Author: Yale Bock, Y H & C Investments
Covestor model: GARP
Disclosure: Long GIGM, DGI, CLGX, CASS, DLB, JMBA
Sentiment has changed dramatically in the market as we head into the first Friday in August. What is weighing on the market? A better question is what is not weighing on the market? First, the sense that the European sovereign debt crisis has been bungled by the politicians has turned any asset manager on that continent into a seller. Second, the way our politicians handled the raising of the debt limit inspired no confidence from any rational person living in the United States. Third, almost every piece of economic data in the United States has recently shown a slowing economy. In combination, the investment world is now fearful. Meanwhile, my portfolio continues to underperform – which is the bottom line in the investment world.
Portfolio Holdings
1. Gigamedia (NASDAQ: GIGM): The stock continues to underperform and the company will announce earnings on August 15, 2011. Hopefully we will see improved revenues, a reduction in cash burn, and some more information on how their Asian businesses are performing. Also, of critical importance is an update on the Spongebob game release – when will it ever happen? The Everest Poker division is of some interest, but I think better information on monetizing their investment portfolio and how the internal development of games is progressing is more significant. At some point, either this company has to produce revenue producing games or it ceases to exist.
2. Digital Globe (NYSE: DGI): The company reported revenues and earnings of (.01) cents per share for the 2nd Quarter of 2011. Revenue came in at almost 82 million dollars, and for the first six months of 2011 versus 2010, cash flow from operations was up to $105 million from $57 million. The thesis for owning DGI remains the same – private and public enterprises all over the globe will continue to demand high quality pictures from satellites due to security and legal issues. The growth story here remains in place.
3. Corelogic (NYSE: CLGX): The company reported 2nd quarter 2011 net income of $0.29 per share on August 4, 2011. Total revenues were $396 million, down from 411 million in the 2nd quarter of 2010. The premise behind owning Corelogic is the mandatory need of their services from any buyer of real estate information. Operating earnings on a pretax basis were $21 million, hurt by weakness in the business and information segment, mainly due to softness in volumes of mortgage originations, which hurts the mortgage information segment. The company also reported a one -time gain of $59 million dollars on its initial investment in RP Data. The company also named a new CFO and repurchased almost 9 million shares for $161 million.
4. Cass Information Systems (NASDAQ: CASS): The nation’s leading provider of transportation, utility and telecom invoice payment and information services reported record second 2011 earnings of $.61 per diluted share, an increase compared to the $.52 per diluted share it earned in the second quarter of 2010. Net income increased to $5.7 million and revenues increased to $26.6 million.. A very solid company in the transportation industry which has a long history of being shareholder friendly and I want to continue to own it, and they should do even better if interest rates ever start to rise.
5. Dolby Laboratories (NYSE: DLB): On August 4, 2011, the company reported earnings of $61.7 million dollars (.55 cents/share) for the 3rd quarter of 2011. In the 3rd quarter of 2010, DLB reported earnings of .55 cents per share, or $63.5 million dollars. Operating weakness was in the services portion of the business. The company guided earnings for the rest of the year to $2.61-2.70 on a GAAP basis. Growth areas for the company continue to be the mobile, gaming, tablet, digital television, satellite television, and 3D markets, both domestically and globally. The majority of their revenues come from licensing entertainment products, which have huge operating, cash flow, and net margins. The lingering issue here is the ability of the company to find growth areas away from its traditional strength, the PC market.
6. Jamba Juice (NASDAQ: JMBA): The company reports business results for the quarter ending June 30, 2011 on August 16, 2011.
Sources:
Digital Globe Press Release. 4262950129.html?x=0&.v=1
Corelogic Press Release. 572536540.html?x=0&.v=1
Cass Information Systems Press Release.
Dolby Laboratories Press Release. Reports-bw-4028877614.html?x=0&.v=1
