Epiphany Investing

Searching Out the Optimal Portfolio of “Revelation” Stocks

Earnings Reports…Rundown on Watchlist (T, VZ, AMZN, BIDU, NITE)

Posted on | October 23, 2008 Time: 9:40 am |

Here’s a brief rundown of what’s been clogging up my computer screen lately. Earnings reports are coming in by the proverbial truckload, and while nobody can read them all I’m trying to get as good a sample of what’s going on out there as possible.

time to read the earnings...

This quarter, more than any in my memory, reading the transcripts means everything, while the actual reported numbers carry little weight. It’s all about the tone, the placement of phrases in the prepared spiel, the intangibles that can help us to start painting a real picture of what GDP could look like over the next few quarters. Right now my estimating ability on that front is shot…there are simply too many moving parts to pinpoint a range, and until the market can get there in our minds and in our models, all we can do is read, read, read…Then make some more coffee.

On to the reports….

AT&T (T) reported earnings up 5.5% to $3.23 billion, slightly below expectations. Despite the overshoot on sales that Apple reported yesterday for the iPhone, AT&T is not seeing any immediate benefits as they are subsidizing the cost of the phone…The power of Apple to negotiate is indeed legendary.

While the yield on AT&T makes it look somewhat attractive, I see much safer comparable yields that could keep me away from AT&T’s $60 plus billion in debt and $100 billion plus in goodwill & intangibles. In the telecom space I would rather own Verizon, which has a similar yield and much prettier balance sheet.

Baidu.com, the “Google of the East” reported revenues up over 80% YoY and EPS up over 90%, but this is really just a backburner company for me. I love the company’s position as the search leader in China, but the valuation is insanely high and I don’t want imply a huge level of confidence in China’s spooky GDP number for the 3rd quarter.

Many smart folks that I try to keep an ear turned towards feel that those GDP numbers could be (and would be if necessary) highly fudged to keep the peace. I am biting my tongue as I mentally ask myself if the U.S. is really that much different?…but for now the stock is a complete pass; there are comparably better deals and growth stories in the United States.

Amazon (AMZN) - Yes, I’m sure we all know this company, whether as shopper or shareholder. Not having looked at the stock in a while, I would have gone in expecting guidance weakness as Amazon slides down the sharp side of the blade in discretionary spending. Sure enough, current earnings looked great but revenue forecast was reduced by about $1 billion, or 5%, for the full year.

The stock traded down over 14% in the after-hours, which certainly doesn’t surprise me but still begs the question, “what exactly to people expect?” We’ve already traded the major indexes down 40%, so how much of it is related to the credit crisis and how much is attributable to the certainty of recession? Yet another question I don’t have an answer to, but my guestimate says that the losses in the past 6-10 sessions have been primarily driven by recession-pegging, and not pricing in the tail risk of systemic, carry your money in a wheelbarrow collapse.

Ryan Barnes

  • Share/Bookmark
Category: China, Tech Earnings, Telecom
Tags: > >

Comments