Today we had 4 important earnings reports, in "bell weathers" that the market does follow closely. As we stated earlier this week, it is not so much the results, but the reaction to results that matters. So far, it's not been a good reaction to results. I won't get into
Oracle (ORCL) too much because it's not really a name I follow too closely but it is down 3-4% in after hours on
what appears to be solid results. Remember the "tech is immune to oil" trade is what is keeping the NASDAQ (relatively speaking) outperforming everything else (NASDAQ being top heavy in technology names).
- Oracle Corp (ORCL Quote, Profile, Research, Stock Buzz), the world's third-largest software maker, reported on Wednesday that quarterly profit rose 27 percent, beating Wall Street estimates, on strong new software license revenue. The company had a profit, of 47 cents a share, excluding items, which beat the average analyst target of 44 cents.
- "Nobody expected the May quarter to come in as strong as it did," said David Garrity, director of Research at Dinosaur Research.
So good news, but the stock sinks? Don't like to see that if we are bulls. But let's compare this to say
Bed Bath and Beyond (BBBY) which is a retailer who reported a shoddy year over year quarter but it beat the all important
lowered expectations and that stock is rocking up 9% in after hours. This is why it is generally safer to hold stocks with no serious expectations going into earnings versus ones everyone has high hopes for, as we saw this morning in
Monsanto (MON).
Off we go to one of our fund holdings,
Research in Motion (RIMM) - the earnings are spectacular but not good enough for hyper expectations. We sort of like that here, selfishly, since we only have a placeholder position at 0.1% of fund - awaiting some sort of pullback. The stock is down to low $130s after hours which coincides with its 50 day moving average. Might be a spot to begin scaling in, but frankly at 33-35x forward earnings it is hard to see huge upside in either this name or
Apple (AAPL) - we'd like to see more pullbacks on prices. Again, as with
Monsanto (MON) when everyone expects the world from you, many times any i that is not dotted or t not crossed leads to a sell off - expectations simply get out of hand on some of these names which is why I usually always cut back ahead of any earnings. In this case "earnings were light" - as with
Apple, the most likely scenario is the typical
underpromise then over deliver... but when the
underpromise part happens (today) people forget that in 3 months the over deliver part will come, and instead try to scrutinize every line item trying to find the "weakness"... weakness in 100% year over year growth. :) We've sold some of this off in the $100s, $120s, and $130s - but by and large the stock has been stagnant for the past 6 weeks while we chased more fruitful opportunities so that is
ok.
