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Sunday, 19 February 2006
A Reader Writes "Precision Castparts (PCP) came upon my radar...."
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

Last week, my good friend George K. wrote me a note and here I am late Sunday night, catching up with things, and I really figured I owed George an answer. George is a member of my stock club as well as a friend of mine. He wrote:
"Hi Bob,
Precision Castparts (PCP) came up on my radar screen recently. I'd be interested in your take; thanks for all you've taught me and freely sharing your advice...your blog is great...
Geo"
Well, first of all, I sure appreciate your support and kind comments. When I was first putting together the ideas for this blog, George put down a list of the names I was looking at, and encouraged me that I was onto something. I hope that I still am, and appreciate your interest and support.

So let's take a brief look at Precision Castparts (PCP), and see how it fits into my perspective on stock investments. I cannot predict whether the stock will rise in the future or the price will fall, I can just tell you about a few of the things that are important to me and whether it would be a stock that I would include on my blog. But you probably knew that already :).

First, what does this company do?

According to the Yahoo "Profile" on Precision Castparts, the company
"...provides investment castings, forgings, and fasteners/fastener systems for aerospace and industrial gas turbine applications. It operates through four segments: Investment Cast Products, Forged Products, Fastener Products, and Industrial Products."
Let's run through some of the basic screens that I like to review on a stock: latest quarter, Morningstar.com financials, and a 'point and figure' chart. By the way, PCP closed at $56.37 on 2/17/06 and I don't have any shares or options on this company. I don't know if George has any shares or options.

First, the latest quarterly result: on January 17, 2006, PCP reported 3rd quarter 2006 results. Sales totaled $864.4 million, up 16.2% over sales of $743.9 million, the previous year same quarter. Net income (including discontinued operations) totaled $93.7 million or $.69/diluted share, vs. net income of $61.7 million or $.46/diluted share last year. These were certainly solid results!

On the 'good-news front', the company announced a completion of an accounting review which resulted in a $1.9 million or $.01/share decrease in net income which was recorded as an adjustment in the second quarter of 2006. The 'street' hates uncertainty, and it is a positive that the company has this review of earnings behind it.

What about Morningstar? Reviewing the Morningstar.com "5-Yr Restated" financials on PCP, we can see the erratic growth in revenue from 2001 to 2004, when revenue changed from $2 billion in 2001, down to $1.9 billion in 2004. Fortunately, strong growth has developed since, with $2.9 billion reported in 2005 and $3.1 billion in 2006.

Earnings have also been eerratic, dropping from $1.23 in 2001, to $.41 in 2002, climbing to $1.18 in 2003, then dropping all the way to a loss of $(.02) in 2005, only to come back to $.16/share in the trailing twelve months (TTM).

Free cash flow is solidly positive with $190 million in 2003, increasing to $301 million in 2005 and $287 million in the TTM.

The balance sheet is adequate with $1.2 billion in cash and other current assets, balanced against $755.9 million in current liabilities. This gives us a reasonable 1.5 current ratio.

In addition, the company has $1.05 billion in long-term liabilities.

Looking at Yahoo "Key Statistics" on PCP, we can see that this is a large cap stock with a market capitalization of $7.51 billion. The trailing p/e is moderate at 23.95, with a forward (fye 03-Apr-07) p/e of 18.36. The PEG is a tad rich at 1.92.

There are 133.3 million shares outstanding and 132.8 million of these float. Of these, 1.64 million shares are out short representing 1.2% of the float or 3 trading days of volume (the short ratio). This short interest doesn't look very significant to me.

According to Yahoo, the company pays a small dividend of $.12/share yielding 0.20%. The last stock split was a 2:1 split in September, 2005.

How about a chart?

Looking at a "Point & Figure" chart from StockCharts.com, we can see that the stock was trading very weakly from January, 2001, when it hit $24.00/share, until declining first to $9.00/share in late 2001, and then again down to $8.50 in October, 2002. Since that time, especially after breaking through resistance at $16 in July, 2004, the stock has traded strongly higher to the $56.37 level. The chart looks strong, especially the last couple of years.



So what do I think? Well this is an interesting stock market idea! I like the latest quarterly report. However, the Morningstar.com does not show the consistency in revenue and earnings growth that I generally like to see. At least for two or three years. The last couple of years have been quite strong, and the stock price has behaved accordingly.

Not a perfect fit to my blog, but then again, not too shabby a selection either! Just what I would have expected I guess.

