Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: With housing sales in a slump, you wouldn't expect construction materials companies to be doing particularly well this year. You wouldn't expect it -- but that's just what happened at roofing and sealant maker Carlisle Companies
So what: Carlisle reported a 27% rise in sales (from continuing operations) last quarter, alongside a startling 44% rise in profit. Granted, much of the additional revenues and earnings came not from Carlisle's construction segment but as a result of the company's absorbing the auto parts business of new acquisition Hawk. But still, the 16% increase in construction materials sales came as a welcome surprise.
Now what: Just don't expect a reprise. At today's prices, Carlisle sells for a whopping 18 times earnings, which seems optimistic if analyst estimates of 10% long-term growth play out as projected. The company's struggling with higher input costs (largely a factor of oil prices), which could stomp on profits at "construction materials" and "brakes & friction" alike. Seems to me, now's a good time to apply the emergency brake yourself, grab the profits, and exit the vehicle.
And when might it be safe to board Carlisle again? Add the stock to your Watchlist, and keep close watch on its progress.