This envirnomental cleanup and consulting firm has been a consistant performer through the years but it's valuation may be getting abit ahead of itself considering the debt they carry. A bright spot in the portfolio no less with a respectable 25%+ gain this past year.
Today I cleared the CRM position. Salesforce.com has been a bright spot these past few quarters but relative to other opportunities it's not as appealing as it once was. Thanks for the gains CRM
Neflix hit a new high yesterday as the company continues to execute and take share from a growing list of competitors. Time for me to exit, store up on powder then avg down on a few positions.
I just checked the markets today expecting the worse after yesterday's Bear Sterns news and hearing the market open some 200 points down. To my surprise the markets ended nearly flat and there was a bright green indicator on my portfolio. I-trax was us 34%. Walgreen has offered 5.40$ a share for I-trax. Walgreen is trying to put pharma and primary care physicians into the workplace. A bold move that creates an completely different activity system for the leadership team at Walgreen to manage. Time will tell if this proves to be a smart move for Walgreen. It's a good move for I-trax shareholders.
Thermage has been one big investment disappointment for me. The recent weakness is tempting me to average down (again) but the reason I'm not pulling the plug is that the company has not fixed (IMHO) it's single biggest problem - a negative net promoter score.
At first, second and even third analysis this company looks like a sound investment. What's undermining their performance and outlook is all of the negative reviews from patients who have had the procedure (2-3K$) and didn't seen any results. I'm not certain what the right answer is to fixing their negative NPS. Something more needs to be done to improve the efficacy of Thermage skin tightening procedures AND the company needs to do something for the patients that have had the procedure and didn't see results e.g. a guarantee, a credit for a procedure on a different body part, 'something' needs to be done to turn the tide from negative to positive.
If anybody at Satmetrix is reading this please call Steven Fanning at Thermage!!!
Iteris, Inc. has been has nearly doubled in value this past year. In large part because of their vehicle safety products. The company came onto my radar after I realized that I wasn't driving my Benz anymore and the primary reason was that it doesn't have a backup camera and my Lexus does. Truth be told I prefer to drive my wife's mini-van (lic. I CAVED 2) as it has a cam plus the backup sensors. It just feels more dangerous to be in reverse without these safety features. Not unlike HD-TV once you have it you don't want to go back to life without it. A bit of research led me to Iteris a small, debt laden highway safety company that was transitioning its focus towards higher margin safety products. Below is an excerpt from a recent press release and part of the reason I'm thinking about buying more of this stock in 2008:
"....systems use a small camera installed behind the windshield to detect lane markings in front of the vehicle, calculate its position relative to the lane markings and warn the driver of lane drift (leaving the lane without the use of turn signal) with a visual display and audible warning. Iteris has upgraded the technology by improving overall system performance and expanding the environmental conditions under which the system will perform. These enhancements to the technology enable the system to interface with the vehicle’s braking system to offer more active support for the driver. In addition to alerting the driver of unintentional vehicle movement outside the designated lane using an audible/visual warning system, the LDP system uses the vehicle’s Vehicle Dynamic Control (VDC) system to help the driver maintain lane position if the vehicle inadvertently starts to drift outside the lane."
LookSmart recently came onto my radar screen while doing some research on Wikia more specifily their search engine. Wikia is said to have picked up some distressed assets from LookSmart. Having not heard that name for a number of years it caused me to dust of some cobwebs and dive in...
After selling FindArticles to CNet for ~20$M LOOK is planning to use the proceeds to buy back shares. Shares that are trading at a measely 1.5X Sales. On the surface this seems way too cheap. When you consider that AdBrite just raised 23$M on what had to be near 100$M valuation - and while not public company I am led to believe AdBrite does about 10$M in revenue annually. (Fact check? Anybody out there know?) Anyway, LOOK looks too cheap. I'll need to dive deeper on this one as operational execution is the biggest concern but LOOK is a new addition to my 'watch list'.
This year has been a wild ride for the portfolio with some big winners and big losers. The chart below represents the gain/loss since initial purchase (not necessarily the 07 YTD).
Gain/Loss | Security | Description | Last Price |
| 92.72% | ITI | ITERIS INC NEW | $4.05 |
| 46.62% | CRM* | SALESFORCE.COM INC | $63.75 |
| 35.08% | NFLX* | NETFLIX INC | $28.10 |
| 23.12% | DMX | I-TRAX INC NEW | $3.40 |
| 6.19% | TTEK* | TETRA TECH INC NEW | $22.30 |
| 4.21% | AMZN* | AMAZON.COM INC | $91.26 |
| -10.56% | THRM* | THERMAGE INC | $5.92 |
| -23.70% | YHOO* | YAHOO INC | $24.01 |
| -35.58% | TICC* | TICC CAPITAL CORP | $9.81 |
| -36.30% | MNKD* | MANNKIND CORP | $8.46 |
Wrong bets on wholesale lender TICC, poor execution at YHOO and the lack of user adoption for inhaled meds have off set a few big winners. It's been fun but I think this will be the last year of posting my trades as 2008 is promising to be a busy year back at work for me.