Thanks for visiting! If you or anyone else have any other questions or comments, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Bob




Posted by bobsadviceforstocks at 10:59 PM CST | Post Comment | View Comments (2) | Permalink
"Looking Back One Year" A review of stock picks from the week of November 29, 2004







Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

If you are a regular reader of my blog, you will know that I like to review my past stock picks each weekend with about a trailing one year period. Since I have missed a couple of wekeends along the way, this has grown to about a trailing 15 month period. This week, I am up to the week of November 29, 2004.

For the sake of reviews, I presume a "buy and hold" strategy for assessing my past stock picks. In reality, I use a very involved investment strategy, selling my losers quickly and completely at an 8% loss level, and then selling my gaining stocks slowly and partially at predetermined appreciation targets. I also have a strategy to sell stocks after they have reached targeted gains and then declined at certain pre-detmermined levels. All of these strategies will greatly affect the actual return in practice. But for the sake of these reviews, a buy and hold strategy is the easiest way to calculate returns!

On November 29, 2004, I posted Ixia (XXIA) on Stock Picks Bob's Advice when it was trading at $15.13. XXIA closed at $13.50 on 2/17/06 for a loss of $(1.63) or (10.7)% since the stock selection here.

On February 6, 2005, XXIA announced 4th quarter 2005 results. Net revenues for the fourth quarter ended December 31, 2005, came in at $37.5 million a 6.5% increase over last year's $35.2 million in net revenue. Net income, however, dropped to $5.5 million or $.08/diluted share, down from $7.6 million or $.11/diluted share last year.

On December 2, 2004, I posted Gildan Activewear (GIL) on Stock Picks Bob's Advice at a price of $32.65. Gildan had a 2:1 stock split on June 1, 2005, giving me an effective "pick price" of $16.33. GIL closed at $49.30 on 2/17/05, for a gain of $32.97 or 201.9% since posting!

On February 1, 2006, Gildan announced 1st quarter 2006 results. Sales for the quarter ended January 1, 2006, came in at $120.3 million, up 10.4% from $109.0 million in the same quarter last year. Net earnings were even better, coming in at $16.2 million, and diluted EPS of $.27/share, up 92.3% from $8.4 million or $.14/diluted share in the first quarter in 2005. These were great results! In addition, the company raised guidance for earnings for the full fiscal year.

So how did we do that week in November in 2004? Well since posting these two stocks, XXIA came in with a small (10.7)% loss and GIL came in with a fabulous 201.9% gain! Thus, the average performance for these two stocks was a gain of 95.6% since posting. Please remember that past performance is NO guarantee of future price performance! And unfortunately, I don't own Gildan or Ixia stock.

Thanks again for stopping by and visiting! If you have any questions or comments, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Bob










Posted by bobsadviceforstocks at 9:54 PM CST | Post Comment | Permalink
Dynamic Materials (BOOM) "Weekend Trading Portfolio Review"











Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website as I am an amateur investor. If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

One of the things I like to do on the blog, is to share with you my actual trading portfolio. I do this by posting trades as I make them and also by reviewing my holdings, one at a time, on the weekend. Going alphabetically, I am at Barnes Group (B), but since I just wrote about this stock that I just purchased this past week, we shall skip this review for now, and take a closer look at Dynamic Materials (BOOM). With 22 positions in my Trading Portfolio, and my occasional weekend that I skip, it should take me about 6 months to get through the list, allowing me to update my holdings about twice a year at this rate.

I first discussed Dynamic Materials (BOOM) on Stock Picks Bob's Advice on May 23, 2005, when it was trading at $37.64/share. BOOM had a 2:1 stock split on October 13, 2005, giving me an effective pick price of $18.82. Dynamic Materials closed 2/17/06 at $29.55, giving my 'stock pick' an effective gain of $10.73 or 57% since posting.

I puchased 240 shares of Dynamic Materials (BOOM) on 12/5/05 at a price of $28.27. On January 27, 2006, I sold 40 shares (1/6th of my 240 share position) at a price of $37.50 for a gain of $9.23 or 32.6% over the purchase price. As you may know, the 30% appreciation point is a target for me in managing my portfolio and my strategy dictates that I sell a sixth of a holding at that level. Since I have now sold 1/6th of my position for one sale, my sale point on the downsite is supposed to be my purchase price. As an earlier entry has pointed out, I missed that sale, and the stock rebounded to a level above my purchase price. Thus, on the downside, my sale point for my remaining shares would be at $28.27, or on the upside, another 1/6th position (or 200/6 = 33 shares) would be at 1.60 x $28.27 = $45.23.

