Is This Titan Out of Control?
01/24/2012 4:04 pm EST
Volatility is not new for this mining equipment supplier's stock, but the company's new guidance adds too much fear for MoneyShow's Jim Jubak, who can also be found at Jubak's Picks.
On December 9, Titan International (TWI) told Wall Street to expect sales for 2011 to be around $1.4 billion (that’s slightly below the Wall Street consensus of $1.48 billion) and 2012 sales of $1.7 billion to $1.9 billion (the Wall Street consensus for 2012 stood at $1.82 billion)
Nothing wrong with those numbers—or with Wall Street’s estimates of a whopping 194% increase in earnings from 2010 to 2011, or with the 59% earnings growth rate projected for 2012.
But as anyone who bought this stock when I recommended it in my Jubak’s Picks portfolio on July 1 knows, Titan International is an extremely volatile stock that rises and falls with fear and hope about growth and earnings in the commodities sector.
Since that purchase date, the stock has traded as low as $13.83 on October 3, and as high as $24.81 on January 24. That’s not unexpected of a company that sells tires to the makers and users of giant earth-moving equipment used in mining (as well as tires for farm equipment and construction), but it does give me pause.
Titan has galloped ahead at the head of the herd in this rally, climbing 37% from December 19 through 1:45 p.m. New York time on January 24.
With the good news on sales for 2011 and 2012 hardly a secret, and with analysts going gaga for the stock after the company signed a contract with Caterpillar (CAT) to supply that company with tires, I think it’s time to sell into this rally and look to buy another day. (In Jubak’s Picks, I’ve got a 0.7% loss on these shares.)
It’s not like 2012 won’t offer lots of volatility...and possible future entry points.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Titan International as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/