Today trades crossed selling out of positions in RealNetworks and FAST, Nektar. None of these trades panned out. In fact Nektar was my biggest loser at ~45% under average buy price. Pfizer's return of the licensing rights killed NKTR the inhaled insulin device manufacturer. RealNetworks took it on the chin when Microsoft settled its lawsuit and FAST is seeing a lot of competition from upstarts like Endeca and consumer search folks like Google. There are a few other trades on the way...
Portfolio year in review next week... it's been a year of big wins and big losses. Up on the year but not by enough...
With the market in the toilette again today I stepped up and doubled down on THRM with an average buy price of $5.85. The company was hammered yesterday and again today (down total of %15) due to the weak quarter (only +11% Y/Y revenue) and the reduced forecast for the year. Marco issues probably spooked more people out of the stock today as a consumer led recession hits the headlines. While there are certainly risks to this investment I stand by the Wrinkle Free Nation thesis and will wait years if necessary for it to play out.
Today I sold 60% of the RNWK position at 7$ down from 9.80$ the average buy price. This one hurt. While I like the call option the stock has on the online gaming space the MSFT settlement set this one way back... Looking now to redeploy the cash into other current holdings that are showing weakness.
Today I sold 60% of the RNWK position at 7$ down from 9.80$ the average buy price. This one hurt. While I like the call option the stock has on the online gaming space the MSFT settlement set this one way back... Looking now to redeploy the cash into other current holdings that are showing weakness.
Emre Sokullu wrote a nice piece comparing what Amazon is doing with EC2 and S3 to what Google did with AdSense. He cites the inevitable competition from MSFT and GOOG but he also indirectly points out an interesting fact - Hardware as a service has lock-in. The more Amazon web services a company that is on EC2/S3 uses the more difficult it will be to switch off of Amazon's grid onto a competitor's grid. It's hard to say how much of a lead Amazon has on the competition but as Emre correctly points out this is one of AMZN's initiatives to increase profit margins. The Join Advantage program is an other big deal as it relates to expanding margins - don't house inventory have your partners do it.
Last week's pull back was a good time to start a position. Any additional weakness and I'll be pushing chips to the center of the table.
OK, that is a bit self serving as I am long Iteris (ITI). Today the company closed up 25% on news of 17% sales growth, profitability, and a better outlook. This is one of those companies I did a lot of research on, liked a lot, but was really concerned about the debt load. Needlesstosay, today I am kicking myself for only buying 2000 shares (@ 2.10). The company is firing on on cylinders with prudent use of the gas pedal - unlike when I invested in it back in Dec.06. What drew me into this stock was my wife's purchase of a Lexus Rx330 that has a backup cam that appears when you are in the reverse gear. We have subsequently (cough, she has subsequently) bought a Toyota minivan that also beeps when you approach an object. These two features now have me worried the rare times I back up my Benz, as it doesn't have the warning systems. I don't understand why cams on cars are not required equipment- Anyway, hat tip the the management team at ITI! Great quarter. Let's keep it rolling!!!
Today I purchased 120 shares of AMZN at an average price of just under 87.50$. The stock has had an amazing run up this year and today got slammed on due to margin concerns but growth is strong. Search AMZN or EC2 on this blog to see why I am starting this position.
This past week inhaled medicine device maker Nektar received a blow from Pfizer when licencing rights for Exhubra were returned. Back in January 07 I started building positions to take advantage of what I thought to be a really big market - inhaled meds. Having grown up watching my father inject insulin and dying before his 55th birthday due to 'uncontrolled diabetes' (a rather disrespectful sounding official COD), I've followed the insulin market, quests for cures, and alternative delivery methods for years now. There is something about diabetes and insulin that strikes a cord in some people. For me its the fact that its estimated that 10% of the US population has the disease while only 5% of the population have it diagnosed, that it is manageable disease but somehow is mismanaged, and arguably it's curable. So, this passion led me to trade into shares of companies in this space (NKTR & MNKD). MNKD has found itself also in a world of hurt as their founder has had to pledge an unsecured loan to the company while making another equity investment into the company. The premise of the investment may have been flawed but some how I find myself struggling to fight the temptation to double down (like the MNKD founder just did) rather than walk away....