Let's take another look at Dynamic Materials (BOOM) and see if it still fits into my strategy on this blog!

First, the profile. According to the Yahoo "Profile" on Dynamic Materials, the company
"...engages in metalworking business in North America, western Europe, Australia, and the Far East. The company operates in two segments, Explosive Metalworking and Aerospace. The Explosive Metalworking segment utilizes explosives to perform metal cladding and shock synthesis. Its principal product is a explosion welded clad metal plate, which is used in the construction of heavy, corrosion resistant pressure vessels, and heat exchangers for petrochemical, refining, and hydrometallurgy industries. The Aerospace segment provides welding services principally to the commercial and military aircraft engine markets, and to the power generation industry."
And how about the latest quarterly report?

On November 8, 2005, BOOM announced 3rd quarter 2005 results. For the quarter ended September 30, 2005, sales advanced 68% to $20.2 million vs. $12.1 million the prior year. Net income grew 278% to $3.2 million or $.52/diluted share, up from net income of $.8 million or $.16/diluted share in the same quarter last year. Even sequentially, from the immediately prior quarter, net income increased 49% from $2.1 million or $.35/diluted share in this year's second quarter. This was a solid performance for this company!

How about longer-term? Looking at the Morningstar.com "5-Yr Restated" financials on BOOM, we can see the strong, if somewhat inconsistent, revenue growth from $24.3 million in 2000 to $54.2 million in 2004 and $76.1 million in the trailing twelve months (TTM).

Earnings have also been quite erratic, bouncing from $(.27)/share in 2000 to $.27 in 2001, down to a loss of $(.06)/share in 2003, and then improving to $.27/share in 2004 and $.79/share in the TTM.

The company has paid $.10/share in the TTM, the first dividends noted by Morningstar. Total shares have increased from 8 million in 2000 up to 10 million in 2004 and 12 million in the TTM.

Free cash flow has been positive, if small, with $4 million in 2002, dropping to $2 million in 2003, then increasing to $3 million in 2004 and $4 million in the TTM.

The balance sheet is solid with $1.4 million in cash and $29.2 million in other current assets, which, when balanced against the $12 million in current liabilities, gives us a current ratio of 2.5. A ratio of 1.5 or better usually is an indication of a healthy balance sheet. In addition, the company has another $6.8 million in long-term liabilities.

What about the chart?

If we look at a "Point & Figure" chart on BOOM from Stockcharts.com:



We can see the very strong upward movement of this stock from the $.50/share range in January, 2003, to the $38 range in January, 2006. The stock has recently pulled back to the $29.55 level, but still is staying well above the support (blue) line. On my limited understanding of technicals, the stock price appears steady and doesn't appear to have broken down.

What do I think?

Well, I should really have sold BOOM when it hit my cost, but the stock rebounded and by the time I realized what had happened it was once again above a selling point. In any case, the company reported a superb earnings report, and is due to report the fourth quarter results soon. Revenue growth has been solid, but earnings reports have indeed been erratic. The company is generating free cash and the balance sheet is reasonable.

Thanks so much for stopping by and visiting! If you have any comments or questions, please feel free to email me at bobsadviceforstocks@lycos.com.

Bob














Posted by bobsadviceforstocks at 9:15 PM CST | Post Comment | Permalink
Friday, 17 February 2006
Micronetics (NOIZ) "Revisiting a Stock Pick"
Click ***HERE*** for my PODCAST ON MICRONETICS

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website!

The market is taking a bit of a pause today, but that doesn't mean we can't look for our kind of stocks on the top % gainers list! In fact, looking through the list of top % gainers on the NASDAQ, I came across Micronetics (NOIZ) which is an old favorite of mine, in fact a stock that I briefly owned in this trading account, but in which I was stopped out with a loss.

I first discussed NOIZ on Stock Picks Bob's Advice on June 2, 2004, when the stock was trading at $9.33. As I write, NOIZ is trading at $16.22, up $1.72 or 11.84% on the day. Thus, the stock is trading $6.89 higher than my "pick price" or ahead by 73.8%. I do not currently own any shares of Micronetics nor do I have any options on this stock.

And what exactly does this company do?

