging trends, with decent software numbers but weaker hardware numbers. IBM also cited a notable drop in enterprise spending in September, which spooked the market. Cisco Systems then reported a set of results that were pretty much in line, and the market loved them. However, conditions don’t appear to have gotten any better and Oracle, as it proved this time last year, can be a bit of a wild card. Given that Oracle competes with IBM in many markets, these results will be a kind of litmus test for IBM's assertion that September heralded weakness in tech.
Oracle needs to demonstrate that its cloud based acquisitions are working on track and, as ever, articulate its current competitive positioning viz a vis SAP, IBM and others across middleware,servers,data analytics and storage. IBM reported low single digit growth in middleware overall so Oracle is likely to set the tone for this segment of IT for the next quarter. It's something to look out for with Tibco reporting on Thursday too.
The other three I want to highlight are AAR Corp, which I’ve written about here in the context of the aviation industry and on a similar theme Heico is one of the best plays in the sector. Both should give good color on the state of aviation and airline spending. Another stock I like is FactSet Research Systems which is discussed here, it is a good ‘trading down’ stock (in my view) within the business information sector. It just doesn’t look cheap enough.
Wednesday
Wednesday sees five diverse companies reporting. Bed, Bath and Beyond will demonstrate if it has improved its competitive positioning and global bellwether’s FedEx’s forecasts and commentary are always interesting. It’s forecasting is better than the Federal Reserve’s! I'm intrigued to see if the move towards slower rail frieght based delivery has accelerated.
Another company that will give good perspective on the US economy is Paychex which is looking set to benefit from an improvement in small business prospects. The market will be fascinated by what Jabil Circuit (NYSE: JBL) says about the IT contracting and in particular its exposure to Apple’s iPhone. Apple is believed to be responsible for around 10% of Jabil’s sales. Jabil has invested heavily in capital expenditures in order to prepare for huge sales via manufacturing casings for the iPhone. It is usually quite tight lipped about this relationship but its hard to imagine the market wont draw its own conclusions. Another good read from Jabil will come in the form of its reporting on the solar cell industry where beleagured investors will hope to see some faint sign of a trough. Perhaps some decent commentary from Jabil will put some strength back into Apple?
And lastly, General Mills (NYSE: GIS) which is not a stock I am in love with but then again who cares what I think? The market loves yield and GIS gives you that but frankly I think the whole ‘stable high yield and who cares about growth’ attitude is going to unwind at some point. GIS is using its cash flows to buy growth in the form of acquisitions but this is building up debt. The challenge here will be to see some turnaround in its core business in the US. GIS cant rely on acquisition led growth forever.
Thursday
Speaking of the food sector I’ve long believed that ConAgra (NYSE: CAG) is the pick of the high yield food sector and has a good mix of value brands on the consumer side and a strongly performing commercial sector (Weston Lamb) with exposure to potatoes and fries. In other words, ConAgra can do well in a weak environment. I just wish I had shared the market’s enthusiasm because I got out too early here. Investors should look for continued growth in the commercial plus some stabilization on the consumer side and listen carefully to what the management says about its sales channels. One of the key issues for the food companies this year has been the shifting of sales to alternate channels (dollar, discount or even specialty food stores) and how this has affected their rout to market. ConAgra has the product range to be able to manage these shifts but it needs to keep executing.
Another stock I regret (I didn’t even buy this one) is Discover Financial Services which remains a good way to play a resumption of credit issuance in the US. And finally Tibco Software (NASDAQ: TIBX) will report some eagerly anticipated results. The company has already pre-reported but the commentary and color will be fascinating and most probably cause some volatility. Investors should look out for more information on its performance and degree of confidence in the administrative changes in its US operations. Tibco's challenge will be to reestablish investor confidence in its outlook after it previously guided far too high. Moreover investors will be looking to learn about why the company is under-performing in the US. Look out for analysts questions on the issue. If the management can make a convincing case for a successful restructuring than sentiment could turn around very quickly with Tibco
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