earnings, market

I mentioned last note that we could see a pull back post options expiration and so far its been more up and down action but not really getting anywhere. The pattern of the last few months would suggest we are ready for a 3-5% whack after going nowhere for a week or two. then we rally hard to new highs. of course once everyone recognizes the pattern it won't work. how do you know? well in the past every time we sold off a few percent the hedge funds/traders that are negative go too far -- they load up on puts and start shorting and then when the downside momentum stalls and starts to reverse they have to cover and sell their puts, which adds fuel to the rally. So if we get a decline and you don't see a lot of puts being bought or get the feel that there is panic or if you don't see the bears come out and gloat that this is it -- finally the decline is here. That's when you should be more concerned.

Earnings have been strong for many companies but stocks have not reacted well which coincides with us being over bought. I am not worried about that -- it fits in more with a consolidation. As the quarter plays out and people keep getting more positive info on business trends I would expect stocks to move up again. If not, that just sets us up for a strong earnings season in Q1 -- i.e. you either get the move up before the reports like in Q3 or after the reports like in Q2 but as long as fundamentals are improving the stocks will move up.

I mentioned semi's last note too -- about all the concerns about double ordering. This note from Bob Faulkner writing on minyanville.com sums it up well:

http://www.minyanville.com/articles/ordering-double-semiconductor-sector-texas-instruments-fairchild-index-OEM/index/a/25063

No one double orders unless they are worried about getting their chips when they want them. That doesn't happen as long as lead times are short and not increasing.

Earnings -- FLIR -- solid numbers. Some analyst downgraded the stock on valuation concerns. ok. I could see it being fairly valued near $30 depending on what happens with estimates going forward. As the economy improves I would expect demand to drive upside to numbers -- meaning fair value might be $30 now but it could be $35 within a few months as numbers go up. secular story is powerful.

CY -- strong revenue growth sequentially and guidance for the next few quarters for growth vs. normal seasonality of declines. That was pretty positive in my mind but the stock has done nothing but drop since -- tied in I think to concerns its all just inventory or double ordering or whatever. fine. those concerns are wrong and this secular story will continue to improve -- question is how long will it take to be reflected in the stock. at least for now its probably best to play the volatility -- buy on the dips towards $9 and trim on the runs to $10 and higher.

CLB -- wow. very strong report especially on a cash flow basis -- to have as much free cash flow in 9 months this year vs. all of last year is huge. The stock has been a strong performer this year. -- one that I really should have loaded the boat on when I had the chance near $50. bought some but not enough of this great franchise. more after I review the details and think about valuation. On a near term basis its clearly vulnerable to a pull back in commodities/rally in the dollar.

LH -- strong free cash flow and great pricing. Volume was flat so the growth came from pricing. I say great because in the midst of a still recovering economy to be raising prices -- even if some or all of it is a mix shift benefit -- is a great sign. Stock has run into the $71 range. I sold calls on my position just in case we get a post report pull back but the valuation is not hard to handle given that the stock sells for less than 12x free cash flow for 2009. i could easily see this stock working its way higher towards the all time highs (low 80's) over the coming months. in terms of the government -- that is a risk but I think there is so much more opportunity in higher cost testing (imaging) and in other high cost areas that labs should not be a big focus.

enough for now -- hopefully more on earnings as I digest.