According to the Yahoo "Profile" on Micronetics, the company
"...engages in the design, development, manufacture, and marketing of wireless components and test equipment used in cellular, microwave, satellite, radar, and communication systems worldwide. The company's products are categorized into four groups: Receiver Components, Noise Products, Test Solutions, and VCO Products."
Last week, on February 10, 2005, the company announced 3rd quarter 2006 results. These results include the results from the acquisition of Stealth Microwave, which occurred in 2005. Excluding sales from Stealth, net sales grew by 35%. However, including this acquisition, sales grew to $7.4 million for the quarter ended March 31, 2006, a 108% increase over sales of $3.6 million in the previous year same quarter. Net earnings for the quarter grew 360% to $662,773 or $.14/diluted share, up from $143,971 or $.03/diluted share in the same quarter in the 2005 fiscal year.

And how about results 'longer-term'? Reviewing the Morningstar.com "5-Yr Restated" financials, we can see a fairly steady record of revenue growth (except for a small dip between 2001 and 2002), from $7.9 million in 2001 to $14.1 million in 2005 and $18.2 million in the trailing twelve months (TTM).

Earnings have been a bit more uneven dipping from $.21 to $.10/share between 2001 and 2002, and then dipping from $.34/share in 2004 to $.29/share in 2005. Earnings came in at $.35/share in the TTM, and I suspect that this figure might need updating due to the very latest report in which the company reported $.14/share, up from $.03/share the prior year.

Free cash flow has been positive or nil, with $0 in 2003, and $0 in 2005, but $1 million in free cash flow in the TTM.

The balance sheet is solid with $2.9 million in cash and $11.0 million in other current assets, balanced against $4.2 million in current liabilites. This yields a "current ratio" of almost 3:1. The company also has $7.5 million in long-term liabilities on the books as well.

And how about some 'numbers' on this stock?

Looking at Yahoo "Key Statistics" on Micronetics, we can see that first of all, this is really a very small company with a market capitalization of only $72.02 million. This, in my view, is a "micro-cap" stock, which I define as being under $100 million in market capitalization. The trailing p/e is 35.46. We don't have a forward p/e (probably no analysts have estimates) and thus there isn't any PEG to review.

Referring to the Fidelity.com eResearch website, the company is in the "Diversified Electronics" industrial group, and is moderately priced within this group of companies. At the top of the group in terms of richness in valuation is International Game Technology (IGT) with a Price/Sales ratio of 5.7, this is followed by JDS Uniphase (JDSU) at 5.4, Micronetics (NOIZ) at 3.1, Amphenol (APH) at 2.5, WMS Industries (WMS) at 2.4, and Molex (MOLX) at 2.3.

Other statistics from Yahoo reveal that the company has only 4.47 million shares outstanding with 3.27 million of them that float. Currently there are only 50,540 shares out short representing 1.8 trading days of volume or 1.50% of the float. This doesn't look like a significant level of short sales to me.

No cash dividend, and no stock dividend are reported by Yahoo.

What about a chart?

Reviewing a "Point & Figure" chart on NOIZ from StockCharts.com, we can see that the stock actually declined between January, 2001, when the stock was trading as high as $7.00, to a low of $2.25 in July, 2002. The stock then broke through resistance later that month at $3.00 and has actually traded higher since then staying above its 'support lines' as illustrated by the blue lines on the point and figure chart. The stock currently is trading at the $16.00 level and the graph looks strong to me!



So what do I think? Well, I wish I hadn't sold the stock previously, that's what! But rules are rules. The stock still looks nice although much of the growth in revenue and earnings comes from the Stealth Microwave acquisition in 2005, this is an acquisition that was additive to earnings as things actually have improved earnings-wise since the acquisition. Thus the solid earnings report! The P/E is a bit rich but with the rapid growth in earnings, that too doesn't look bad. The Price/Sales ratio is moderate in the middle of its industrial group, the steady revenue growth is attractive and the nice balance sheet is good as well. At this point, the company is not burning up its free cash so to speak, however, the company is not generating much either. Finally the chart looks nice.

On a downside, the company is extremely small, and may be subject to increased volatility because of this. On the positive side of small, the potential of stock appreciation may also be greater if a large number of people try to 'get through the door' at the same time. Works both ways I guess.

