Thursday, July 27, 2017

Winner, Winner, Mexican Dinner.

OK, so you can have your Amazon, Facebook, Netflix, and Google (FANG) and we all have them, if you own an S&P 500 Index fund (which you should), they represent the top holdings and most of the gain you have had over the past 5 years.  That's great, and it's right in your face - or on your computer - whatever.  They're easy to spot.  The virtual low-hanging fruit.  Buy them, don't buy them - the market moves on them, and it's probably just best that we own an index fund and let it run on its own momentum - of which there is plenty.

The fun, and to me, the interesting part comes in finding the high-hanging fruit.  The companies that require a little effort and sometimes patience.  One of them is yesterday's Limelight Networks, which is up again today off of yesterday's great quarter.  Another is Mexican casual "fast-food" chain DelTaco Restaurants (TACO) which reported earnings today.  I waited with clenched teeth and sweaty palms, because the casual dining segment has been a mess. Some have prospered and others have failed.  The view here was that DelTaco is a growth story, and its growth continues.  The big "if" was the profits and earnings.  I'm happy to report...

That's a beautiful thing, coming from the restaurant group.  Eight-percent growth, meeting or exceeding earnings, and raising guidance.  The guidance is the key.  If they didn't raise guidance, the stock may have suffered, as investors were probably looking for an excuse to sell it and move on.  As it is, there is no reason to sell this, and there may even be a reason to buy more.  After hours today, the stock is up 29 cents to $13.10, which is basically where it has traded at the high end over the past month or three.   Let's see if Wall Street expresses confidence in them by driving the price up into the 14 to 15-dollar range.  That would show me something.  As for now, I'm a happy long, and I'll look forward to 2017 and 2018.  Maybe I'll get to eat at one of their restaurants?

As for the rest of the goings-on, Starbucks deserves a look if you have a long-range time horizon.  The stock is down after reporting a quarter that didn't give anybody a stiffy.  For those of you with longer term horizins, there may be a buying opportunity.  Just like their coffee, let it cool off a bit before you start sipping.  And, you should sip, not gulp.

Wednesday, July 26, 2017

One Down, Several to Go.

When the CEO of a company you are invested in says something like this (below) I couldn't think of a better reason to (a) have tremendous confidence in the company and (b) encourage me to buy more.  Regardless of whether it's a huge conglomerate like Ford or Boeing, or a tiny microcap like Limelight Networks (LLNW) I am thrilled to be in this, and looking forward to watching them grow in 2017 and beyond.

As for the numbers:

Limelight Networks, Inc. (LLNW) (Limelight), a global leader in digital content delivery, today reported revenue of $45.4 million for the second quarter of 2017, up four percent compared to $43.6 million in the second quarter of 2016, and up one percent compared to $44.7 million in the first quarter of 2017. Currency headwinds negatively impacted year-over-year comparison by $0.3 million, or one percent.

Gross margin was 47.1% in the second quarter of 2017, an increase of 390 basis points from 43.2% in the second quarter of 2016.  On a GAAP basis, Limelight reported a net loss of $1.6 million, or $0.01 per basic share, for the second quarter of 2017, compared to a net loss of $57.9 million, or $0.56 per basic share, in the second quarter of 2016. The second quarter of 2016 net loss included a $54 million provision for litigation related to the settlement of the Akamai lawsuit.  Non-GAAP net income was $2.9 million, or $0.03 per basic share, for the second quarter of 2017, compared to non-GAAP net income of $0.6 million, or $0.01 per basic share, in the second quarter of 2016.

And thus goes the first report of my earnings season.  Tomorrow, we hear from DelTaco (TACO) after the market close.  I'm still contemplating adding more, but it might be prudent to wait and see what they have to say.  Chipolte had a nice quarter, as did McDonald's. But Buffalo Wild Wings stunk it up, and the stock was halted.  Ended the day down about 9% after saying that the price of chicken wings was a headwind.  Gee, when your business is serving chicken wings, I'd think that you should be better at managing that obstacle.  Having eaten there a time or two, I wouldn't buy the stock based on my experience.

The casual dining area is difficult, and if DelTaco can impress with a strong quarter and put out a nice forecast for the remainder of the year, it would present an attractive buying opportunity for long-term investors.

Monday, July 24, 2017

Earnings Season! Rabbit Season! Duck Season! Earnings Season!

You know the drill.  It's been three months since they last reported, and God forbid we go more than twelve weeks without having our opinions changed about companies that we liked at one point - or hated - whatever.  Twelve weeks isn't long enough to age wine, let alone figure out what's going on in the high-end world of finances, but it's here, so we deal with it.

Alphabet (nee Google) reported after the close tonight.  The numbers looked pretty good to me.  They beat on the top and bottom line, increased hits and decreased the costs - but Mister Market saw fit to drop the hammer on them after hours.  That tells me that you might get a bargain if you're a buyer.  Wait for the legendary three-day period before jumping in.  It takes a long time to unload a $900 a share stock.  Let it settle-in.

Otherwise, yes I eat my own cooking. Last week, I picked-up shares of Square (SQ) at $26.  I suspect it hasn't run its course yet, and there is still a lot of settling to be done in the payment space.
I sold shares of Micron (MU) to finance it, so I'm counting on the semiconductor companies to be through with their run and make this a good trade.

As for another favorite, Rocket Fuel (FUEL) they have been purchased by a private equity firm, and the transaction was a net loss for me.  Proving that not all takeovers are positive for shareholders.  Nevertheless, I sadly sold my shares for $2.65 and will be using the money to make an attempt to gain back that loss - which is usually a sucker's bet - but I'm a sucker, so I'll go with it.

Limelight Networks reports earnings on Wednesday.  The stock has been gradually climbing out of the $3 range, and is at $3.18 as I write.  I'm planning on buying more before they report.  I am confident that their market in India is strong, and will provide the company with strong growth and earnings into 2018.  We'll know more after their call, but that's the game we play.

The rest will go into a stock that I like, but as Karen Finerman would say, "I'm long and sad."  DelTaco has been trading downward for a month or so.  Several analysts have put a price target on it significantly higher than the current $12.08 price, so this believer is still buying.  Currently, I own over 300 shares.  I'll either look like a giant nitwit or a genius - but that's the game we play.  There is too much growth in this company to be ignored.  An earnings call should come next week.

I'm standing pat on the rest of the calls. Cisco, Pfizer, Extreme Networks, and Square all report in the next couple of weeks.  I'm more confident in EXTR and SQ than PFE and CSCO, but I have been surprised before.  Sometimes, low expectations can work in our favor.

Face east and get on your knees.