SETTING THE BAR

Today, we engaged in one of the most mind numbing, “we got dumber reading & having to endlessly reply to someone’s misinterpretation of our post,” type of days on Twitter. It follows some bizarre replies we received following a post made days ago regarding “Tracking One’s Blog.” Each contributes to our waning desire to be active participants in the Social Stock Trading Media, as the focus has now skewed WAY too far toward “style” over “substance.” This change, however, is to be expected. “Style” people have trouble with the Jung term “actualization;” those who are completely open, honest, fully transparent & successful all while willing to call out their own losers, short comings & misreads.

Think for a minute how worthless a TwitPost would be if it read “phenomenal trading week thus far” or “nothing like a good sell off to reveal how good (or lacking) your PM skills are” … but the writer never posted any trades during the week nor had they ever shared or posted anything allowing you to gauge Portfolio Management skill. Think for a second minute about how worthless a Blog Post is stating “I took profits last week & moved clients to 100% cash” & “I’ve had a great run lately & don’t want to give anything back” by an author who’d never shared in a preceding Blog Post any entries, exits, positions or idea performance tracking so you, as a reader, could attribute validity to any of the claims. Pointless & valueless are both.

To that end; hasn’t anyone ever been curious enough to plot the performance & track record of the very “Bloggers” you all fawn over RT, heap praise on, congratulate for being on TV & in general, look up to like they’re Jesus Christ or some Latter Day Saint? Probably not but even if you did, who offers up that kind of detail? We know of only one, Eddy Elfenbein’s annual Buy & Hold list. It was an ironic encounter, seeing this lone example last year; Eddy self posted & was “patting himself on the back,” praising his List’s returns. The post was heavily RT’d, made it’s way on to our stream & fans of transparency + excited about the prospect of RT’ing a “popular Twitterati Blogger,” our euphoria was dashed by that bugger of a thing that drives our business – performance (in this case, lack thereof). It took less than a minute to cross reference Eddy’s List performance to that of the S&P only find he trailed the S&P over the same period (NOTE: Folks, when you’re underperforming, that’s not when you make “noise.” #Duh).

THE “WE DIFFERENT”

Sad as the examples above are, our sporadic & rag tag Blog didn’t have a performance tracker on inventory either & that’s why, today, we offer up something no one else we can find who writes a Stock Trading Blog does – for better or worse – the track record of every single Blog Post idea we’ve made, the track record of every single Insider PIGGYBACK Notable Buy Strategy post we’ve made & the track record, as we’ve posted for over 3 years, of all trades > .5% AUM we’ve run. With no futher fanfare ….. transparent performance posts that don’t exist elsewhere in the Social Stock Trading Media (with returns that aren’t half bad, eh?);

1HFY13 Realized Performance (includes supporting trade documentation – with a time stamp – so you can look trades up on Social Media): +20. 21%

https://docs.google.com/spreadsheet/ccc?key=0AkUPKZxe8PS-dGV1em1YZEduZHd5bF82UUtMQk51amc&usp=drive_web#gid=1

Q3FY13 Realized Performance w/ Open Trades into Q4 (includes supporting trade documentation – with a time stamp – so you can look trades right up on Social Media): +1o.3% (Audit Pending): +10.3%

https://docs.google.com/spreadsheet/ccc?key=0AkUPKZxe8PS-dGZIcDhHSjh6LWViWUxNYW5JTmFiNWc&usp=drive_web#gid=1

All Blog Posts – Detailed Idea Generation with entry, stop, target & time horizon from Q1, Q2 & Q3 FY13 (includes supporting trade documentation – with a time stamp – so you can look trades right up on Social Media): Wow, find a comp for this –> +70.95%

https://docs.google.com/spreadsheet/ccc?key=0AkUPKZxe8PS-dFNKdzZ6MW5FQmdlZTBSNTZJekRIRGc&usp=sharing#gid=1

All Insider PIGGYBACK Notable Buy Strategy – 1H13 (includes supporting trade documentation – with a time stamp – so you can look trades right up on Social Media): +17.2%

https://docs.google.com/spreadsheet/ccc?key=0AkUPKZxe8PS-dGRWMEM2UE85N0JpTDkzd1RocWVLclE&usp=drive_web#gid=1

All Insider PIGGYBACK Notable Buy Strategy – Q313 (includes supporting trade documentation – with a time stamp – so you can look trades right up on Social Media): +11.5%

https://docs.google.com/spreadsheet/ccc?key=0AkUPKZxe8PS-dHJnVkNkM2pTNzE2SWRFcmh5Y0JQRGc&usp=drive_web#gid=1

POST SCRIPT: We don’t post these because we think we’re “the best,” or because we believe we’re “better than anyone else,” nor to “show off, grow a subscriber base or raise assets;” we post these because we feel a responsibility to those who follow, track, update & inventory ALL the ideas we’ve written about at length. Responsibility & accountability are very simple concepts. One day, maybe more Bloggers will take the time & do the same … THEN you’ll have the proper information to know who is “good” or “worth RT’ing.”

Readers, consider doing a little less RT’ing, interacting with & supporting of folks just because they’re “popular (style)” & pay more attention those who are responsible & accountable (substance); folks who document trades, offer a track record, provide thorough trade plans in their Blogs, educate in the face of realized or unrealized draw downs & leave behind those who pop off with BOOM, BAM, YAHTZEE or POW everytime they have an up trade. Enjoy those with experience running real money – guys & gals with audits + a track record – & stop fawning endlessly over pikers who “shotgun” the stream 20-30 ideas each night only to, the next day, pick out the 3 that “worked” (while burying the WOOD, of course). Applaud those who shoot with the rifle, not the shotgun.

