Author: Yale Bock, YH&C Investments
Covestor model: GARP
Disclosure: Long GIGM, DGI, NDAQ, CASS, CLGX, JMBA
January 2010 was a month of increasing volume and very eventful, with a slew of earnings reports, the State of the Union Address, and the recent turmoil in Egypt. I see February as an extremely volatile month, and I suspect the volatility will persist because of the events in Egypt, which certainly bring an unknown to the market. I will continue to own what I currently own, as every company has performed pretty well, except for the hole in the boat which is called Gigamedia.
Covestor Model: The Reasons for Owning the Portfolio Holdings
1. Gigamedia: The stock has been terrible and really has hurt the portfolio. The company released earnings on January 26, 2011 for only the 3rd quarter of 2010 and the results were terrible (Source – company press release http://bit.ly/eWICIA). Cash burn from operations was around $8 million, and the company expects about the same in the 4th quarter, with the write down of the T2CN division probably taking place then. On the positive side, the 3rd quarter was probably the worst of it and they did say GIGM will be profitable in the back half of the year. The AEA game has been released and the company developed a Flash Mah Jong game for Yahoo and Facebook. The Spongebob game with Viacom should be developed at the back half of 2011, which is very disappointing. Finally, IAHGames will be included for the full 4th quarter, so that should give us a better look at where that business stands. After the report, the stock got bombed again, but I will still give them another 6 months to give me reasons why I should continue to own it, and if not, will have to adjust as events play out. It makes no sense to sell it now with the price where it is.
2. Digital Globe: Again, the reason for ownership of the company is the continued increasing demand by governments and private enterprise for digital photography from satellites, to help with defense, intelligence, and information collection. The business is very good with free cash flow generation at about $70 million per year. Not much happened in January, but the company releases earnings on February 21 and current estimates for revenue and EPS are $84 million and $0.04 (Source: Yahoo Finance).
3. NASDAQ: The company announced a large buyback where they borrowed $370 million dollars to fund a $500 million share buyback. The buyback constitutes a bit over 10% of the outstanding shares. NDAQ also announced they bought two companies – FTEN to help brokers manage risk, and Zoomvision Mamato to help investor relations firms. (Source: Yahoo Finance)
4. Cass Information Services: Solid company and continues to perform well as the latest quarterly report was solid. On January 27th the company reported revenues of $25 million and EPS of $0.54 a share for the 4th quarter of 2010, a 20% and 17% increase of their respective numbers year over year. CASS declared a 1Q11 dividend of $0.16 per share, payable March 15, 2011 to shareholders of record March 4, 2011 (Source: press release .
5. Corelogic: The company announces earnings on February 24, 2011 for the 4th quarter of 2010. The company announced a $100 million share buyback. CLGX sold their employer services and litigation support business of First Advantage for $265 million in order to make acquisitions in core areas, like the completion of its purchase of Experian Information Solutions, the 20-percent ownership interest in CoreLogic Real Estate Solutions, LLC (formerly First American Real Estate Solutions, LLC). Initiated in April, the transaction closed as scheduled for the purchase price of $313.8 million.
In addition, CLGX bought RP Data, the leading provider of residential and commercial property information throughout Australia and New Zealand. The company is the largest supplier of electronic property valuations and consumer reports in Australia. RP Data serves more than 10,000 clients including a significant market penetration with real estate agents, appraisers and financial institutions in Australia and New Zealand. For RP Data financial year ending June 30, 2011, RP Data has provided EBITDA guidance of A$30 million to A$32 million.
6. Jamba Juice: Jamba Juice reports earnings on March 7, 2011 with revenue and EPS estimates of $39 million and $0.15 per share. (Source: Yahoo Finance) The company announced the first opening of their South Korean franchise store in the Incheon Airport in Seoul on January 31, 2011 with partner SPC Group.
