IRA Investing: Market Indicators Weaken

Interestingly, one of the stocks that I had owned in this screen was TBS International(TBSI Quote). This particular company was due to report earnings last week on the day before I was to rebalance my screen. Usually, I wouldn't let this fact affect my actions, but I had a large gain in the stock and felt some insurance might be warranted, so I sold the stock a day early and waited for earnings.

As is usually the case when I try to second-guess short-term stock market action, earnings turned out to be great, and the stock just continued to move higher. Making things even more complicated, TBS had now qualified for my main screen as a buy, so I bought the stock back the next day for about 3% more than my sale price. Fortunately, the stock has continued to work its way higher.

TBS is a shipping company. Shipping rates have been quite strong recently, and this industry has been one of the best-performing stock market groups. My concern with the recently reported TBS quarter was that the company is undergoing a major drydock and vessel upgrade program. I was worried that increased drydock days might lead to earnings problems.

Indeed, drydock days more than doubled in the quarter from 94 to 212. But rates were so strong that revenue increased 11% and EBITDA was up 43.5%. The future looks bright as well, because this rehab program will start to wind down later in the year, and earnings should benefit well into 2008.

With increasing international trade, it doesn't seem likely that shipping rates are in for a major decline. In terms of valuation, TBS sells at a 20% discount to the median company in the shipping industry, using the EV/EBITDA metric.

My other monthly screen sales were:

• Asbury Automotive Group(ABG Quote)
• Nexstar Broadcasting(NXST Quote)
• Novamerican Steel(TONS Quote)
• Valspar(VAL Quote)