Anyhow, that's my take on the stock! If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Bob







Posted by bobsadviceforstocks at 3:03 PM CST | Post Comment | Permalink
Updated: Monday, 20 February 2006 8:29 PM CST
Thursday, 16 February 2006
A Reader Writes "Would you suggest this a good entry point for NILE?"
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please remember to consult with your investment advisors prior to making any investment decisions based on information on this website.

Looking through my email this afternoon, I found a nice note from Subir who writes
"Bob,
I do value your advice on stocks as it gives the nuts and bolts of the
company . I am new investor and so your site helps sort through the
company's stock mumbo-jumbo as you focus on the fundamentals.. I have
bookmarked and look forward to your blog every day at work. I have been
following and mulling over buying Blue Nile (NILE) for some time . The
stock price stumbled couple of daya ago after the company did not meet
overly exuberant analyst's expectation. But from what I see it is a solid
company in a niche market. At $31 , the stock price seems a bargain with
little or no debt. Would you suggest this a good entry point for NILE.
Thanks"
Subir, thanks for writing! I appreciate your kind words and hope that I may have the opportunity of contributing some information and perspective on investing to your fund of knowledge. Let me take a look at NILE and see what it looks like from my perspective. I must point out that I am unable to predict price moves of individual stocks. Furthermore, when a stock has declined, much of the air has been let out of its tires so to speak. The momentum investors have left the party and now the value investors must shoulder the load! I do not own any shares of NILE nor do I have any options on this stock.

Let's look at three things: the latest quarterly report which disappointed, the Morningstar.com "5-Yr Restated" financials page, and a nice point and figure chart.

First the latest quarterly report: On February 7, 2006, Blue Nile (NILE) announced 4th quarter earnings results. As they stated:
"-- Fourth quarter net sales totaled $73.2 million, compared to net sales
of $64.5 million in the fourth quarter of 2004, an increase of 13.5 %.
-- Net income in the fourth quarter increased 15.9% to $5.3 million, or
$0.29 per diluted share, from $4.6 million, or $0.24 per diluted share,
in the prior year."
Well that doesn't seem too shabby, does it? But they also went on to provide guidance for the upcoming quarter and 2006 fiscal year:
"-- First quarter net sales are expected to be between $47.0 million and
$49.0 million.
-- Net income is expected to be between $0.11 and $0.12 per diluted share.
The estimated net income per diluted share includes the estimated
impact of expensing stock options under FAS 123R of approximately $0.03
to $0.04.

Expectations for the Full Year 2006 (Year Ending December 31, 2006):
-- Net sales are expected to be between $220.0 million and $245.0 million.
-- Net income is expected to be in a range of $0.62 to $0.72 per diluted
share. The estimated net income per diluted share includes the estimated impact of expensing stock options under FAS 123R of
approximately $0.14 to $0.16."
First of all you can see that sales are expected to drop in the upcoming quarter to $47 million-$49 million, from the latest quarter of $73.2 million of sales. But you probably are right that jewelry sales are seasonal, and the period around Christmas is probably the strongest time of the year for this company. So the $220 to $245 million in sales is a reasonable growth. However, the expectation of earnings of $.62 to $.72/diluted share is unexciting as 2005 came in at a diluted eps of $.71/share. I suppose that the drop is attributed to expensing options, but in any case, I prefer to see growth in earnings even after all of the 'footnotes' are taken care of :).

As another article points out
Analysts projected higher per-share profit of 33 cents on $80.3 million in sales.
So this latest quarter disappointed in both earnings and revenue estimates.

Apparently, as the article continues, the estimates for the next quarter are also examples of lowered guidance:
"Blue Nile forecast first-quarter profit of 11 cents to 12 cents per share, including stock compensation costs of 3 cents to 4 cents, with sales between $47 million and $49 million. Analysts expect profit of 19 cents per share, not including stock option costs, and sales of $54.1 million."
In other words the company lowered guidance for the upcoming quarter to a level below where current analysts were expecting the company to perform. Thus, with this single report the company, while apparently just doing swell, did a double whammy on the stock price---they missed expectations AND they lowered guidance. Exactly opposite what I have observed is the most helpful in boosting a stock price; BEATING expectations and RAISING GUIDANCE. This doesn't mean that the company isn't a great company. It just means that the price correction is part of a larger adjustment in expectations for future performance.

O.K. enough on that! How about a look at Morningstar.com?

Looking at the Morningstar.com "5-Yr Restated" financials on NILE, we find the steady record of revenue growth from $44 million in 2000 to $169 million in 2004 and $194 million in the trailing twelve months (TTM).