Finally, on the topic of transparency & performance, we’re well aware there’s folks – managing similar size or larger money than we are – who are outperforming us. There’s ALWAYS room for improvement. Understand the self reflective value in someone willing to tell you “what we’ve got to fix” or “what we need to adjust in OUR OWN portfolio,” as it’s just as important as an impressive track record. Humility, the ability to change, self examine, the capacity + willingness to engage & learn from others are characteristics not only see in good people, they qualities that all successful PM & HF managers possess. Performance alone is never enough, always be looking to improve and let’s hope over time the Social Stock Trading Media becomes more open, honest, transparent & self reflective on both performance & things to improve in the future.

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PIZZA, ACCOUNTABILITY & CREDIBILITY

This is neither a “naughty or nice “post, it’s a post focused on perception vs. reality, credibility, transparency & attitude. It’s a view highlighting Social Stock Media & TV punditry paired to the certainty in which many “make their point,” wherein the “point,” all to often, is vacated when wrong. Finally, the post is written to help expose a reader to the realities of “if you had real dollars at work” performance vs. the smug, positive & high conviction delivery many pundits you fawn over because of “popularity” or their TV appearances. We all make mistakes – it’s part of the business – and traders, arguably, learn more from their mistakes than they can from their “winners.” The best, real money trading Social Stock Media participants do a great job detailing “what went wrong” when they’ve had to take a STOP, TV pundits & loudmouths – not so much ….. like the following;

We don’t know Steven P. Grasso & he doesn’t know us; we’ve never done business & have never met or spoken. We don’t follow Steven on Twitter & he doesn’t follow us, yet in 2012 he felt compelled to make unsolicited, opt in comments to our feed regarding a trade plan & action we made SS: MCD > $100. The exchange was notable because we don’t understand the point / value in making unsolicited comments to those you don’t follow and that they came from a popular TV Co-Host / NYSE Floor Broker suggesting that “taking SS: MCD @ these levels tells me that you should deliver pizza.” Unsolicited or not & regardless of the pedigree of the speaker, we’ve never known anyone in the business to “go broke” or have to “change careers” when using an 8% STOP loss, defined in the SS: MCD trade we’d posted. As it turned out, MCD closed 2012 as one of the worst performing S&P 500 stocks & carries an ALL TIME HIGH of $102.89. We can’t find any “updated” TV appearances following Mr. Grasso’s remarks to us – and we certainly didn’t see any Tweet that said “you were right, I was wrong” but it’s fair to say we won’t be “delivering pizza” anytime soon.

Chart forSPDR S&P 500 (SPY)

SHIFT YOUR EYE

Many people “clown” Jim Cramer & we get it, he’s become a cartoon. Jim, like many other talking heads bark loudly about winners while sweeping losers (hello … NES fka HEK) under the rug, never to be mentioned again. Actually, to Jim’s credit, he’s willing to highlight & say when he’s wrong … when pressed. Folks, GET USED TO IT, that’s Social Stock Trading Media in 2013 & beyond!

The one thing many overlook, which we’ve highlighted in two rare posts (Mr. Cramer misinterpretted both posts & replied negatively to our feed), is that Jim Cramer ran REAL money with Jeff Berkowitz (an unbelievably bright HF manager & trader) for years & was one of the most active & profitable traders on the Street; generating – per annum – results of 18%+ net of fees for LP’s over a decade+ long span. Plug in any amount you like – $100K, $500K or $2.5B paired to Jim & Jeff’s compounded return – and still say the guy’s a jackwagon who doesn’t know what he was doing simply shows YOU know nothing about the business of trading.

PIN THE TAIL ON THE … REAL … DONKEY

Instead of getting “up in arms” over the sensationalist, cartoon that Jim – one of the best former traders on the Street (oil & gas trader Eric Bolling is another one – signed, with “love,” Jeff Cardot) – has become, look at the WOOD “home gamers” & novice traders deal with from those with a FRACTION OF THE TRACK RECORD …. here’s an example from this overly cocky NYSE order taking Grasso fellow; who fails to acknowledge his mistakes which should be a “tell” to you that the speaker has zero accountability & zero credibility whom we now jokingly dub #GrassholeSteve;

PROOF IS IN THE … YAMMERING

- Fast Money, August 12 (after market close): http://video.cnbc.com/gallery/?play=1&video=3000189852

- QUOTABLE (from August 12 show linked above for those too lazy to do the ‘Due Diligence’): Steven P. Grasshole says “for a short term trade, money out of GOOG into FB & AAPL is long in the tooth. From here, GOOG goes higher & AAPL + FB go lower.”

- CHECKING IN (from those August 12 comments to today’s close): Minutes are “short term” to some traders, as is a day or 2. Certainly a week is short term, right? Maybe he meant two weeks, perhaps that’s “short term” for him, eh? What you DO know is this; if & when this “trade” pans out – whether it be in 2 weeks, 4 weeks or 8 weeks – Steve will use his hindsight mirror & denote whatever # of weeks it took to “work” for the TV camera. Stop paying so much homage to talking heads with vague trade plans (or none at all …. how many of you are “bag holding” Steve’s L: ZAZA …. he got out fine, did you?), no accountability or credibility & start pay more attention & homage to folks who help you tailor a detailed trade plan for each transaction you make that suits your style.

FACT CHECK

Steve told you GOOG was going higher, WRONG: GOOG (8/13 open – first chance to trade Steve’s opinion): $886.83 vs today’s close of $859.66, WRONG to the tune of -3% on his long.

