Earnings Preview

We have 2 late filers tonight in Brazilian homebuilder Gafisa (GFA) and American iron ore producer Cleveland Cliffs (CLF). It looks like they will be reporting later in the evening, but I expect positive things from both - but wish to hear something negative to lead to selloffs in both to build up positions. I really doubt anything of that nature could happen in CLF simply due to its long term iron ore contracts but maybe in GFA.

Andarko Petroleum (APC) which is a natural gas/oil hybrid is out late this evening and continues the drumbeat for successful outcomes in that space. Frankly, the dichotomy in this market is very easy to spot. You can either buy (a) trash that has bad earnings, and unclear prospects on hopes you are catching the “bottom”, the “strong dollar” will last more than a week and a half, “the 2nd half recovery” is imminent and the stocks are “cheap based on full year 2008 estimates” (which will be slashed within 6 months, and thus turn from cheap to expensive) and hope enough of your fellow bulls buy the company line and take your stock up or (b) you can buy stocks with massive global underpinnings, explosive earnings growth, and go from “somewhat pricey” to “cheap” everytime they report a great quarter and raise guidance. Myself, I’m more of a (b) guy but in the past week we’ve seen the (a) guys show their faces - which they do every so often. I have a few (a) stocks sprinkled into the portfolio so that in weeks like last we don’t get decimated but frankly the sight of DR Horton (DHI) next to a fertilizer or coal stock is a bit amusing. Again, if I am completely wrong and our economy will return to full or near full growth rates by the 2nd half, the (a)’s are a huge bargain here. But you can have them; I don’t see a reason to keep grasping for hope when we have fantastic stories playing in front of our eyes outside the United States of Subprime. Now again, the foreign markets are not risk free as global inflation will be impacting their populaces - but some of these countries have foreign governments loaded with surplus, either through petrodollars (thanks USA!) or trade surplus (thanks USA!) so they can subsidize growth in a way we could only hope to (with our money).

Off we go to a very busy day tomorrow….

Bellweather types…

Cisco Systems (CSCO), Fannie Mae (FNM) < — should be a disaster on results but as long as it’s “better than expected” the stock can rally, Teva Pharma (TEVA), UBS (UBS), Walt Disney (DIS)

Of interest…

Brazilian bank Banco Itau (ITU),

Natural gas player Cimarex Energy (XEC),

Clayton Williams Energy (CWEI) < — what a chart, Brazilian steelmarket Companhia Siderurgica Nacional (SID),

James River Coal Company (JRCC) - this is an unprofitable coal company but has a lot of unbooked production so could be a good lottery ticket,

Kinross Gold (KGC) - we just sold this today; one issue with miners is they are going to start seeing their costs go up as fuel, steel (for machines), rubber, etc all starts to skyrocket (darn that inflation that doesn’t exist),

MGM Mirage (MGM) - this is a name on upticks, will appear to be a great short since the # of Europeans and Asians coming to Vegas should not offset the fleeing Americans over the next year or so. They don’t have Macau (China) exposure to provide hope to bulls either. [Stocks/Sectors I'm STILL Bearish On] Speaking of which, small casino operator Tropicana just filed for bankruptcy; again folks I cannot stress enough to avoid almost anything tied to the US consumer (that the Federal Reserve won’t try to prop up); outside of a trade it’s not worth it.

Papa Johns (PZZA) - inflation (that does not exist) here, inflation (that does not exist) there,

Playboy (PLA) - hey I like to look at the annual report, sue me,

Ruth Chris’ Steakhouse (RUTH) - high end restaurant,

Tesoro (TSO) - I keep reading that these refiners need to rally any day now… unfortunately I’ve been reading that for 3 months now,

Our holdings…

DR Horton (DHI) - we’ll see bad news, but these stocks seem to ignore bad news the past 4-5 months because… well… “it cannot get worse”

Huron Consulting (HURN) - this consulting company has warned twice since I’ve owned it, and expectations should be low after the most recent go around.

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