This must be a fairly recent ipo as there is no record of earnings on the Morningstar.com page.

Free cash flow has been positive and growing from $16 million in 2002 to $28 million in 2004 and $23 million in the TTM.

The balance sheet is solid with $81.0 million in cash and $17.6 million in other current assets, balanced against $24.2 million in current liabilities, giving the company a 'current ratio' of approximately 4.0. Long-term debt is a very modest $900,000.

How about that chart? Looking at a "Point & Figure" chart on NILE from StockCharts.com:



You can see that the stock was moving sideways between much of 2004 and 205 and then in April, 2005, broke out to the upside to the $44 level. The stock broke down in January, 2006, and now is looking for new support at the $31 level.

What do I think? Well, as nice as this company might look to you, I am concerned about the earnings report which disappoints by not meeting expectations for the current quarter and continues by lowering guidance for the upcoming year. Therre is a lot for this stock to work through before becoming a great-performing stock imho.

I look for great stocks that beat expectations and have management reports that raise guidance.

Please try not to confuse great companies with great stocks. The two don't always match up! In my experience, you can lose a lot of money trying to fight the street because you believe you understand a stock better than the rest of the investors. On the other hand, you can make a lot of money if you can identify a great company becoming a great stock ahead of the crowd! That is always my goal.

I hope that I have been helpful to you. And not too disappointing. I cannot tell which direction the stock of NILE will be going in the near and the long-term future. If you buy some shares, for your sake, I hope that they climb to the stratosphere! However, this is not my kind of stock to be buying at this time.

If you have any other questions or comments, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Bob









Posted by bobsadviceforstocks at 9:28 PM CST | Post Comment | Permalink
Updated: Thursday, 16 February 2006 10:20 PM CST
February 16, 2006 Barnes Group (B)
Click ***HERE*** for my PODCAST ON BARNES GROUP (B)

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

Earlier today I sold 33 shares (1/6th of my position) of Morningstar at a 30% gain level. This 'entitled' me, according to my trading strategy, to add a new position to my portfolio. With that nickel burning a hole in my pocket, I turned to the list of top % gainers on the NYSE to find a suitable candidate for purchase. A new stock, Barnes Group (B), appeared to fit the bill and I went ahead and purchased 180 shares earlier today for my trading account. As I write, B is trading at $39.11, up $2.06 or 5.56% on the day.

And what does Barnes Group actually do?

According to theYahoo "Profile" on Barnes, the company
"...engages in the manufacture of precision metal components and assemblies; and distribution of industrial supplies. It operates through three segments: Barnes Distribution, Associated Spring, and Barnes Aerospace."
What drove the stock higher today, as is often the case, was an outstanding 4th quarter earnings report. Revenue for the quarter came in at $276.4 million, a 10% increase from the $251.6 million reported in the same quarter last year. Income for the quarter was $11.6 million, or $.47/share, up approximately 200% from $3.9 million or $.16/share last year. In addition, to complete the "trifecta", the company raised guidance with expectations of earning $2.50 to $2.60/share in 2006. Currently analysts are expecting $2.44/share for the year.

How about longer-term?

Looking at the "5-Yr Restated" financials on Barnes from Morningstar.com, we can see the steady increase in revenue from $.7 billion in 2000 to $1.0 billion in 2004 and $1.1 billion in the trailing twelve months (TTM).

Earnings during this period have been a bit erratic, dropping from $1.90/share in 2000 to $1.01 in 2002, increasing to $1.49/share in 2003, dipping to $1.40/share in 2004 and increasing to $2.14/share in the TTM. The company has been paying a dividend during this period increasing it from $.79/share in 2000 to $.80/share in 2004 and $.82/share in the TTM.

Free cash flow has been positive with $35 million reported in 2002, increasing to $45 million in the TTM.

The balance sheet as presented on Morningstar looks reasonable with $31.5 in cash and $354.9 million in other current assets. This is balanced against current liabilities of $247.8 million, giving B a current ratio of just under 1.5. In addition, the company is reported to have $369.4 million in long-term liabilities.

And what about some valuation numbers?



Looking at Yahoo "Key Statistics" on Barnes, we can see that this is a mid-cap stock with a market capitalization of $924.95 million. The trailing p/e is reasonable (imho) at 18.10 with a forward p/e (fye 31-Dec-06) of 15.90. With the growth expected, the company based on 5 yr expected earnings, comes in with a PEG of 1.70.

