Weekend reading and the week ahead

Spent part of my weekend reading about Praxair -- interesting company. They sell industrial gases including hydrogen for oil refiners; oxygen for medical use; helium for fiber optic lines; carbon dioxide to preserve your orange juice; a bunch of gases for use in making semiconductors; oxygen for increasing energy efficiency; and I think oxygen for lowering the cost of steel production. Bottom line is that they benefit from 2 forces -- economic growth and their ability to innovate or find new applications for industrial gases.

The management is very focused on return on capital and free cash flow -- they do ok on the numbers. No where near as good as Graco or Factset but pretty good relative to most chemical companies or most other manufacturers. Their growth is helped by growth in energy, emerging markets and environmental needs (hydrogen in refining removes sulfer). To me this is a play on the growth of manufacturing and a classic Philip Fisher play on innovation. Its kind of on the expensive side now but that depends on what future earnings will really be -- if they are able to keep beating estimates then the stock is cheap. plan on doing some more thinking on this one -- could be an interesting addition but it might be just one to watch and wait on.

This is a big week -- UEPS will finally report June earnings -- key is what they say about nigeria, wage payments and any update on the welfare distribution RFP of the South African government. Those are the 3 biggest issues but obviously I'm assuming they didn't miss numbers.

DFR has its actual dividend payment and its first repo refunding since the end of July. If they make the dividend payment, then they believe they will make the repo refunding -- why would you pay the dividend if you expected trouble? If they make the repo refunding that gives them some breathing room for the next few weeks and is a good sign. TMA was not able to do their refunding -- that's why they "sold" $20 bill worth of mortgages. As I joked with someone this weekend, if the stock makes it to $13 then most likely the liquidity crunch is over for them and the story will shift back to whether they can meet estimates or what the dividends will be in the future. So anyone that is saying if it just gets back to $13, then I'll sell is missing the point.

If it makes it back to that point then the reason to sell -- concerns about liquidity and survival -- will no longer be an issue and therefore you might as well hold. But if the stock stays below $10, then most likely the liquidity issues persist.

Its very easy to assume there are no problems since the stock has moved up but that is not true -- all the same issues are there in the mortgage market, its just the sellers were exhausted temporarily.