Trump, Home Solutions Remain Clunkers

Total revenue rose 1.8% at Trump's Taj Mahal site, increased 0.6% at Trump Plaza, and fell 1.5% at Trump Marina, as decreased slot machine use at all three properties hurt results.

The data were particularly weak given that Atlantic City casinos were closed for three days in July 2006 because of a government budget shutdown.

Home Solutions Questions

Home Solutions, another stock I've flagged as overvalued, reported earnings late Thursday of 15 cents a share for its latest quarter, which was essentially in line with guidance. Revenue more than doubled from a year earlier to $51 million, helped by numerous acquisitions.

Despite the improved results, the stock was down 65 cents, or 11%, to $5.17 in recent trading.

There are several reasons for investors to remain wary of Home Solutions. Management is not giving earnings guidance for the remainder of the year -- a new policy. The company also continues to give zero additional color on its previously announced $200 million in contracts for projects in New York City and Tampa, Fla. The company still hasn't verified exactly where the bulk of these jobs are located, as I reported in June.

Home Solutions also did not include a balance sheet in earnings release, so investors have no idea if the company's accounts receivables ballooned in the past quarter.

We do know, however, that the company continues to take longer to collect its accounts receivable. This is a huge red flag. Home Solutions said its days sales outstanding -- a measure of how long it takes to collect revenue from customers -- rose to 105 days in the second quarter from 90 days in the first quarter.

One of my major knocks on this company is that it manages to produce earnings and revenue growth each quarter but has done a horrible job of converting this revenue into cash.

On its earnings call, management said the company had $12 million of negative cash flow from operations, while cash was at the $5 million level, slightly lower than the $5.5 million from the prior quarter. Analysts had been expecting the company to turn cash flow positive at some point this year.

Management also continues to do a poor job of explaining just how far its margins will fall in coming quarters as the business model shifts from higher-margin hurricane recovery work to lower-margin construction management work.

My earnings model takes a more conservative stance on margins and revenue growth, which is why I expect Home Solutions to report earnings per share of around 40 cents to 45 cents this year, as opposed to the 60-cent average estimate from the two analysts following the stock.

Bricks and Mortar Portfolio A look at how Nicholas Yulico's picks have performed
	Rating Date	Price at Rating	Rating	Current Price*	Return**
Brookfield Properties (BPO)	1/23/2007	$28.67	Own	$24.57	-14.3%
Global Real Estate ETF (RWX)	1/23/2007	$64	Own	$61.41	-4.0%
Ryland (RYL)	1/23/2007	$56	Flag	$38.44	31.4%
Trump (TRMP)	1/23/2007	$17.50	Flag	$7.60	56.6%
Penn National (PENN)	2/6/2007	$45.56	Own	$56.83	24.7%
Hilton (HLT)	3/2/2007	$34.69	Own	$44.30	27.7%
Melco PBL (MPEL)	3/12/2007	$15.46	Own	$13.27	-14.2%
Home Solutions of America (HSOA)	4/24/2007	$4.98	Flag	$5.82	-16.9%
Starwood Hotels	7/12/2007	$72.37	Own	$56.16	-22.4%
Average Total Return, Unweighted					7.6%
	Close At Start of Portfolio			Current Value
S&P 500	1427.99			1453.09	1.8%
U.S. MSCI REIT Index	1140.36			979.9	-14.1%
*(8/9/07 closing prices) **For "flagged" stocks, a drop in price is tracked as a positive for the portfolio, and a rise in price is a negative.

'Bricks and Mortar' is a mock portfolio meant to generate investing ideas. In keeping with TSC's editorial policy, Yulico doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.