It's impossible to know what the market is going to throw at you from day to day. One day the market might be up 1%, because earnings look great. The next day we're down 1% on weak earnings or because German Chancellor Angela Merkel told Spanish Prime Minister Mariano Rajoy his tie is ugly.
OK, the problems in Europe are much more serious than that, but the market can be unpredictable. So as much as I enjoy looking at which markets are up and down every day, I only use the price wiggles as an indication of where to poke around for big news stories and ideas to research.
I'll make an occasional small speculation in the Orange Portfolio, but for the most part I'll be buying companies with above-average returns on invested capital, valuations that don't reflect their growth potential, and, if they have debt, enough cash flow that repayment shouldn't be an issue.
Check Point's great quarter
The qualities outlined above are precisely why I purchased shares of Check Point Software Technologies
This week's second-quarter earnings showed more of the same. Revenue was up 9.3% to $329 million and operating earnings jumped 20.3% to $181 million. Just as important is that deferred revenues, an indication of future sales, were up 17%. Tack on a $1 billion share repurchase program and you have a great set of results.
The negatives were some weakness in Europe, accounts receivable growth that outpaced revenue growth, and a slight decline in the rate of revenue growth. The weakness in Europe and slightly slower growth aren't a surprise given the economic data that have come out the last few months and I'm not yet worried about the accounts receivable growth. Overall I still like the shares a great deal at their current price and will be looking to add to the position.
Here are two other stories that caught my eye this week.
APB owns the well-known Tiger brand of beer and also has the right to brew Heineken in these markets. That makes this a logical deal for Heineken, particularly when you consider that Thai Beverage was starting to build an ownership position in APB. I think all of the major beer producers are pretty richly priced right now, but they're always worth keeping an eye on because of their long-term growth potential in emerging markets.
China and iron ore
Earnings reports are due in the next few weeks for the Orange Portfolio's other three holdings and while I'm not jumping to buy industrial metal companies right now there are a couple of new buy ideas I'm working on. So check back next week for all the latest global investing news and portfolio moves.
As a reminder, you can follow along with all my real-money Orange Portfolio trades and updates here.