Barnes is in the "Misc. Fabricated Products" industrial grup. Within this group, according to the Fidelity.com eResearch website, Barnes is reasonably valued with a Price/Sales ratio of 0.8. Only Shaw Group (SGR) is more reasonable with a Price/Sales ratio 0f 0.7. Topping this group in richness in valuation is Ceradyne (CRDN) with a Price/Sales ratio of 4.2, followed by American Science and Engineering (ASEI) at 4.1, Parker Hannifin (PH)at 1.1, and Masco Group (MAS) at 1.0.

Going back to Yahoo for some additional numbers, we can see that the company has only 23.84 million shares outstanding with 16.16 million of them that float. Of these, 743,540 shares were out short as of 1/10/06, or 3.60% of the float, for a short ratio of 6.1. With this many shares out short, today's stock rise on good news good well represent (imho) a bit of a squeeze on the short sellers.

As I noted earlier, the company does pay a dividend, which in today's low interest environment is actually significant, at $.88/share or 2.40% yield on the common shares. The last stock split reported per Yahoo was a 3:1 split in April, 1997.

And what does the chart look like?

Examining the "Point & Figure" chart on Barnes from Stockcharts.com:


We can see that this stock was trading sideways between January, 2001, when it was at the $16.50 level, until January, 2002, when it peaked at the $25 level. The stock backed off again to the $16.50 level in October, 2002, and since then, has been moving steadily higher to the current $39.06 level.

So what do I think? Well, I liked the stock enough to buy some shares :). This is in an industrial area that is not well represented in my trading portfolio. I like the latest earnings report, the increased guidance, and the steady growth in revenue the past five years. Earnings have indeed been a bit erratic, but have been strong recently. Valuation is nice with a p/e is the teens to twenties, and the PEG is close to 1.5. The Price/Sales ratio is near bottom of its group, and the chart looks strong.

That's my update! Thanks again for visiting. If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Bob










Posted by bobsadviceforstocks at 1:59 PM CST | Post Comment | Permalink
Updated: Sunday, 19 February 2006 2:54 PM CST
"Trading Transparency" Barnes Group (B)
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any investment decisions based on information on this website.

A few moments ago I purchased 180 shares of Barnes Group (B) at $39.09/share. Barnes is having a nice day in the market today. I haven't reviewed this stock previously, so I shall try to get around to a few comments on this company this afternoon if possible.

Bob


Posted by bobsadviceforstocks at 12:44 PM CST | Post Comment | Permalink
"Trading Transparency" Morningstar (MORN)
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any investment decisions based on information on this website.

A few moments ago, I sold 33 shares of my Morningstar (MORN) stock at $43.27/share. I had purchased 200 shares of MORN on 11/22/05 at a cost basis of $32.57, giving me a gain of $10.70/share or 32.9% appreciation since purchase. The 30% level is my first targeted appreciation level for a partial (1/6th position) sale. Since I am just at 21 positions, this also gives me a "chit" to purchase a new position if something comes up that seems to fit my strategy!

And you know that nickel is just burning a hole in my pocket already! Thanks for stopping by! If you have any comments or questions please feel free to email me at bobsadviceforstocks@lycos.com or leave your comment right here on the blog.

Bob


Posted by bobsadviceforstocks at 9:01 AM CST | Post Comment | View Comments (2) | Permalink
Wednesday, 15 February 2006
A Reader Writes "I was wondering about PMTI"
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

My mailbox is practically humming! Just when I think it is safe to get back into the water....Anyhow, I was delighted to get a short email from Shawn who wrote:
Hi Bob:

i have been following your picks for awhile. I was wondering about PMTI. you had posted a while ago last month but the stock has been lagging lately. could you reevaluate the company.

Shawn
Shawn, thanks for writing! Please do remember I am a fellow amateur. I obtain my information from easily available free websites that I believe to be reputable and that you can access as well as I can.

Before I comment on Palomar, I want to encourage you to think critically about all of your investments. Do not get too attached to them :). I hold a stock only as long as it behaves as I want it to. If it develops an 8% loss, I sell it quickly. I have other sell points that I am sure you are familiar with.

But let me take a look at Palomar. As you pointed out, I posted Palomar Medical Technologies (PMTI) on Stock Picks Bob's Advice on January 9, 2006, just a bit over a month ago. At that time the stock was trading at $39.05. Palomar closed today (2/15/06) at $32.35, thus it is down $(6.70) or (17.2)% since posting.

