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Cracks in the Gloom


In the world of investing, quarterly conference calls are an opportunity to review a company’s performance as perceived by management. On a call, usually the CEO makes a broad summary of the previous quarter and sets expectations going forward. The CFO explains the numbers, adding some detail and background not included on financial filings. Then they take questions.

The questions are posed by stock analysts at large firms, or by private investors. Listening to the questions, and the answers, is a wonderful way to learn more about how a company is run. It is also a great way to insight on related businesses and general economic conditions. Since every business depends on customers and suppliers, good management knows a lot about both.

I’ve just finished listening to my second call for this “earnings season”. I heard Abaxis (ABAX) tell me that their customers—doctors and clinics—are concerned about the future and resistant to spending $15K for the sophisticated blood-testing machines the company makes. I heard Fresh Del Monte Produce (FDP) tell me that consumers of fruit are buying less pre-cut and more whole fruit because of pocketbook concerns.

This supports the perception that general economic conditions are not how most folks would like them. Both companies are seeing changes in customer behavior and attributing it to “tough times”.

Yet both companies offered an upbeat and optimistic view. By listening to the question-and-answer sessions, I think one can get a better estimation of sincerity. These execs weren’t just doing PR. They’re genuinely pumped.

The ABAX team had a particularly positive tone. The numbers came in better than expected. They’ve solved some manufacturing problems. And their product saves their customers time and money. So, if clinics are tightening their belts, ABAX is in great position to help.

At FDP, they also beat expectations. The end of the oil bubble helps them at every phase, from the cost of fertilizer, to reducing freight rates, to leaving more money in consumers’ pockets for small luxuries like gold pineapple. Fruit and vegetables are a staple, and substantially recession-proof. Both sales and share price are well-positioned to rise.

The common idea of “the economy” is too broad. Here are two companies doing well in the midst of a sour economy. So how bad is it really? Some companies and industries are hurting. Or failing. But the gloom is not as solid as the media portrays. There are always opportunities.