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Old 07-26-2011, 09:24 PM   Nav to Top  #1
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Money What Did Today's Earnings Tell Us?

Yesterday I wrote down what was required for homework and what to listen for in today's massive earnings day. I don't know if it is selective hearing on my part due to old age, but I heard a bunch of the same theses I have been talking about for months.

Thesis I - China, India, Brazil is definition of growth

Las Vegas Sands beat their numbers and had a great forecast on China and Singapore revenue in their new casinos. I mentioned this would happen after the Wynn Resorts earnings release said the same thing. Las Vegas Sands has a larger overall portion of revenues coming from Macau and Singapore than Wynn, so this seemed like a no brainer. Cummins and Ford also had very similar comments to China and the other emerging markets

Thesis II - Oil over $85 a barrel puts stress on consumers and airlines

Buffalo Wild Wings and Panera both came in under estimates on less than expected growth and higher costs. Dominos actually beat earnings which reaffirms this thesis since they deliver. Families are more likely to order in a couple pizzas for the family then drive to Chili's wasting 3 gallons of gasoline and then having to pay twice as much for dinner! Airlines have such a big portion of their costs related to fuel costs which makes them a perfect short. Because of that, oil around $100 a barrel just cuts off their air supply and make it hard for them to breathe. This thesis might change once the new airplanes that Boeing are getting so many orders for hit the airports, but we are still a couple years away from that. Jet Blue proved this on their call, so did the other airlines that reported last week. I expect similar results from Delta tomorrow.

Thesis III - Select areas of technology are in full bull market

We had better than expected results from Amazon today with Baidu and Broadcom yesterday crushing expectations. All of these have strong fundamentals. Amazon is just the best shopping mall in the world which anyone can drive to without having to waste gasoline! Baidu is the Google of China. Google is my favorite technology company right now and my above thesis of China. I like those odds. Lastly Broadcom is in the sector I strongly have liked the semiconductor space with mobile devices in a secular growth mode right now. I expect Akamai continues this momentum tomorrow.

Thesis V - Natural Gas is in still the first phase of a multi phase bull market

Petrohawk acquisition. Chesapeake, Southwestern Energy, EOG Resources, Schlumberger and Weatherford all having amazing quarters within the last week. The technology of being able to access stored gas and oil in the shales across North America has given us a look into the future. Then today I listened to the Cummins call and it really made me feel great about this thesis. They had record growth because of the emerging markets as stated in Thesis I, however what really impressed me was the number of natural gas engines that they produced and sold. This is telling me that the big catalyst for this fuel becoming the financial burden answer to our current oil and gasoline prices. When this does happen, I might break one of my biggest rules and put more than 25% of my portfolio in one sector. That is how confident I am in it. If Cummins can continue to dominate that market, this company will be a multi bagger even from here.


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