Monster Portfolio Week 42 Results

MONSTER PORTFOLIO 2011

Balance: Inception 01/07/11
$1977.32 Stock
$13.65 Cash
Total $1990.97

Balance: End of Week 41 10/28/11
$1,506.05 Stock
$1,059.87 Cash
Total $2,565.92

Since Inception: -1.53%

Back out cash inflow and we have a balance of $1,960.42. 

Welcome back everyone!  So I was able to dig into Weatherford’s (WFT) 3^rd qtr. earnings transcript last week and I’m here to say that WFT appears to be doing all of the right things. (All of the right things that are within their control.)  The positives outweigh the negatives.  First I will cover the negatives to get them out of the way.  These are the issues that negatively impacted their earnings.

Negatives

1.      An increase in the effective tax rate reduced the earnings by $0.01

2.      Foreign exchange book losses accounted for a $0.03 hit against earnings

3.      Middle East, North Africa, and Asia Pacific revenue declined $45 million due to increased start up costs in Saudi Arabia, Kuwait and Iraq, contracts in Algeria lapsed and WFT was forced to demobilize and relocate outside of the country, and lastly higher incurred costs in Iraq due to shut down costs, idling costs, and problems with recent started operations

4.      Net debt increased roughly $301 million for a grand total of $7.3 billion in debt

Positives

1.      Quarterly revenue reached a record high of $3.4 billion

2.      Year on year revenue growth of 33%

3.      Sequential quarterly growth of 11% (Always a positive to see revs higher on back to back quarters.)

4.      Continued positive outlook for North America (Conservatively)

5.      Positive outlook for Canada which has lagged for years

6.      Increasing margins and volume in certain product lines including artificial lift, production optimization, formation evaluation, and open hole completion for North America in 2012

7.      Positive outlook in Latin America, Russian, and European operations

8.      Increased activity in North Africa (Libya and Algeria)

9.      Margin improvements internationally for the 4th qtr. and strengthening into 2012

10.  15-20% of North America earnings is from fracking, which means more room for growth

In conclusion of the earnings I still continue to believe that WFT is a viable investment.  There is much room for improvement!  That being said I believe Weatherford is on the right track to increase revenue and improve their operations.  The one thing that is a slight concern is the increased debt, but as a company grows to increase market share in a competitive industry taking on debt to grow is quite normal.  If the debt to equity continues to increase passed Q3 of 2012 I may change my tune.  So my recommendation is to continue to buy WFT on the dips well into 2012 as the strength in earnings will continue with elevated crude prices.

I would also like to disclose that I sold a large stake in WFT on Thursday and Friday as selling into strength is what I do.  This was mostly because I had to much invested in WFT and I had to reduce my risk.  Since October 4^th Weatherford has increased in value by 35.97% as of Friday’s close.  A run like that deserves a little profit taking.  You have to lock in your profits while the gettin is good!  Remember I try to think like the big fund managers. And currently they are selling as we saw some profit taking today.  My objective is to make as much money as I can while reducing my risk along the way!

Westport Innovations (WPRT) reports tomorrow.  Depending on the outlook I may try to sneak back into the speculative alternative energy play for the remainder of the year.  I still have a goal to finish up 10% on the year and I have to pick my stocks wisely as I’m running out of time. LOL!


All research was derived from Weatherford’s website and can be viewed by clicking on WFT (hyperlinked)

Have a great night! 

Clay-

“When in doubt buy more!”

Current Holdings:
Apple (AAPL)
Cosi Inc. (COSI)
Weatherford International (WFT)