Yesterday I sold 8 S&P100 Dec. 64$ put contracts for 0.75$ a 50% loss on 40% of the original position. Back in August I sold 25% of the original position for a 33% gain. Net net I'm down on the trade. The hedge has for the most part served it purpose protecting the portfolio from a >10% correction. I'll look to clear the hedge entirely during the next week or so as it looks like they may expire worthless otherwise.
I had the pleasure of having lunch with Nick Arnett yesterday. Nick hit my radar a while back as he is an active member of a web analytics discuss group I follow regularly. He made an interesting comment about the correlation between the volatility of a stock and the number of people discussing that stock online. He was quick to note that the direction of the stock price was not predictable but only a change in volatility was correlated with the number of (unique?) people discussing a stock.
There must be an option trading strategy that could take advantage of this fact(?).
The order finally filled this past Tuesday- 1000 more shares of THRM where purchased at 7$.
The wild ride the market has been on has me on the sidelines (in my bunker) with ~15% of the portfolio in cash. The question I have been asking myself is when is the right time to start averaging down on a few of the positions. Generally speaking I am waiting until the second week of Oct. for two reasons. First, the Fed will have meet and cut or not and second, the Hedge Funds will have reported their quarter. My gut feeling is that there is still a lot of unravellings to go...
TICC - My second largest position currently down 16% EXCLUDING the ~8% gain I've been yielding since starting the position. While I believe this stock is unfairly punished I can't spend my disappointment. Its rumored that Barclay Global Investors has been liquidating its positions and they happen to be one of the larger TICC investors this could be a reason for the underwhelming bid. The other factor at play here is TICC' s ability to raise more money. They have historically borrowed money and relent it. That is the business they are in. This summer they tapped the equity market which surprised me at the time but makes sense to me now. In April 08 TICC will need to renew its credit facility. The terms and amount of that renewal will be all telling. Course of action - wait and see. The stock is trading below book value, the yield is ~11% at these levels, but the uncertainty remains. HOLD and watch for signs of default within their portfolio.
THRM - My largest position nearly flat after rising about 30%. I am still a buyer of this anti aging company. This is an under covered, growth story, with proprietary technology and a guns and bullets product mix where the bullets have 90%~ margins. The risk is a consumer recession that impacts the affluent. Thermage procedures are not cheap (a couple of thousand bucks). Even with that risk I am still a BUYer of this volatile stock. The order is in but unfortunately didn't fill the other day when the stock dipped...
NFLX - I'm giving this a quarter or two more to play out. HOLD
RNWK - The Microsoft settlement buoyed the stock, the negative outlook sparked downgrades, and I'm left in a hole. The stock is probably fairly priced at 6.50$ well below my 8.90$ avg buy price. There is 4$ in cash in this stock and a reasonably interesting game download offering that is growing nicely... HOLD for now and reassess if the stock trades near 7$.
MNKD/NKTR - Uhgg. HOLD Inhalers will eventually be the go to alternative to IV drugs.
CRM/ITI/DMX - All hanging in with modest gains. I'll let these ride a while.
As December nears I'll reassess with taxes in mind but for now (other than THRM) I'm staying in the bunker. Which is really tough to do as AMZN and CSCO have caught my eye.
Wow. Take a look at the 5 day DJI - nearly a 400 point swings, (Arguably) The market is moving without some key pieces of information. Hedge funds only post results quarterly as I am told. If this is the case the world will find out how many/much the hedge funds were/are exposed to sub-prime mortgages. The ride is bound to get wilder. Even if the Fed eases three times more this year there seams to be a lot of unwinding still to come...
Rather than continuing to post stock trades days if not weeks after they have occurred (and not providing much color as to the rational behind them) I'll be posing only the transaction and a link to the portfolio (Google Spreadsheet) once a month. The fact that I simply don't have time to research many stocks will drive me to longer term investments. There are a few trades still to be made to rebalance a few positions but this mini flurry of trades will be the last for a while....
Yesterday this order was processed...
Sell to close 5 HRB AX CALL HRB JAN 22 1/2
Executed: 08/21/07 10:00 AM EST
Price 1.35
The clock was ticking and the sub-prime mess is still playing out so I'll take my lumps and clear this position. This trade didn't turn out as planned. I bought leaps before I started blogging (I think?), back when Buffet was trimming his stake I thought the company was over sold and picked up some long term calls. The OptionOne sub was a concern at the time and widely reported as Buffet's reason for selling. Well he was right. I took this one on the chin and lost half my position. That said I like HRB long term (3+ years). Unfortunately my call options will probably expire worthless and the 'wait to next quarter' rational for holding will only find this position wasting away more quickly....
