Quarters - The End of the Terror
This is a simple business. Companies that report good quarters go up 5%, and companies that report poor results go down 20%. Such is the life of a value investor these days.
In the day of the dinosaurs, washed out stocks did not go down 20% when they reported bad quarters, investors just yawned. Right now every bad report is an automatic -20%. I wish there was a good way to measure liquidity in individual stocks. My general “feeling” is that liquidity is much worse than anyone is willing to discuss.
Overall 19 of my 25 companies had decent results, and got a grade of B or better. Only 6 companies had poor results/forecasts, but this was enough to kill the portfolio,
January and February are frighting months to be invested, as many companies make new 2025 forecasts. This is especially true when the economic outlook is so foggy. I never really considered the issue, but actually 3/31 is the best time of year to start a new portfolio. Now we have 10 months of relative calm before the the next period of terror. Next Fall I might just switch to a high relative strength portfolio, and wait out the the next period of terror. I am only kidding, but I will think about it.
This was an interesting exercise. I never really kept a quarterly scorecard before. The period of terror started on 1/22 when Kinder-Morgan reported, and lasted until 3/5 when Thor reported. KMI does not report the first quarter until 4/16. The results:
Kinder-Morgan - results strong as expected, but forecast a little muted, solid B
Halliburton - solid results, but a weak forecast given, “Drill Baby Drill”, slightly puzzling, weak B-
Alexandria Real Estate- conservative forecast, good investor day from early December, B+
Sysco - June year end, so forecast only to 6/25, solid performance in national accounts, but local restaurants still weak, I like the story more, A-
Brunswick - is this the earnings trough?, strong results but conservative forecast, B
Revvity - solid results, lab spending better, but China issues linger, C
Tyson - strong results, but cattle cycle still weak, B+
RXO - confusing results with Coyote mixed in, this was a frustrating call because of the short-term focus, debt still only 1.7x trough EBITDA, all the analyst focus was on the short-term rate environment, this is still my best stock, B, but Wall Street thought it was a D
Rayonier - solid asset sales, some concern about solar and carbon capture decent buyback news, story intact, B+
Corteva - seeds are strong but pesticides are still weak, B
FirstCash - strong results, but I guess Wall Street wanted a bigger forecast, B+
Red Rock - strong quarter, but conservative forecast, story intact, B
Restaurant Brands - strong quarter, conservative forecast, story intact, A-
Royal Gold - good quarter, tougher to find new royalty deals, A
Iridium - strong quarter, maybe some government contract issues, A
Matador - decent quarter, 25% dividend boost, but oil fundamentals are weak, A
Teck - ok quarter, tariffs issues hard to understand, B
HF Sinclair - Margins under pressure, solid operations, C
Middleby - 2/20 - activist, former Trian guy, takes a 6% position, not sure I want to sell the retail business, stock has done well, great quarter, spinoff planned, getting a little confusing, A
Nutrien - quarter weak, decent forecast, tariff exemption?, C+
Chart - quarter weak, but forecast OK, these are frustrating companies because earnings are lumpy, D
Darling - strong quarter, decent forecast, but lots of Trump uncertainty, B
Nexstar - strong quarter, but the elections helped, ok forecast, tough company to understand, A
AES - decent quarter and forecast given Trump uncertainty, was expecting worse given the stock acts like death, B
Thor - ok quarter, but weak forecast, 2025 EPS down to $3.75 from $4.50, so the world is not ending, D