I have not been following this stock closely, but let's take a look at a chart and see when the damage was done. Here is a one month chart on PMTI from CNN.Money.com:


I think you can see on this chart, that while the stock was indeed drifting lower after the February 2nd close, the big drop in price came on February 9, 2006 when the stock which closed on February 8, 2006 at $38, dropped on the 9th to $35, and then down to $31.00 and change on February 10, 2006. So what happened that day to drive the stock lower?

As is often the case, on both good and bad news, we can see rather significant motion in stock prices after the release of earnings reports.

On February 9, 2006, before the opening of trading, Palomar announced 4th quarter 2005 results. While revenues for the quarter ended December 31, 2005, came in at $21.6 million, up from $16.4 million, buried in the story is this simple statement:

"The Company reported net income of $5.3 million, or $0.27 per diluted share for the fourth quarter of this year versus net income of $5.4 million, or $0.29 per diluted share, for the fourth quarter of 2004 which included a benefit from income taxes of $1.1 million due to the reduction of tax reserves."
While the revenue growth was great, I am sure that "the street" didn't like that drop in earnings, which while small, and which also had a reason, was disquieting for all of those momentum investors much like myself who are banking on persistence of revenue and earnings growth to drive a stock price higher!

I hope this answers your question. I am sure there may be other explanations for this drop, this is my best bet on an examination of the news and developments on Palomar! Thanks again for dropping by. Be sure to visit often, and let me know if you have any other questions or comments by writing me at bobsadviceforstocks@lycos.com.

Bob


Posted by bobsadviceforstocks at 8:33 PM CST | Post Comment | View Comments (1) | Permalink
A Reader Writes "I will appreciate if you can give your OPINION on how will you spend HYPOTHETICAL ten grand of your own today."
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

I received a nice email from Imran who writes:
Dear Mr. Freeland, Good Evening, I am a resident (physician in
training), and have 10K to invest. However, I am not vary savvy when
it comes to finances. I was going to buy some index fund and leave
the money there. While surfing net, I came across your site and spent
close to three hours there. I was impressed with your indepth
analyses. I must say that I learnt a lot in those three hours about
how to look at stocks. I went to morningstar, stockcharts and other
sites first time in my life. I am still lost how to navigate your
site to look at your current stock-postions as I was going to simply
follow those positions. I understand that one should spend time to
learn financial know how, but it may take some time for me. I will
appreciate if you can give your OPINION on how will you spend
HYPOTHETICAL ten grand of your own TODAY. It will help me a lot.
Thank you very much for your time. Have a good day ad I am looking
forward your email. With kindest personal regards, I remain,
Sincerely yours, HeartDoc
East Lansing, MI
Imran, thank you for taking the time to write and taking the time to read my blog! I hope that what I introduced you to is educational and provides you with some ideas of your own on how to invest in the stock market. First of all, there is nothing wrong with an index fund either. Many mutual funds have failed to keep up with the broader indices.

Please excuse the disorganization on my blog. I write quite a bit, but haven't kept up with some of the other pages on the website. But if you go back about three or four pages, you will find an entry describing my current holdings. Also, on almost every weekend, I have been going alphabetically through my holdings reviewing one at a time, my history with the particular stock and my current plans and an update on some of the information surrounding those investments.

I am not qualified to advise you about your own specific $10,000. What I want to convey to you is my approach to identifying stocks that I believe to be good quality investment candidates. With $10,000, I would probably start with four stocks of $2,500 in each position. You might want to consider setting up a discount brokerage account online with a company like Fidelity or Schwab. Set up a regular debit from your checking or savings each month so that the account will grow. For instance, if you can deposit $250.00 regularly, then in ten months you will have enough for a fifth position. I would try to get to five positions and consider this your minimum # of positions. Go to a 6th position only if a portion of your five stocks is sold at a gain. Maybe consider going to a maximum of 20 positions. Read through my blog, I think you will understand my own strategy.

I cannot tell you which stocks to own. Be sure to sell your losing stocks quickly and your gaining stocks slowly.

Good luck and keep me posted. Let me know if you have any more specific questions on my personal approach to thinking about stocks! With a smart guy like you, this should be a cinch.

Bob


Posted by bobsadviceforstocks at 8:02 PM CST | Post Comment | View Comments (1) | Permalink

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