Time to move on.
I'm falling way behind on keeping the portfolio updated on this blog (1 month behind now) as work is getting pretty busy these days (more on that later). Friday I sold 5 of the 20 Put contracts on the S&P 100 for a .50$ gain on my 1.50$ investment. The remaining contracts are my insurance policy on a continued down turn.
Today I bought 300 more shares of TTEK at 20$ per share adding the the 200 I bought in June at 22.50$. I like this water/environmental services play as it is a predictable business and shouldn't see a lot of downside during this shaky market. The recent pull back is unwarranted. I still think this is a 25$ stock in 12months.
Today I sold all 1000 shares of TIVO at 6.78$ for a ~10% gain. While I like the company and believe there is more room for it to run I wanted to redeploy cash into a few of the more beat up names in the portfolio. The DirectTV deal as well as AMZN partnership paint a bright future for Tivo. Thank you for the gains TIVO.
Yesterday I solde all 750 shares of OPSW at 14.10$. HP's offer to buy the company at 14.25$ a share put a nice floor under the stock during the markets wild ride. I'd wait for the additional .15$ a share as there are a few stocks in the portfolio that have been beaten up lately and the cash may be better used averaging down those holdings.
OPSW is a stock that I had successfully traded from 5-8$ and then only a month ago reentered north of 9$. "too many good things" was the thesis - thankfully HP agreed and a quick +45% gain was the result. Time now to focus on the rest of the portfolio....
The market is taking a beating today so I probably over paid for these contracts....
Today I bought 20 contracts of IOF-XL at 1.5$. The contracts are puts with a 64$ strike expiring Dec. 07. The purpose of this trade is to hedge the entire portfilio against a broad market correction (>-10%). Some of the recent news out of New York is unsettling (BearStern hedge funds wrote down to .09$ on the dollar, Books&Co. not getting its financing, Chrystler is that next?).
Having recently sold out of the large TYC position the portfolio is a bit more tech (and biotechnology at that) heavy.
Today I purchased 750 shares of OPSW at 9.45$ per share. Somewhere in this blog you'll find successful past trades on this ticker. Memory tells me I sold out around 8$ and have been kicking myself since then. Insiders have been buying, the product cycle is strong, the company is best in class, the market needs a solution of CMDB and ITIL related processes. A competitor in the space is getting ready to go public and doing their roadshow this week and next. I'm betting on the momentum but plan to hold this for several quarters.
Netflix is one of those high beta holdings in my portfolio that from time to time I start to worry about. While I believe the stock undervalued they play in a very competitive space. It was nice to see this week BlockBuster replacing its CEO and this piece of anecdotally evidence regarding adoption of Netflix WatchNow. While I have never really trusted Compete's scoring there service does fill a hole in the market.
It's still all about subscriber growth at Netflix. This quarter's results will be interesting to see.
Today I purchased 200 more shares of NKTR at 9.674 per share. I'll update the portfolio balances this weekend. Betting on more products (other than Exhubra) and a smaller next generation device....
Today I purchased 100 more shares of YHOO at 26.79$ per share. Adding to the 300 shares already held. Its no secret that Google is eating Yahoo's lunch but there a lot of value in this company. I'm going to be patient with this one and slowly add on the dips.
Today I sold the remaining 700 shares of PKTR at 9.50$. The YTD lose was near 40%. The total lose on the position since inception was minimal (~5%) and that is'nt including the covered calls I wrote when the stock was trading near 15$ last year.
Time to move on. The plan is to find some shorts, keep the cash balance near 15% and average down on some the existing portfolio holdings.
I've been looking for good shorts for sometime now and have price points in mind for SAP, IIG and Crox.
There is very little to like about IIG. This article by 10k Detective sums it up nicely. The Bad Debt reserves at 50% of AR?? WOW Sandbagging? or Not collecting due to unsatisfied customers. The lack of R&D and significant investment is peculiar for a 'software' company. Stocklemon.com (some think Stocklemon.com is a fraud) also has in depth reporting on IIG.
The company has issued a dividend recently. What growth company issues a dividend?
The troubling thing with this short is the company has some top tier investors. What I don't understand quite yet is where the true value of the company is. i.e. when to cover a short. The company at best should be valued as a sub-prime lender that doesn't have claims on collateral or maybe a services company where 1.5x Revenue would be an appropriate metric (not 2.18).
Anyway...
This company smells bad. Really bad.
With the first half of the year coming to and end this week it seams an appropriate time to review the portfolio trades and should've/would've/could've trades.