Steve told you FB was going lower, RIGHT: FB (8/13 open – first chance to trade on Steve’s opinion): $38.24 vs today’s close of $37.08, RIGHT to the tune of +3% on his short.

Steve told you AAPL was going lower, WRONG: AAPL (8/13 open – first chance to trade on Steve’s opinion): $470.94 vs today’s close of $502.33, WRONG to the tune of -6.6% (generous on rounding) on his short.

RESULT

Add it all up and you have 3 paired trades working 6.6% against you IN ONE WEEK. You’re down -2.2% PER IDEA. Amortize that. #Embarrassing

 

 

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CapAP + YIELD + MIND THE TA

In a market running rich on VALuation, we periodically screen for names offering a good yield that also forecast REV + EPS growth, affording the prospect of Capital Appreciation (CapAP) of the underlying common shares as a compliment to said yield. Unsurprisingly, the list is thin.

There are just 10 US based Companies with a yield > 3%, trading an average of 50,000+ shares a day with a PEG < 1, positive EPSe growth in FY13, + REV growth QoQ, net profit margins > 5% & FY14 EPSe growth of > 5% over FY13e. Of the 10, here’s some notables;

KCAP – The investment company was recently taken to the woodshed following it’s poor – second in a row – EPS report, however, the outsized yield (12.75%) & management team make it worth a look. We’ll try to pick up shares with scales L: $7.75 (heavier) – $8.75 (lighter), STOP on a break & close below $7.25, collect the yield & expect a return toward $10+ over the next 12 months.

KMI – Maybe the “trough” is in for this Oil & Gas Pipeline name, maybe not. Two consecutive poor Q’s, yet the stock has held up relatively well, potentially because Value players are attracted to the balance sheet & solid management. We’d welcome the chance to scale this 4%+ yielder L: $35.80 (heavier) – $36.80 (lighter), prefer the SUP/RES $36 area on TA to hold & likely STOP on a break & close below $34. Swing players target $42+ if you have 9 – 12 months but, in truth, the 200SMA @ $36.25 likely holds & one would only get 1 L: scale. If so, treat it as a Scalp & target quick type profit scales @ $37.90+, $38.70+ & $39.80+.

MDC – Here’s one that’ll blow your mind; we’re actually looking to the L: side of an XHB name AND it’s one we’re currently SS: from $39.39. Price to Book (P/B) is ALWAYS the key with XHB names & MDC’s has come down dramatically as it made a new 52 week low on Friday. The builder carries a 3.4% yield & certainly has more room lower to $25 but there’s an attraction at that level L: side, as the yield would be over 4% & the P/B ratio would be nearer 1.1x, offering value. No rush but keep an eye & consider L: scales $24.90 (heavier) – $26.90 (lighter) and STOP on a break & close below $22.25.

RNF – The nitrogen names didn’t get blasted as bad as the potash names on the recent “Russian buyer conglomerant disbands” news & we’re fans of this spin off, believing it’ll find a bottom @ $25 – $26. We’d wait to scale L: $26 (heavier) – $28 (lighter), STOP on a break & close below $24 and target $32+, $34.85+, $37.40+ & $39.25+ to the upside using a 6 – 12 month time horizon.

TAL – Insiders have been selling the stock but this 6.4%+ yielder is a play on increased shipping & TA; TA that’s held up very well. Pretty decent EPS history in the name & it’s underfollowed by most. Not but 3 wicks below $39 in FY13 but pesky lower high’s have “kept a lid” on it, a lid we’d expect to see cracked through in the next 6 – 12 months. Interest is scaling L: $39.50 (heavier) – $41.50 (lighter) and traders certainly don’t want to see 3 consecutive closes on a break below $38.75, as that’d likely trigger a STOP. Target $41.90+ has been a tough, near term nut to crack but when it does, expect to see $43.50. Big tests are closes above both $44 & $45 but when the latter $45 level goes, it’s a break out of multi-year porportion & the name works to $50+.

Honorable Mentions: HCLP, NTI and two names we’ve written on before; PDLI + TCRD. If you’re interested in the views on these email legacy.trades@gmail.com.

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Insider PIGGYBACK Buys – Please Won’t You Be My NBR?

We’ve seen a very interesting, late month, surge in Insider Buying Activity & a range of names this month that spans MicroCap to LargeCap, liquid & illiquid, poor FA to great FA & ugly TA to nice looking TA. A total of 14 names make the “Notable Insider PIGGYBACK July Buys” list – for the full list & trade plans for each email legacy.trades@gmail.com – and one name familiar to just about everyone is;

NBR – The Bermuda based Oil & Gas Driller is our favorite name on the list this month. The sector (Energy, Oil & Gas Driller + Explorer) is an attractive one for both ST & LT traders alike, two Directors added a very significant % interest to their holdings, the FA is attractive for Swing Traders & the TA offers clean entry & stop levels w/ a very positive Risk : Reward skew in favor of both Day / Scalp + Swing Traders.

INSIDER BUYS OF SIZE – Director John Kotts raises his stake in NBR from 27,000 shares to 147,000 shares w/ buys of 85,000 shares @ $15.02 (7/25) http://www.sec.gov/Archives/edgar/data/1163739/000112760213023587/xslF345X03/form4.xml & 35,000 shares @ $14.79 (7/26) http://www.sec.gov/Archives/edgar/data/1163739/000112760213023587/xslF345X03/form4.xml and Director Howard Wolf joined Kotts in buying on 7/25 & 7/26, increasing his stake from a 27,000 shares to 45,000 shares w/ buys of 11,000 shares @ $14.90 http://www.sec.gov/Archives/edgar/data/1163739/000112760213023484/xslF345X03/form4.xml & 7,000 shares @ $14.78 http://www.sec.gov/Archives/edgar/data/1163739/000112760213023589/xslF345X03/form4.xml

INTERESTING FUNDAMENTALS - FA: Nabors trades w/ a fPE: 12x vs fEPSe Growth: +48%, Price/Sales Ratio: 0.68, Price/Book: 0.75, manageable debt & a yield, albeit undersized, of 1%.

