School's in, folks. The markets continue to teach me expensive lessons.

I recently bit the bullet and dumped my underperformers at quite a heavy loss (I'm still up, though!). Yahoo!, after rebounding on earnings, decdied to start sliding down again. I decided to bite the 5% loss and just sell it off. I recently bought Cogent before earnings; my due diligence showed a promising company with low debt, steady earnings (in a lumpy contract market) and a promising industry (biometrics). What I didn't understand when buying was the market sentiment - apparently management doesn't care squat about the investors. The conference call was very weak, and I decided that although I'm still bullish on the long-term prospects of this company, there's no reason to tie in my money for 3-6 months before next quarter (3Q/4Q shoudl show lots of promise). I took a 15% loss (I didn't put in a stop-loss because I'm a moron). It's on my watchlist, and if it's still hovering at $16 about 4-5 months from now, I'll considering buying back in.

Another big lesson I learned was from PCU. I bought in at PCU in the early 90s and was expecting a huge earnings report from them. Their earnings, last week, was incredibly dissappointing. They reported lower income, no end in sight for the strikes that are affecting production. What bothers me more is that they continued to pay an astounding $2.25 dividend on lowered earnings. I have to imagine that GMEX (the parent company) is trying its best to pillage the cash hoard of PCU before the Peruvian presidential elections (with both outcomes looking as bad as the USA's past presidential election). PCU also entered into forward contracts for copper production at $2.80, which means their profit line isn't going to benefit from an increase in copper spot prices.

Not to mention GMEX is making a lot of noise of selling the company ... it just does not seem like solid fundamentals to drive the company for the next year.

So naturally I sold out at about $96. I was happy to walk away with money. The next day, I seemed vindicated when the price dropped down to $92.

Then it started going up. And up. All the way to $100 (today). It astounds my mind. How can a poor quarter and poor future quarters be buoying the stock? I'll continue to track PCU closely and see if I can learn my lesson from this.

Unlike PCU's earnings report, NXG's earnings report yesterday night was spectacular. The only downside was reporting the consensus $0.10 EPS, but things that are showing promise:

  • They unhedged the price of copper, so they should be able to take advantage of these spot prices when selling
  • They've lowered the net cost of the gold they mine
  • Further efficiencies in their stripping costs should improve margins (unlike PD)
  • They continue to pay off their debt (unlike PCU)
  • Vast upside from Young-Davidson mine and Kemess North
  • No political instability (it's a Canadian company!)

Here's to upside :)

So currently I'm holding TD, NXG, B, BTSE, and EWW (I bought this in solidarity of my Latino brothers). Let's hope my re-aligned portfolio will perform better :)

Currently listening to: Shakira ft Wyclef Jean - Hips Don't Lie
Posted by roy on May 1, 2006 at 12:46 PM in Finances | 13 Comments

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Comment posted on May 5th, 2006 at 09:45 AM
If PCU had cut the dividend, it really would have sent the share price spinning. A lot of people look at that dividend as a sign of stability. When you cut it for 1 quarter, it really makes people question the future of the company... this is why insurances companies continued to pay their dividend even after the 2004 Hurricane Katrina losses.
Comment posted on May 5th, 2006 at 10:44 AM
What's incredibly troublesome is if you look at PCU's cash flow, PCU's had a decreased cash flow (and it looks like the cash flow is going to decrease even MORE) this past quarter and they're keeping the dividend the same! EPS was only about $2.80, but they're still paying out $2.25! Notice they still have debt they could pay down... I really do think the parent company (GMEX of Mexico) is trying to get as much money out of PCU before they sell it.

Then again, the market seems to disagree with me - everybody is still loving the dividend. I imagine next quarter it's going to get cut way down... and the stock might spiral :/

Julian (guest)

Comment posted on May 4th, 2006 at 07:23 PM
yo, ever check out ?? Webblogs, Inc. runs it.
Comment posted on May 5th, 2006 at 10:44 AM
I dunno... I don't think I would trust any website that had the word 'blog' and 'stock' in it.
Comment posted on May 2nd, 2006 at 09:24 PM
Hi, whatever you do, whether you follow the earnings (fundamental) are go about trending curves (technical way), please do have stop loss in place for anything that you buy. You may be darn bullish, but chances are that there are factors which you haven't thought of that could pull the prices down. But for the stop loss orders you might be thrown out of the market.
Comment posted on May 2nd, 2006 at 10:03 AM
totally not related to this post... but... is on <a href=""></a>

Comment posted on May 4th, 2006 at 12:31 AM
interesting. how did you find this?
Comment posted on May 4th, 2006 at 06:02 AM
looking through the extended info of hit logging... it was one of the sites that someone got to my site from. (:
Comment posted on May 2nd, 2006 at 02:07 PM
i don't see it?
Comment posted on May 2nd, 2006 at 09:20 PM
This is what the link says

Latest Links:
Comment posted on May 2nd, 2006 at 09:16 AM
um. one thing to think about.

the market isn't nearly as reactive as you think it is. most of this crap they know about ahead of time.

google is good about keeping quiet.. most companies are not.
Comment posted on May 2nd, 2006 at 09:27 AM
yeah i'm aware of how sentiment can price in a value, but no matter what people think they know, an earnings report can set everything in stone. everyone knew NXG was going to have a good quarter, but it definitely reacted 6% (on top of a nearly 20% run-up in the past two-three weeks) .. so i think there is some market reaction, although most of the reaction does occur beforehand.

what bothered me mostly about PCU is everybody was expecting blowout earnings, which is why i perceived its valuation around $100 to have that priced in. without a good earnings, i thought maybe the max it should be worth was $90, which is why i dumped it. i'm still confounded as to why it's $100; it's shows OK earnings for a miner, but has the bad news not been priced in?

i guess only time will tell.