As an old colleague often reminds me, "trading is easy, but
investing is hard." When you trade stocks, you only need to stick
around for a few days or weeks to see whether your investment
thesis is correct. But if you invest -- and really want to score
big gains -- then you need to find unloved stocks and then remain
considerably patient. We've all lost faith in a stock, only to see
it much higher a year or two after we've sold it.
I'm reminded of that lesson every day. For my
$100,000 Real-Money Portfolio
, I intentionally seek out stocks that are in a rough stretch.
Whether it's the
, an out-of-favor sector or simply subpar recent results, these
stocks are often so unloved, that they trade pretty close to a
bottom. Still, there's no way to
an absolute bottom, and even though these stocks were typically off
by 50%, 60% or 70% from their
, a slumping
in the second-quarter took most of them even lower.
Yet, like I said, considerable patience is required with this
approach. It has stood me in good stead in the past, and will do so
Even as I look at these as long-term investments, I still need
to track quarterly results to ensure the investment thesis I've
laid out remains in place. With this in mind, here's what to look
for as several of my portfolio picks release quarterly results in
the week ahead.
1. MDC Partners (Nasdaq:
Earnings report: after the close of trading on Monday, July
This company will release results just a few hours after this
article is published. I bought
of this leading ad agency
in early April
, noting that shares were quite inexpensive.
That thesis was confirmed about a month ago, when MDC Partners
acquired a key rival -- at a significant premium to
MDC's valuation metrics
This isn't a story about earnings-per-share, though. MDC
Partners has made so many acquisitions, that
is eating into
profits. Instead, investors are focused on operating
Frankly, 2011 was a disappointing year. MDC poured so much of
its profits back into the business, that it generated just $9
million in operating profits, down from $30 million the year
before. Management knows it needs to do better. First-quarter
results were a good start: MDC generated $7.5 million in cash flow
That number likely moved north of $10 million in the
second-quarter, and investors will be watching closely to see how
much higher it may get from here. Just as important, management is
likely to discuss expected cash flow for the next two quarters.
If guidance for each quarter is above $10 million, then this
stock may finally start a long-awaited upward move.
2. Goodyear Tire (NYSE:
report: Tuesday, July 31.
For a company with such a long track record and a $3 billion
, its share price sure can be volatile. As I write this on the
afternoon of July 27, shares are up roughly 7% -- for no apparent
reason. The neck-snapping moves are the result of the European
crisis, which some investors believe will heavily affect global
But the situation in Europe is simply irrelevant. Even if
consumers hold off buying new cars, they still need to replace
tires. And all signs point to an improving backdrop for
after-market tire sales. Yet, that's not why I bought this stock.
My focus is on Goodyear's costs. As I noted i
n early June
, the prices for natural rubber and synthetic rubber have been
steadily dropping. I don't expect Goodyear to exceed second-quarter
forecasts of $0.45 a share -- there is a one-quarter lag before
raw-material price changes have an effect. Instead, I think
Goodyear will meet -- or likely raise -- third-quarter and
fourth-quarter profit guidance.
This remains a remarkably inexpensive stock, and rising
estimates could be the
to get shares moving higher.
3. Marathon Oil (NYSE:
Earnings report: Wednesday, Aug. 1
I stand by my long-term view for this energy driller. (which
you can read about here
But my short-term timing was lousy. I bought this stock when oil
prices were surging in the late winter, which turned out to be the
cyclical peak. Though oil prices have yet to return to those
levels, at least natural gas prices are finally making a move,
rising more than 50% in the past few months.
As I noted in February, Marathon Oil has acquired a vast amount
of acreage of the Eagle Ford shale in Texas, and is expected to
ramp up production sharply in coming quarters. As with my other
picks, I think it will take 12-18 months for Marathon's
to fully mature, and though shares are up 15% since bottoming out
in late June, I still see solid upside ahead.
On the conference call, listen for a discussion of cash flow
projections as Marathon's energy plays get fully exploited over the
next few years.
4. Calgon Carbon (NYSE:
Earnings report: Wednesday, Aug. 1
This maker of filtration equipment should hold few surprises
when quarterly results are announced: much of its business is tied
up in multi-year contracts. Yet, it's the progress on a pair of
environmental initiatives that may help to get shares going. As
I spelled out
back in March, demand for the company's carbon-based air and
water scrubbers could rise once regulations tighten. I'll have a
lengthier discussion of this topic after results are released.
Maxwell Technologies (Nasdaq:
Exide Technologies (Nasdaq:
are set to weigh in on Thursday. Aug. 2, and Friday, Aug. 3,
respectively. Little has occurred since I profiled Maxwell
three weeks ago
and reviewed Exide's quarterly results
in early June
Both of these stocks toil in the energy storage business, and
each has a deeply undervalued stock price. I'll be reviewing
quarterly results with a fine-tooth comb and will report back after
the numbers -- and management's commentary have been digested.
Action to Take -->
has revealed some fresh bargains, and I hope to deliver another new
pick to you in coming trading sessions.
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-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC owns
shares of MDCA, GT, MRO, CCC, MXWL, XIDE in one or more if its
"real money" portfolios.