Index S&P 500 P/E 14.02 EPS (ttm) 1.06 Insider Own 1.20% Shs Outstand 294.75M Perf Week -2.56%
Market Cap 4.38B Forward P/E 12.06 EPS next Y 1.23 Insider Trans - Shs Float 287.44M Perf Month -4.99%
Income 313.00M PEG 1.65 EPS next Q 0.19 Inst Own 83.90% Short Float 3.41% Perf Quarter 1.16%
Sales 6.47B P/S 0.68 EPS this Y -29.90% Inst Trans 0.51% Short Ratio 2.41 Perf Half Y -9.72%
Book/sh 20.09 P/B 0.74 EPS next Y 48.43% ROA 1.60% Target Price 17.43 Perf Year 11.48%
Cash/sh 2.06 P/C 7.20 EPS next 5Y 8.50% ROE 3.30% 52W Range 12.69 – 18.15 Perf YTD 3.34%
Dividend 0.16 P/FCF - EPS past 5Y -21.70% ROI 2.30% 52W High -18.12% Beta 2.14
Dividend % 1.08% Quick Ratio 2.50 Sales past 5Y 7.20% Gross Margin 35.10% 52W Low 17.08% ATR 0.44
Employees 24500 Current Ratio 2.50 Sales Q/Q -6.20% Oper. Margin 10.00% RSI (14) 40.54 Volatility 2.48% 2.70%
Optionable Yes Debt/Eq 0.69 EPS Q/Q 123.50% Profit Margin 3.00% Rel Volume 1.35 Prev Close 14.93
Shortable Yes LT Debt/Eq 0.69 Earnings Jul 23 AMC Payout 11.80% Avg Volume 4.07M Price 14.86
Recom 2.70 SMA20 -3.34% SMA50 -6.72% SMA200 -3.24% Volume 5,476,500 Change -0.47%

THE DAILY FOR SCALPERS - TA: Scalp Traders can feast off the daily chart, trading againsts well defined levels, L: or SS: side. Clearly, we’d favor the L: side in NBR.

SCALPER TRADE PLAN: Seems pretty clear that 14.50 is a key SUP/RES area & this name has spent the entirety of FY13 above 14.20. Scales L: between 13.75 & 14.75, targeting a cost basis near the FY13 lows @ 14.20 appear prudent. Although the 52 week low sits @ $12.69, a Scalper Stop likely rests -5% or @ $13.50 (technical no man’s land). Truth told, be smart & use a wider -8.5% stop, which puts you out of the trade on a break & close below $13. Should NBR breach $14, a “wick / touch” of $13.50 isn’t out of the question, however, a cascade through $13 lower is highly unlikely w/ the fundamentals & forecast here. As for targets, be mindful of the overhead confluence of the 20SMA, 200SMA & a two month downtrend @ 15.25 but expect, following a pause there, acceleration to @ $15.90 where the 50SMA currently sits. Through $16 yields $16.80 – $17, a level at which NBR has traded at in only 10 days of the last year. Should the broad market & the O+G sector cooperate, expect that if the name can get through $17.75 – on VOLUME – it sends this stock off to the races, target $20.

THE WEEKLY & MONTHLY CHART FOR SWING PLAYERS – TA: These two charts may offer a clearer view as to why Swing Traders should consider L: NBR.

SWING PLAYER TRADE PLAN:  Save for 6 months in 2009, NBR has spent the past 10+ years at $12/share or higher & with a robust forward forecast in hand & the litany of US based Oil & Gas finds – many of which NBR is participating in – consider Swing L: scales 12.25 – 14.75 and STOP on a break & monthly close < $10. The longer term view seems to suggest that $12.50 is a more than adequate “floor” & a nice, 12 month base has been built in the $12.75 – $15 window, staging – in our opinion – for higher prices. Energy building (pun intended) over the past year, NBR has a date w/ $17.50+ & once that nearest term hurdle is hopped over, it’s smooth sailing to $20.50+ for our Bermuda based friend. Give this name 18 months & you get $26.25+ & if you have 3 years enjoy the return trip toward $35 (let’s be specific & target $32.20+) for a cool Reward: 150%+ vs untested Risk: -30%, a Ratio of +5 : -1 (no one’s going broke runnin’ those type trades). Enjoy!

Posted in $NBR, The INSIDER PIGGY BACK strategy, Uncategorized | 1 Comment

Just a Taste

From: Legacy Trades <legacy.trades@gmail.com>
Date: Tue, Jul 2, 2013 at 1:41 PM
Subject: VACATION, like LUNCH, is for LOSERS
To: Legacy Trades Members < PRIVATE @gmail.com>

 

The statement found in the SUBJECT header is ridiculous, of course, but when we were young, 20-something, hard charging Institutional Brokers we said dumb things like that. Vacations are great & lunch is just as important as breakfast … and dinner for that matter.