1) Far and away the biggest miss call was selling the RVBD June 30 Calls. While the trade was my biggest winner at >100% the stock proceeded to hit 45$!
2) CNTW found some life. After holding this dog through a new capital raise this illiquid stock finally found a bid and is up +30% YTD and was up close to 80% earlier this year.
3) DMX I found this one at the bottom it would seam. Now up ~30%YTD, I'm looking at this stock as a long term winner as the mega trends of on work site medical care and professional employment organizations continue to see double digit adoption gains.
4) TYC This stock preformed well. While no longer in the portfolio it was a solid gainer (~30) in a yea's time.
5) POP - Called the top and sold out of the position at 8$ a 40+% YTD gain.
The losers (sorta)
1) APPL - I sold out the position at 94$ up from the 68$ cost basis. The stock is now north of 120$
2) PKTR - Competition and poor execution have me down and wanting out... (see chart on blog template)
3) NKTR is pulling me down but I still like this inhaled medicine category and will keep a short lease on this one and if the quarter looks decent average down my cost basis.
4) The CRM calls were also a dud. The catalyst appeared after I figured it wouldn't and closed the position at a lose. If I'd held an other week it would have been a winner...
Anyway, THRM is the big bet for the second half of the year. TICC and its 8% dividend I am watching closely as any interest rates changes will drive this stock price. Any further weakness and I may buy more with a 6 month horizon.
This week has proven to be a good week for Thermage (THRM)- the single largest position in the portfolio. Needham & Co upgraded the stock to buy from hold, the company filed a patent infringement lawsuit against a competitor (note THRM has recently won a similar suit), and the company received FDA clearance on a new product. The stock is trading in the mid 8s today.
The other interesting finding this week was that Theramge is being used more frequently in breast lifts. Before buying THRM I asked my wife to ask her dermatologist about getting the procedure done. She enthusiastically agreed. Well, my wife didn't qualify for the procedure because her skin 'is sooo good' (makes me wonder why she even goes to the dermatologist??). She came back with a wealth of information and has set up a nice channel check for me. But now I can send her back out (in the name of equity research mind you) this time to a plastic surgeon to investigate non invasive alternatives.....
I'll let you know how that conversation goes over.... If you don't see any blog postings for a while call the police and file a missing person's report.
Today I started a position in Tetra Tech Inc. (TTEK) by buying 200 shares at 22.50$. This consulting and services company has long been focused on winning EPA and government contracts for clean-up projects. Even after factoring in the recent rise in the the stock price- at 1.3x revenue this company is probably too cheap. While not a bargain (notice I'm only buying 200 shares) this company finds away to increase profit while y/y sales are flat. It doesn't hurt that this week they announced a $60M+ contract win from the EPA...
I am usualy leary of services companys that don't have senior management owning the at least 10% of the shares and I am stratching my head at why they have any debt on the balance sheet.... nevertheless, this is at 25$ stock today if the price to sales ratio comes in line with other services companies. If the company can increase sales this year and or squeeze out more costs the stock could see closer to 30$ per share. The professionals have a one year price target at 21$. Somebody is reading the wrong.... (time will tell)
Today I purchased 300 shares of NFLX at 19.20. Bringing the position to 450 shares at 20.80$. This one may stay beat up for a few quarters due to competive concerns. I'll be watching the subscriber numbers and churn this quarter but this brand is worth more than the current stock price reflects.
I found this on The NFLX message board at Yahoo finance:
"....BBI lowering prices. Are they kidding? They are biting off more than they can chew. Sort of like a fat person who decides one day to lose weight and signs up for a gym membership. They pay all of their money on day 1 and then go to the gym 4 times during the course of the year. They don't take a realistic look at themselves and think if they can weather the storm long term. Lower the prices BBI? Suicide."
I have been watching and waiting NFLX and haven't yet taken a full postion. BlockBuster is an interesting competitor and appears to have taken subscribers from NFLX. The post above pretty well sums up my thinking of BBI.
One more quarter of wait and see.... but in the meantime everybody and their brother wants in on the online movie delivery (online&snail mail). The AMZN takeover rumors have heated back up and I have to think an other bad quarter and Mr. Hastings may consider a bid. I'll be watch the insiders activity on this one sub 20$.
Today I sold the final 189 shares of TYC at $33.96. This final sale was a 31% winner from time of purchase nearly a year ago. TYC was my largest holding in 2006 and the thesis certainly played out nicely. To Mr. Breene and his team, Thank you.
Why sell? Time to move on. TYC will split into three seperate public companies this quarter(?). I don't have time to foll