IHS (IHS) "A Stock Moving Higher in a Declining Market"

Hello Trading Goddess Fans! I just realized that I am the "Yoda" of the crew. I am honored and hope you all stay away from the 'dark side'!

Seriously though, what is an investor to do in a day like today? I suppose if you are 'short' shares then a decline like this is terrific. As for me, I am still an investor although I have tried from time to time to 'trade', it just doesn't really suit my thinking. I am long the market and work to reduce my exposure 'automatically' during times like this.

I wanted to share with you a stock from my own account that moved higher today, IHS (IHS) and think about why a stock might move higher when the rest of the market was heading lower. IHS closed at $60.00, up $2.18 or 3.77% on the day.

In case you haven't particularly heard of this company, let me touch on a few points about why this stock might be attractive in a market like we have seen this year. First of all, much of their business which is in engineering support, is for the energy business including "exploration, production, and transportation activities" and for utility, defense, construction, electronics, and automotive.

Not exactly a Peter Lynch kind of play. But then again, with oil heading towards $100/barrel, energy-related businesses can be quite profitable.

And that gets me back to my second point. There has been some discussion on this blog about what an investor should be looking for in an investment. Pradeep talked about 'value' being the most important long-term. I beg to disagree. It has been my observation over and over and over again that earnings drive stock prices.

It was IHS's announcement of 4th quarter 2007 earnings yesterday after the close of trading that drove the stock higher today. Revenue for the quarter came in at $197.5 million, up from $148.1 million, and the company earned $25.1 million or $.40/share compared with $13.9 million or $.24/share last year. Excluding 'certain items' the company came in at $.47/share.

Great numbers.

But more important, the company was expected to come in at $.43/share on $186.3 million in revenue. So this was both a great quarter but the results also beat expectations.

But that wasn't all.

The company raised expectations on revenue to $812.3 to $826.1 million for 2008. Analysts had been expecting $809.1 million in revenue.

So with a single report, the company reported increasing revenue and earnings, beat expectations on both and raised guidance. A great announcement---enough to buck the tide on the street.

To finish it off, it is nice to look at Morningstar.com where we can see that the company has been steadily growing its revenues, increasing its earnings for the last couple of years, and has kept the shares stable. Free cash flow is increasing and positive and the balance sheet is adequate.

This kind of analysis isn't particularly sexy like TG and her girls, but then again, I am supposed to be a Yoda not a Harrison Ford sort of Saturday Matinee kind of guy :).

But I am going to stick with consistent earnings growth that just might beat expectations and companies raising guidance and demonstrating a 'habit' of reporting quality results for my portfolio.

I am also going to listen to my own stocks that when declining and hitting sale points are talking to me loud and clear about the correction that is ongoing in the market.

Have a great weekend friends!

Bob "Yoda"
Stock Picks Bob's Advice