 

TRADER RADAR

EVENT DRIVEN (EPS): GS - Goldman’s FA is as good or better than any other Investment Bank on the Street & they’re certainly both the best traders + operators but this is strictly a price + event + TA play. GS reports EPS on July 16 (ahead of the July monthly call expiration) & there’s some rumblings that they may miss. Anything’s possible but if the historical EPS performance noted below is any gauge – including a pair of Q’s in which the same type of rumblings about a miss existed – we think things are fine. We’re pairing that to the TA which shows a recent + sharp pullback in the shares, stalling @ the key 150 level. TRADE THOUGHTS: Simply looking to take an Options – LOTTO trade here @ EPS, using the July monthly calls. We’re watching how the stock trades this week @ 150. Currently, keeping an eye on the July 155 & 150 calls trading + open interest changes. IF the 150 level holds this week, we’ll participate w/ the July 155 calls, looking to pay under 2.15. Alternatively, IF the 150 level is breached this week, we’ll participate w/ the July 150 calls, looking to pay under 3.15. Risk is 100% loss.

 

Earnings History Jun 12 Sep 12 Dec 12 Mar 13
EPS Est 1.17 2.12 3.78 3.88
EPS Actual 1.78 2.85 5.60 4.29
Difference 0.61 0.73 1.82 0.41
Surprise % 52.10% 34.40% 48.10% 10.60%

 

We’ve run the INSIDER PIGGYBACK strategy with so much success over the last 15 years & it amazes us that more people haven’t caught on. In fact, we’ve gone back to look at every symbol noted in each INSIDER PIGGYBACK post made in FY13 (Jan 27, Feb 27 & 28, Mar 4, Apr 1, Apr 29 & June 10) & the performance is astounding. We’ll be forwarding that in separate cover. The keys to distinguishing relevant insider buying from noise are; a) size & dollar amount of purchase vs existing holdings, b) adjusted cost basis on the positions in sum & c) the Insider’s Trading IQ score (proprietary, historical measure which tracks all of the Insider’s past purchases & sales, gauging timeliness or purchases or sales vs stock performance 3 & 6 months after the sales or purchases have been made).

INSIDER PIGGYBACK: MCZ - There’s not much to hang onto here in terms of FA (although the stock is trading w/ a fPE: 5x vs fEPS growth expectations of +125%), this is purely a “follow the buying & watch what happens when this name breaks over $0.50.” Insiders have taken large % sizes vs. their original holdings – most notably the CFO’s starter position in the name; a buy of 213,000 shares @ $0.47 in June. Purchases have ranged from the most recent “double up” by a Director @ $0.43 to $0.47. The 52 week low is $0.36 & a break + close below that level should serve as your STOP. One likely wants to enter L: MCZ @ $0.40 – $0.45, targeting a break over $0.50 as the first profit SCALE area (for 10%+), vs STOP on a break & close below the 52 week low of $0.36.

Insider Trading Relationship Date Transaction Cost #Shares Value ($) #Shares Total SEC Form 4
Woodward William Director Jun 27 Buy 0.43 100,697 43,723 220,860 Jul 01 11:34 AM
Woodward William Director Jun 26 Buy 0.44 29,303 12,747 120,163 Jul 01 11:34 AM
Peterson Whitney E VP & Gen Counsel of Subsidiary Jun 17 Buy 0.46 200 92 697,228 Jun 18 12:29 PM
Peterson Whitney E VP & Gen Counsel of Subsidiary Jun 14 Buy 0.46 20,300 9,338 697,028 Jun 18 12:29 PM
MCGINNIS KAREN K Chief Financial Officer Jun 14 Buy 0.47 213,000 100,110 213,000 Jun 18 04:54 PM

 

INSIDER PIGGYBACK: INUV - Same song for INUV as noted in MCZ regarding FA (although fEPS growth expectations are for +66% & the name trades at a P/S ratio of 0.36), this name is all about paying less than “the axe in the stock,” Bridgehampton Capital. Now, understand that firm has owns 1MM of their 1.7MM at a strike @ .28 from an offering done years ago, however, they’ve added shares as high as 1.16, with their “cheapest ADDS” done @ $0.73 in June 2012. All in, while the stock trades a fair bit above the Bridgehampton cost basis @ the 52 week low of $0.40, we believe the TA level of $0.60 will hold in the stock AND that the Company will take action to avoid a “listing maintenance requirement” notification, necessitating the stock trade @ $1.00 bid for 10 consecutive days. Our view is that entry L: INUV @ $0.60 – $0.75 vs STOP on a break & close below current 52 week low of $0.40 is worth a look w/ upside targets of $0.84+, $0.94+, $1.04+ & $1.20+.

