The Week That Was: Alcoa, Microsoft, AOL and Nokia
Tim is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As bad as last week was – the 5-day stretch ended up being the worst so far in 2012 – imagine what it would have been if not for Alcoa? After announcing extremely impressive earnings the leader in all things aluminum almost single-handedly propped up the market – almost.
As investors shifted their gaze toward Spain–Greece is SO last month – and the continued debt problems plaguing the region, shareholders figured enough already. But even with that, there were no shortages of intriguing stories, even ahead of this week’s earnings announcements that are sure to make things even more interesting.
As mentioned in last week’s article Alcoa (NYSE: AA) absolutely killed it when they announced Q1 results on Monday. Perhaps most surprising was the reaction of analysts and investors – everyone seemed pleasantly shocked. But why? When Alcoa was first written up in late December it seemed pretty clear there were a confluence of positive signs heading into 2012. Macro economic conditions were improving – though many weren’t and still aren’t necessarily convinced – and a company like Alcoa absolutely needs a growing economy to (out)perform.
Also impressive – though many remain unconvinced and that’s their prerogative of course – were much of the earnings gains came from improved, streamlined operations. Sustainability becomes a concern when this is the case, but how can you fault a management team that is running their business more efficiently? How efficient? Revenue’s were pretty flat compared to Q4 of 2011 but the impact of mnaging their business better resulted in earnings of a whopping $0.10 a share compared to expectations of a $0.04 loss. Going, going, GONE!
AOL and Microsoft
To say investors took the news that AOL (NYSE: AOL) had (finally) sold 800+ content, security and other technology related patents well is a gross understatement. The company’s share price jumped a staggering 45% - give or take – and even more impressively has held on to much of the gains.
Interestingly enough unlocking shareholder value brought cheers for AOL investors, but Microsoft (NASDAQ: MSFT) – the patent suitor – seemed to get lost in the shuffle. Though up ever-so-slightly today, Microsoft continues to be ignored as they expand their offerings, grow revenues and pay their shareholders a sound 2.59% dividend. In spite of all this the company remains the cheapest in the sector – and an outstanding option for investors.
It’s clear the contrarian investment community brethren are about the only ones still in Nokia’s (NYSE: NOK) corner right now. The company continues to be beaten down, with last week’s downward guidance from management to blame for the latest slide. This comes in spite of the fact there should be nothing surprising about it really, other than management was perhaps a bit too giddy the end of last year when they announced sales expectations for the Lumia smartphone. Re-inventing yourself isn't an overnight process, and that's exactly what Nokia management has taken on.
At this point it appears Nokia and CEO Stephen Elop are the target of investor’s outrage and while there may be some basis for that, there are still those – myself included – that like the direction the company has taken in attempting to improve itself. For investors Nokia is well worth a look – and at historically low prices this is especially true for contrarians.
The investment opinions included are just that, opinions. Investing involves risk, as you well know, so consider your decisions wisely. Tim holds no position in the securities mentioned in this article. Motley Fool newsletter services recommend Microsoft and Nokia. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.