Mr. Dwane:
Yes, you're right. Not many companies can produce that many quarters of straight earnings growth. It sure isn't easy. And as for the quicksource link you provided, that is the same one where I got most of my information. All can be checked and verified from that site.
The picture found there was no more rosy than what I painted - since all of it was true. Net Profit Margins have increased for 4 straight years (year over year comparisons, not sequential comparisons since they can be apples and oranges). You'll notice their debt is nil, their ROE has been rising as well and a host of other great things that have been occurring. The catch? That link hasn't even updated the most recent earnings report which, IMO, was great.
Why did this stock go down on positive news? I won't attempt to try to explain the short term reactions of a stock price since they can be unrelated to anything fundamental within the company. I'm sure a lot of people were waiting to sell the second earnings were released, regardless of what they were. A one day reaction is far too short term to make an accurate conclusion on why certain things happened.
And as for your quote, "Every stock is a bad stock till it goes up," it was from William J. O'Neil. In my investment/trading history, I've found hundreds of people that employed excellent strategies but had very contradicting principles. So who's right?
I have to disagree with William on this point as he is taking a very short term outlook. What I often find the case to be as far as market psychology is concerned is quite disturbing. When a stock triples in value, everyone is talking about how clearly obvious it was. How no one possibly could have missed. How the rise was inevitable and that the company's fundamentals and growth prospects were easy signs to have read.
However, when a stock falters, the opposite happens. Everyone is saying "What's wrong with this picture?" "Is this company doing something illegal?" "If it's so good, why isn't it hitting new highs?"
I can corroborate this theory with a stock you mentioned yourself: THQI. At this point in time, you would not dare call THQI a laggard: Rising 150% in 5 months is impressive. However, it was only back in early '97 that the stock fell from 10 all the way to 5. And guess what people were saying all the way down??
Ding ding ding! You guessed it! Everyone was talking about how terrible the stock/company was. How there was obvisouly some hidden factor the market was aware of that they were missing. Of course when THQI recovered to 12 and continued to 20, no one was whining at all. When it's not your birthday, you don't mind getting presents.
Point being? Sure, ISTN isn't at a new high. And it may not reach one for another month, 2 months, 3 months, or possibly even longer (however, IMO, it won't take that long. The fundamentals always rule out over the charts). There aren't many things I can assure you of, but one is this: when ISTN is back at 10-11, everyone here will be acting as if they knew it all along. As if they weren't worried and their previous concerns were made in jest.
I do look forward to reading the 10Q. One thing I want to keep an eye out for is Account Receivable growth which hasn't been troublesome in the past but is always an aspect I like to check on as well as their cash flows. Interstate really is just sitting back while all these contracts and/or revenues sources are coming to them. With the economy doing so well, ISTN is positively affected. And I don't believe it'll be much longer for the market to reward them once again into a more proper trading range. After all, who can pass up a stock trading at 5x earnings? :-)
Conservatively Yours,
Raymond J. Norris |