Insider Trading Relationship Date Transaction Cost #Shares Value ($) #Shares Total SEC Form 4
BRIDGEHAMPTON CAPITAL MANAGEME Director Jun 12 Buy 0.82 9,900 8,159 1,762,800 Jun 12 04:55 PM
MORGAN CHARLES D Director Jun 12 Buy 0.82 9,900 8,159 1,158,315 Jun 12 05:18 PM
MORGAN CHARLES D Director Jun 11 Buy 0.80 100 80 1,148,415 Jun 12 05:18 PM
BRIDGEHAMPTON CAPITAL MANAGEME Director Jun 11 Buy 0.80 100 80 1,752,900 Jun 12 04:55 PM
BRIDGEHAMPTON CAPITAL MANAGEME Director Jun 10 Buy 0.86 11,000 9,429 1,752,800 Jun 12 04:55 PM
MORGAN CHARLES D Director Jun 10 Buy 0.86 11,000 9,429 1,148,315 Jun 12 05:18 PM
MORGAN CHARLES D Director May 16 Buy 0.81 18,573 14,970 1,137,315 May 16 05:03 PM
BRIDGEHAMPTON CAPITAL MANAGEME Director May 16 Buy 0.81 19 15 1,741,800 May 16 05:45 PM
BRIDGEHAMPTON CAPITAL MANAGEME Director May 16 Buy 0.81 18,573 14,970 285,000 May 16 05:45 PM
BRIDGEHAMPTON CAPITAL MANAGEME Director May 15 Buy 0.89 2,500 2,225 1,704,654 May 16 05:45 PM
BRIDGEHAMPTON CAPITAL MANAGEME Director May 15 Buy 0.89 2,500 2,225 266,427 May 16 05:45 PM
MORGAN CHARLES D Director May 15 Buy 0.89 2,500 2,225 1,118,742 May 16 05:03 PM
MORGAN CHARLES D Director May 14 Buy 0.87 13,927 12,084 1,116,242 May 16 05:03 PM
BRIDGEHAMPTON CAPITAL MANAGEME Director May 14 Buy 0.87 13,927 12,084 1,699,654 May 16 05:45 PM
BRIDGEHAMPTON CAPITAL MANAGEME Director May 14 Buy 0.87 13,927 12,084 263,927 May 16 05:45 PM
PISARIS JOHN B General Counsel Sep 11 Buy 0.51 2,500 1,275 262,715 Sep 12 04:57 PM
Corrao Peter A CEO & President Sep 07 Buy 0.54 2,000 1,080 566,033 Sep 11 04:27 PM
Corrao Peter A CEO & President Aug 27 Buy 0.48 5,000 2,378 564,033 Aug 29 10:37 AM
PISARIS JOHN B General Counsel Aug 16 Buy 0.50 2,000 1,000 260,215 Aug 20 03:14 PM
Corrao Peter A CEO & President Aug 15 Buy 0.51 5,000 2,550 559,033 Aug 16 10:17 AM

 

From: Legacy Trades <legacy.trades@gmail.com>

Date: Tue, Jul 16, 2013 at 10:06 AM
Subject: Fwd: VACATION, like LUNCH, is for LOSERS
To: Legacy Trades Members < PRIVATE @gmail.com>

July 16, 2013 – UPDATE: Just a short “housekeeping” note following up on our last, actionable ideas;

GS: This trade would’ve actioned, whether one looked to action the L: July 150 ( < $3.15) or 155 ( < $2.15) strike calls. They’re trading, respectively, @ $12 & $8 and the EPS “event” is over. Nothing wrong w/ a “four bagger” in 2 weeks. SELL ALL.
- MCZ: This trade would’ve only actioned for those that participated at the highest end of our buy range noted, @ $0.45. The name presently trades @ $0.53 – right to the noted, first scale target. REDUCE @ $0.52 – $0.53 for a cool 15% – 17% gain in 2 weeks. TELL A FRIEND.
INUV: Like this name & suggested a “wider” buy range that may not work for many ($0.60 – $0.75) but since the July 2 post, a low of $0.70 is the worst we’ve seen – affording at least 1 scale entry, if not 2 up to the top end of range – and the stock actually tapped $0.90 Monday. We’re fans of “following a plan” and with just 2 scales L: made (not “full”), we’d look PAST the noted, first scale target of $0.84+ & REDUCE should the name trade @ $0.90+ again. From a cost basis on 2 scales @ $0.73 vs a sell at the “lowest end target” of $0.90, you’ve clipped it for a nice & tidy +23%.
SUMMARY: Too bad all weeks don’t work like this; we realized a 400% winner, a 15% winner & a 20%+ winner all with a laid out plan inclusive of entry range, stop & targets. The only thing we “screwed up” was the time horizon …. because these all worked my FASTER than we’d expected. It’ll suffice, since we had “one foot out the door w/ an eye on vacation,” but we can do better. Actually one of our favorite things about holiday is that it affords us countless hours on the beach scanning around for new names to trade. No one has a corner on all the market’s “good ideas” but we’re always trying to source under followed, uncrowded & solid FA + TA or names that fit into a time tested, audited strategy for your consideration. Hopefully, there’s a value proposition in that for you and, if so, we’ve got a few new names to forward later today.
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INSIDER PIGGYBACK BUYS – Reviewing 1H’13 Idea Generation & Performance

There’s any number of reasons for an insider to SELL a stock but there’s typically only one driver that leads insiders to BUY … to make money! We’ve used an audited, proprietary tracker & scoring system that trades aside some of the “best” Insider Buyers for 15 years and, as we often share the ideas on the stream, here’s a look at each & every Insider PIGGYBACK Buy we’ve mentioned in the 1H’13.

THE PERFORMANCE

Total Idea Count #: 46

Gainers vs Losers (from Idea Generation to Present): 35 – 11

Average % Return (from Idea Generation to Present): +16.79%

Average “Best Out” % Gain (from Idea Generation to Present): +30.45%

Average “Max Draw Down” % Loss (from Idea Generation to Present): -9.69%

Largest Winner: $VVTV +123.26%

Largest Loser: $ATRM -30.14%

Performance Link: https://docs.google.com/spreadsheet/ccc?key=0AkUPKZxe8PS-dGRWMEM2UE85N0JpTDkzd1RocWVLclE#gid=1

THE TWEETS – Transparently Yours #TwitStamped

@Legacy_Trades 22 Jan INSIDER ACTS: Very few notable buys in FY13. Cannell ADDS L: $MBND 1.96 – 2.00 (favor L < 1.80). Also eye $VVTV, $OLED (fka $PANL), $VICL, $AXAS, $PENX

@Legacy_Trades 27 FebTHE INSIDER PIGGYBACK STRATEGY – *New Blog Post* – Connecting the dots in $IVAC, is now the time to buy? http://legacytrades.com/?p=397 

@Legacy_Trades 28 FebINSIDER PIGGYBACKS: Review FA & TA; Tier I – $ACI, $ATRM, $AIRT, $CLMS, $ELY, $ENTR, $FCH, $SPRT, $USAP, $ZEUS. Tier II – $GHM, $QBAK, $PNNT

@Legacy_Trades 4 Mar SPEC STAB: Trashy FA but $ETRM Director took a first slug L: @ .95 (150K size). Last @ .85, 52 wk low .81. Reclaim $1 minimum bid candidate?

