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Aug 9

Looking at more quarterly results: Air Canada’s miss

Air Canada is a fairly large position for me so I’ve spent a lot of time on their quarterly results in the last two days.  The short story here is that the stock stock got hit because revenue per average seat mile (RASM) was below expectations and because of this, earnings were also below estimates.

There was an expectation among analysts that because load factors (how full the aircraft is) were strong in the second quarter, and because there was anecdotal evidence that ticket price checks showed improvement, Air Canada would pull off a decent year-over-year RASM increase in addition to its cost savings.

Because they didn’t the company missed earnings estimates and, on Thursday, the stock did what the stock did.  The average estimate for earnings per share for the quarter was 51c.  I saw that BMO was as high as 57c.  The actual number came in at 47c.

First, let me say that I added to position on Thursday afternoon.  I actually pretty much picked the short-term bottom on this one, a rare occurrence indeed, getting in at $8.50.   I added because while the stock was down hard on the RASM miss, I thought that once everyone wrapped their heads around why, we would see it quickly move back up. Read more

Aug 2

Week 161: Earnings so far – Pacific Ethanol and my other ethanol plays

I agreed to this deal with Seeking Alpha where they post my articles from the blog and I don’t have to do anything. Its a pretty fair deal; the reason I never published them before had more to do with me being lazy then anything else. The only downside is that everything I write will get posted and I don’t want everything I write to get posted because much of what I write is blog-worthy but not publishing-worthy.  Sometimes I just want to post my thoughts here, and not have to reference and review every data point to make sure I have all my t’s crossed.  Therefore I created a simple rule whereby if I put the words Week XX in the title of my post they do not get published on Seeking Alpha.  And that is the long winded, paragraphical description of why I continually make the rather banal observation of how many weeks I have been writing this blog  in the title of so many posts.

With that out of the way, lots of earnings reports for companies I own came out this week and I am going to give my thoughts on a few of them.  We will start with the biggest of the bunch, at least in terms of my own P&L: Pacific Ethanol and my other ethanol plays.

Pacific Ethanol

This is a very large position for me and so obviously I was paying close attention to their report on Thursday.  I was a little surprised that the earnings per share number was below a buck.  It turns out that I had missed a couple things.

First, I didn’t realize that the company wasn’t able to utilize their net operating losses (NOLs) in the second quarter and would therefore have to pay tax.  This was mentioned in the Q1 10-Q but I didn’t read through the details carefully enough.  So the company was taxed at 30% and that was a big reason the earnings per share number did not hit the magic $1 mark that I had expected. Read more

Jul 21

2 Comments

Week 159: Blog Days of Summer

Portfolio Performance

week-159-yoyperformance

week-159-Performance

See the end of the post for the current make up of my portfolio and the last four weeks of trades.

Recent Developments

I haven’t done a lot of writing since my last portfolio update four weeks ago. I have made only a couple changes to my portfolio, and added only one new position, Midway Gold, which I wrote about last week.

I remain reluctant to add positions.  As I stated previously (here and here) I remain wary of the market reaction to the post-QE era.  So far nobody seems to care, tapering has had no negative impact on stock prices, and we continue to march to higher highs.  Nevertheless I’m not convinced.  I don’t have a lot of insights into the specific mechanism by which quantitative easing leads to higher stock prices or how the end of it will cause them to go lower  but I know from experience that you can’t overstate the importance of liquidity, particularly where small and micro caps are concerned.  Now we’re in the process of draining a bunch of it and I just don’t think that is a great time to be too far out on the ledge.  Why take the chance when you don’t have to?

I’m also not having an easy time finding stocks that I want to buy.  I’ve spent the last four weeks rather diligently investigating new ideas.  I’ve probably gone through 100 names.  Nothing I have looked at has stood out as something I have to own.

In fact, I’ve come back to old names.  In particular, I’m currently betting the farm on Pacific Ethanol. Below is a list of my top ten positions.  Pacific Ethanol was a 20% position that has grown to 24% because of price appreciation.

07-21-14 topholdings Read more

Jul 14

Pan-ning for Midway Gold

I originally intended this post as a weekly update where, among other things, I would talk about my new position in Midway Gold and about my large increase in my Pacific Ethanol position.  But my description of Midway has turned into a post of its own, so I will leave the details about Pacific Ethanol until later, and only say here that I think the stock presents a good near-term risk/reward and that my current position (20% of my portfolio) reflects my enthusiasm.

As I remarked in my last portfolio update, the only new positions that I have taken of late have been gold stocks.  This has turned out to be a well timed endeavor.  My first three positions, Argonaut Gold, Endeavour Mining and Rio Alto Mining, are all up 30%+ in only a little over a month.

I continued my move into the miners by adding another (soon to be) producer shortly after my last post.  I took a position in Midway Gold (MDW).  As I tweeted at the time:

Midway has three deposits in various stages of development in Nevada as well as other prospective lands.  Midway’s 3 deposits are Pan, Gold Rock, and Spring Valley.  At the current price its market capitalization is a little more than $150 million.  The company has $48 million in preferred share debt and $70 million in cash.  Much of its cash will be spent over the next 6 months as the company brings its Pan deposit into production.  Read more

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