Author: Barry Randall, Crabtree Asset Management
Covestor model: Crabtree Technology
January 2012 was a strong month not only for the Crabtree Technology model, but also for the capital markets as a whole. A steady stream of solid economic news, such as three-year lows in the weekly U. S. unemployment claims, bolstered confidence in general and investor confidence in particular.
In the world of technology, however, there were hits and misses, particularly when it came to reporting December quarter earnings. There were very solid reports from Apple, IBM and Netflix. Conversely, Google and Amazon disappointed, causing each company's stock to decline sharply the day after each reported numbers.
Among Crabtree holdings, IBM (IBM), Electronics for Imaging (EFII) and OSI Systems (OSIS) were the standouts, in each case exceeding expectations and offering forward outlooks ahead of expectations – either their own prior outlook, or Wall Street estimates.
Disappointments came from Symantec (SYMC) and Electro Scientific Industries (ESIO), though neither of those two companies' quarters would be considered to be "blow-ups" in Wall Street parlance.
Nonetheless, February will bring with it a rebalancing of the Crabtree Fund, and those companies failing to exhibit the key Crabtree characteristics (e.g. execution on their business model) will be swapped out for those still possessing them. Of course, earnings season for the December quarter won't be over until mid-February, so we'll have more to say in next month's report, plus an update on the fund's composition, which will have changed by then.
Because we don't really "react" to the general economic and financial news flow by selling current holdings or buying new ones, we typically don't pay too much attention to the daily headlines. However, we do have strong feelings about certain companies. Here are a few words about this month's featured Crabtree holding, IBM.
IBM continues to confound and amaze people.