@Legacy_Trades 4 Mar BIG ADD: A 10% holder tacks on over 50% size L: $ZIGO @ 14.60. Interesting sector, prospects & FA. TA a little dicey w/ 52 week low @ 13.14.

@Legacy_Trades 1 Apr INSIDER BUYS: RGM loves $SPRT, Pennant loves $USAP & Discovery loves $OLED (fka $PANL). Directors add L: $DRAD & $AGCO. Bottoms in @ $PRTS, $CVO & $CVM?

@Legacy_Trades 1 Apr INSIDER BUYS: Honorable mentions type eye on the buys @ Qatar adding $TIF, exec’s buying the $ACFN dip & little known VN Capital adds $BZC.

@Legacy_Trades 17 Apr SIDE WITH STARBOARD – Blog Post: *New* scale 2% AUM starter L: $QTM @ 1.19 – 1.25 (open, DAY), target basis 1.20: http://legacytrades.com/?p=457 

@Legacy_Trades 29 Apr INSIDER ACTIONS: Slim list but interesting buys/adds of size vs an existing holding; $AGCO, $GE, $ECPG, $FCEL, $CDZI, $SGMA & $DRAD (hold L)

@Legacy_Trades 10 Jun INTERESTING INSIDER BUYS: Check VOL & pair to TA set-ups: $RIMG @ 8.10, $ULBI @ 3.86, $CIA @ 6.15, $OESX @ 2.35, $AINV @ 7.96, $SNTA @ 4.45.

@Legacy_Trades 10 Jun INTERESTING INSIDER BUYS: Check VOL & pair to TA set-ups: $ESCA @ 6.05, $CALD @ 5.99. Top Picks: $BAXS (fka: $TSON) @ 2.28, $CLMS @ 10.52.

@Legacy_Trades 25 Jun FREE LOOK: Forget Money Center & Super $KRE‘s; in FY12 we favored $PACW @ 22 & in FY13 it’s $HEOP. Email http://legacytrades.com/?page_id=11  & learn why.

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REFLECTING ON THE 1H’13

GENERAL COMMENTARY

The 1H’13 is in the books & despite the labels “BearTard, PermaBear, Per-MAYAN” and/or derivatives thereof erroneously heaped upon us, we managed to produce returns of +20.21% through Q1 & Q2 2013 ( https://docs.google.com/spreadsheet/ccc?key=0AkUPKZxe8PS-dGV1em1YZEduZHd5bF82UUtMQk51amc#gid=1  ).

It goes without saying, we’re pikers compared to those TwitTraders who’ve suggested they posted +348%, +600% & +900% or more in 1H’13 but we’re pleased with the returns based on the AUM we run & the transparent way in which we chose to share. ** Open Offer **If any reader can show us audited returns of +348% or more in 1H’13 on over $25MM in Total AUM, send me your offering documents & your minimum immediately; we’re in!

Jokes (or should we say “jokers”) aside, there’s ALWAYS room for self reflection & certainly improvement. Many have asked questions regarding our review of 1H’13 & outlook for the OPEN/HELD Swings we carry into 2H’13. We’re happy to address both & will start with this “Part I – Reflecting on the 1H’13,” before a follow up “Part II – Outlook for the 2H’13″ here, with a thought first;

- THOUGHT: Despite the erroneous “labels,” we outperformed all benchmarks relative to our charter & AUM size (L/S Market Neutral Hedge Fund Index – assets over 25MM – SPY & IWM) & did so net long.

- TAKEAWAY: Worry less about “labels” and remains steadfastly focused on “a process, plan, risk management & trade action” because at the end of the day, only the PnL counts.

SELF REFLECTIONS & REVIEW OF THE 1H’13

- 1H’13 OBSERVATION #1: Frankly, the contribution of our 2013 initiated Swing holdings to Total AUM returns ….. sucked. For the amount of time, effort & energy we dedicate to stock selection, trade location & risk management, to only have generated +3.64% with those ideas is pathetic.

- 1H’13 OBSERVATION #2: Worse, the contribution of the sum total of our 2013 Scalp trades to Total AUM returns sucked WORSE. It’s a complete embarrassment to have navigated through the first 6 months of ’13 and have Scalps – trades sized under .5% AUM – generate a NEGATIVE Total AUM return of-0.35%. Totally unacceptable.

- 1H’13 OBSERVATION #3: Pairs to the THOUGHT above, we found it ironic that the largest volume of unsolicited or unprovoked, inbound “mentions” we got on the Twitter feed occurred at the time our STOP was triggered in our first Swing SS: ES_F, our largest loser, which clipped Total AUM for a -1.38% loss. People appear to enjoy when a winner has a loser. Fortunately, two folks actually realized, in that same week, we realized gains from other Swing holdings to the tune of +1.66%, making for a + week. That’s what PM’s running a L/S Market Neutral, Hedged book do; offset losers with a greater amount of winners, all the while raising cash.

