Wednesday, April 8, 2009

Tough Start to Earnings...What Does it Mean?

Earnings season kicked off with a loss by Alcoa, and some soft numbers from a stock I own and follow, Mosaic (MOS). They missed expected numbers by quite a bit. The numbers don't actually matter that much right now. Many times with these announcements, the outlook is more important than the actual results. The market is forward looking, not backward. So, here's the quote from CEO Jim Prokopanko:

"Despite the turmoil in commodity markets, we remain confident that long-term agricultural fundamentals are excellent. This is a self-correcting cycle because demand for crop nutrients can only be deferred for so long," said Jim Prokopanko, Mosaic's president and chief executive officer. "Large crops are still required to secure the world's food supply and crop nutrients will play an essential role in achieving that objective. We are well positioned financially and strategically to serve our customers and create value for our shareholders."

I am a believer long term in agricultural products. We've heard time and time again from the likes of Jim Rogers that this is truly one of the coming themes, and investors would be wise to heed that advice.

Mosaic did miss last quarter, and investors reacted worse than they are today. The stock gapped pretty low in the morning, and worked its way back up throughout the day. The so-called "dumb money" typically trades in the morning, while the "smart money" trades at the end of the day, so we often see over-reactions as stocks open with questionable results. The stock is lower this morning, but not by a whole lot. I'm holding my position.

Long MOS.


Dan said...

Hey Mike,

Have you followed tech recently? I'm Long Sirius XM Radio (SIRI) and love to watch it all play out. I loaded up at 0.09 and I've seen a 350% return with hopes for higher gains as the auto market rebounds in the future. Thanks for the updates on the Ag stocks.

Michael said...

Hi Dan,

Tech in general has held up better than a lot of the market, and many of the big tech companies still have a strong outlook. I own tech through a 2x ETF (symbol QLD). As far as Sirius goes, I love their product. Fundamentally they have a lot to sort out (mostly cut down their debt). The merger was probably the best thing for both companies and will likely ensure their survival. But for trading, these are the kind of stocks that are moving. You clearly got it at a great price, and there is a good opportunity to make money on these types of trades. I follow a lot of people doing that via Twitter and Stock Twits. There are some great traders and most tell when they are moving into/out of stocks. Its a great resource. Thanks for the comment!