The Key Earnings for the Week Ahead: Express Scripts Holding Company (ESRX)

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A very interesting collection of companies will be reporting this week (the week of Feb. 18). Sometimes, constructing a portfolio ends up in actually creating a de-facto an ETF that apes the market or a sector in terms of performance and risk. On the other hand, if you take a sniper-like approach to finding a collection of companies, each with their own profit driver, you can achieve good diversified returns. There are quite a few of these sorts of companies giving earnings this week, so keep an eye out.

Express Scripts Holding CompanyMonday

Express Scripts Holding Company (NASDAQ:ESRX) gives numbers, and investors in CVS Caremark Corporation (NYSE:CVS) and Walgreen Company (NYSE:WAG) will have an obvious interest in its commentary.


There is no doubt that the Herbalife Ltd. (NYSE:HLF) conference call will attract the most media attention today. By now, everyone will have seen the infamous Ackman/Icahn public dust up. I found it somewhat irritating that the CNBC journalists insisted on desperately trying to turn it into a Icahn/Long vs. Ackman/Short event. Yes it is great television (and Icahn has subsequently disclosed that he has taken a large position,) but there is  danger that private investors can find themselves seduced into getting involved in a bitter game of poker between these two investors. A game in which you would be betting but you can’t even see the cards. Make no mistake, these guys go on television in order to influence you to play.

From my point of view, Herbalife has questions to answer over its distributor model, but Ackman is taking a significant amount of risk (as Icahn correctly pointed out) with this position. I happen to think there is a lot of merit in what Ackman says about Herbalife, but I wouldn’t invest a cent in any manager willing to take a “conviction” position like this.

It now looks like Icahn is testing the resolve of Ackman (or rather his investors,) and what happens next will be fascinating. The key point here is the relationship between Ackman and his investors and Icahn must surely know this.  If they start threatening redemptions than a short squeeze could ensue and Icahn makes a lot of money. In my humble opinon, private investors should stay well clear of all of this. There are thousands of other instruments to invest in rather than getting involved in this game.

If there is one good thing about this episode it is this: Call your money manager or broker or whatever, and ask him his opinion on Herbalife. If he tells you to take a position either long/short in tones that suggest it’s the one thing he’s been thinking about all week, hang up the phone and start looking for a new manager.

When the Herbalife fun and games are over, I would suggest taking a look at the earnings from Genuine Parts Company (NYSE:GPC) and Westinghouse Air Brake Technologies Corp (NYSE:WAB). The latter has strong growth prospects and is a rare way to play the growth in rail infrastructural spending. A SWOT analysis can be found here. A couple of health care stocks, Medtronic , Inc. (NYSE:MDT) and Bruker Corporation (NASDAQ:BRKR), will also give results.


On Wednesday, I want to highlight three highly diverse companies that are “recovery” plays for vastly different reasons:  Curtiss-Wright Corp. (NYSE:CW) has had its exposure to military hardware spending hanging over it, while Crocs, Inc. (NASDAQ:CROX is a stock that suffered from ridiculous over-evaluation in previous years as investors bought into the fad even though the barriers to entry for others producing these type of “shoes” is non-existent. Nevertheless, the stock does look cheap now.  Sodastream International Ltd (NASDAQ:SODA) will also report numbers

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