Monday, June 06, 2005 10:09:32 PM
Korn Ferry International (KFY) Trade Journal II
I’m always reluctant to post short sales in the public, but this one is different. This one is an intriguing experiment; an experiment of the paradox. It’s paradoxical because of all the contradictions.
I’ve been posting Conference Board’s Help Wanted Advertising Volume Index, which shows a slowdown in hiring across the nation. Job growth in the temporary help sector also slowed to 6.3 percent from the 8 percent average over the last year. This is in addition to the now widely known Labor Department’s latest data about the lower than expected number of the non-farm payroll job creation in April. Yet, KFY experienced a double-digit intraday gain just a day prior to its earnings call. The earnings call is scheduled for tomorrow morning at 10:00am.
And these are the reasons for the experiments.
REASON # 1
2 analysts upgrades today, just prior to the earnings call.
--- Upgraded to Buy from Neutral by UBS
--- Upgraded to Outperform from Neutral by Robert Baird
Note:This is one of the most widely held stocks by institutionals and mutual funds.
REASON # 2
The red bars are the last 4 quarters’ earnings surprise %. It was a big surprise last April when the actual earnings were 61.50% higher than analysts’ estimates. But, then the “surprises” factor started to dwindle in every subsequent quarter. In addition, the differential between the heights of the aqua bars (Estimated Earnings) and the green bars (Actual Earnings) were shrinking.
Both indicate analysts’ estimates had pretty much caught up with the actual earnings. Unless there is a BIG surprise waiting in the wings tomorrow morning, a big surge of price movement like today would be illogical. But then, how could it be possible for staffing agencies to have a big earnings surprise under the current slowing economic environment? What a paradox!
What if KFY did better than other staffing agencies due to its concentration on executive and managerial positions? Fine. Then, I believe the better than expected earnings had already been factored in the price. Its share price had recently moved above the centerline of the Bollinger Band - see yellow highlighted area.
In order for that big surge to happen today, there had to be a bigger than just the better earnings announcement tomorrow morning. But, no one in the public should’ve known that till tomorrow, right? Maybe not. Who knows?
REASON # 3
Gary Burnison, chief financial and operating officer of executive recruiter Korn/Ferry International, called the payroll numbers "a blessing in disguise," as higher interest rates could be worse news for recruiters if it inspired companies to pull back on capital spending. Burnison said "To the extent that companies are growing and interest rates are favorable, companies are going to continue to invest in their businesses and they're going to need people".
Should I use the four-letter word to describe this type of bull?
------------------------------
So, we shall find out tomorrow morning. I’m willing to take a loss on this trade just for all the intrigue, mystery, and paradox.
I’m always reluctant to post short sales in the public, but this one is different. This one is an intriguing experiment; an experiment of the paradox. It’s paradoxical because of all the contradictions.
I’ve been posting Conference Board’s Help Wanted Advertising Volume Index, which shows a slowdown in hiring across the nation. Job growth in the temporary help sector also slowed to 6.3 percent from the 8 percent average over the last year. This is in addition to the now widely known Labor Department’s latest data about the lower than expected number of the non-farm payroll job creation in April. Yet, KFY experienced a double-digit intraday gain just a day prior to its earnings call. The earnings call is scheduled for tomorrow morning at 10:00am.
And these are the reasons for the experiments.
REASON # 1
2 analysts upgrades today, just prior to the earnings call.
--- Upgraded to Buy from Neutral by UBS
--- Upgraded to Outperform from Neutral by Robert Baird
Note:This is one of the most widely held stocks by institutionals and mutual funds.
REASON # 2
The red bars are the last 4 quarters’ earnings surprise %. It was a big surprise last April when the actual earnings were 61.50% higher than analysts’ estimates. But, then the “surprises” factor started to dwindle in every subsequent quarter. In addition, the differential between the heights of the aqua bars (Estimated Earnings) and the green bars (Actual Earnings) were shrinking.
Both indicate analysts’ estimates had pretty much caught up with the actual earnings. Unless there is a BIG surprise waiting in the wings tomorrow morning, a big surge of price movement like today would be illogical. But then, how could it be possible for staffing agencies to have a big earnings surprise under the current slowing economic environment? What a paradox!
What if KFY did better than other staffing agencies due to its concentration on executive and managerial positions? Fine. Then, I believe the better than expected earnings had already been factored in the price. Its share price had recently moved above the centerline of the Bollinger Band - see yellow highlighted area.
In order for that big surge to happen today, there had to be a bigger than just the better earnings announcement tomorrow morning. But, no one in the public should’ve known that till tomorrow, right? Maybe not. Who knows?
REASON # 3
Gary Burnison, chief financial and operating officer of executive recruiter Korn/Ferry International, called the payroll numbers "a blessing in disguise," as higher interest rates could be worse news for recruiters if it inspired companies to pull back on capital spending. Burnison said "To the extent that companies are growing and interest rates are favorable, companies are going to continue to invest in their businesses and they're going to need people".
Should I use the four-letter word to describe this type of bull?
------------------------------
So, we shall find out tomorrow morning. I’m willing to take a loss on this trade just for all the intrigue, mystery, and paradox.
David
#board-3693
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