- 1H’13 OBSERVATION #4 – The Good: Our exits to realize gains in RIMM, ICAD, COSI, QTM, MCHX, MT, NFLX, OCTX & INVN all met or exceeded trade plan objectives. The sales of EBAY & GOOG, long time holdings that offered “cushion” to “clean up” missteps like that which was realized on our first Swing SS: ES_F, also occurred near highs (at the time & compared to present trade levels) which is “good,” although we’d have preferred to keep both holdings “full.”

- 1H’13 OBSERVATION #5 – Things to Improve:

SIZING, LACK OF FOCUS & STYLE DRIFT: We didn’t get enough size in MNTX, MKL, REXI, BGCP, REGI or MGAM and we were flippant & unfocused with our management of exits, leaving gains on the table. MKL, specifically, annoys us. We bought the name smartly on the poorly received M&A announcement (and have known this company – intimately – for nearly 8 years) but flipped it once the “gap was filled,” straying from the buy thesis modeling “sum of the parts, portfolios and likely accretive nature of the M&A.” Likewise, our sale of REXI – a Leon Cooperman “piggyback” name – strayed from a solid FA rooted thesis & was taken off TA, a foolish action that “missed” another 15%+ of gains.

STUBBORNNESS: Plain & simple – YHOO. Our view remains that the Company is junk, the Dan Loeb posturing was/is ‘noise,’ the Marissa Mayer ‘hype’ was/is overdone & that the endless rubbish about ‘sum of parts’ re: YawnHOO’s Far East assets were/are overvalued but rather than modeling a proper short thesis & mapping trade locations to scale the name short, we made an “emotional trade.” Result, as is often the case when you trade on emotion, a loss. In this case, a -0.22% Total AUM ‘ding.’ The AMOUNT isn’t the issue, net-net it was paltry, it’s the fact the trade was placed & stopped due emotion, not work.

OPTIONS GUYS NEVER SAY THIS BUT ….. : Sometimes the “big, smart money” is wrong. Shocker, right? It’s our least favorite thing about even the best options posters on the stream, you NEVER see them highlight or update “big money trades” that got/get fileted. Well, let our FTNT trade serve as a reminder that sometimes the big guys get it wrong. We’re not professional options traders but we know our way around the instrument & into EPS – knowing the equity & sector fairly well – we decided to “join” the big, smart money that was looking for big downside out of FTNT & took our largest option trade of the year. FTNT blew the roof off in the Q report we were playing short & we ate nearly a -0.5% Total AUM loss.

SOMETIMES IT’S … THESIS RIGHT, TRADE WRONG: Plain & simple – NAV. We know a couple sectors very well & have outlined those in the Home Page. Truckers are one. Carl Icahn is chasing a dead horse in money & market share losing NAV but the Street responded positively to Q4′s loss. In “short order,” our short blew through it’s -9% stop & we were left to chase covers -12.8% which yielded a -0.70% Total AUM loss. Despite the post EPS Street reaction, our FA thesis remained intact (actually, it was further confirmed) but we added insult to injury, sat gun shy (emotion) & didn’t re-enter short over 36 missing, what would have been, a +20% type move. Shhhhhhhhhh …. it happens.

1H’13 OBSERVATION #6 – Last & Final: We had a great conversation with one of our most respected follows re: our views on both Trucker & XHB + related names. We took away great insight from this person’s share regarding how many on the stream read or value commentary (PERCEPTIONS) vs actually pay attention to the correlated trade run in accord or parallel to said commentary (ACTIONS). Carrying over 12,300 followers, we (as does the person who had the exchange with us) feel it’s very important to be clear, concise & thorough when we share or reiterate trade shaping opinions and believe we can improve our feed going forward based on the June ’13 exchange we had that went something like this (not direct quotes);

OH – Dude, you’ve been negative on the Truckers & Homebuilders for, like, 18 months & all they’ve done is go straight up. I mean, you’ve got a lot of readers & that’s what they see … you negative on these sectors over & over and all that’s happened is that these things go up & up, seemingly, everyday.

LT – Well, we’ve posted & talked a lot about both, as they’re core competency sectors. I think the “you’ve been negative on Truckers for 18 months” is a little off base, as our first trade actions came in Q1’13 & that only came in two names, NAV – which we got stopped on – and PCAR which, admittedly, isn’t the best short target in the sector. As for the Homebuilders, we’ve openly shared we bought REO baskets in ’09, ’10, ’11 & our last in SC early ’12. Anyone who looks at pricing trends over that period in the 9 states we own know those have done quite well. We posted short trades of size in XHB names in ’10. Those trades – which gained 30% to 50% – contributed significantly to the ’10 Total AUM returns, that wasn’t too bad. Finally, in just our second foray short Homebuilders started just this year, scaling short Jan ’13 end, mid March ’13 with a last & final “add” mid May ’13 – thus far – isn’t such a terrible pre-mapped plan of action on a Risk : Reward Ratio basis. What’s wrong with any of that?

OH – I’m glad you made money on those but what I’m saying is I don’t follow you – nor do most people – to mirror your trades. Those trades sound great but you have a lot of readers that don’t follow for trades; they follow for commentary, idea generation, sentiment, information exchange, etc. & what I’m saying is that you’ve come off, for months & months & months, as bearish on these sectors.

TAKEAWAY: Admittedly, we presumed – especially since we provide such clear detail denoting L or SS (direction), DAY / SCALP / SWING (duration), stop (risk) & targets (objective) when posting a trade – people were/are smart enough to value & place merit on the result of an ACTION moreso than they lay weight on words, views, opinions or other PERCEPTIONS held about any sector, MACRO or MICRO view on the market.

We all know that it’s the PnL that matters in this business, however, what we appreciated from this exchange is that we need to be more “self aware” of the PERCEPTION that some may take, as there’s only 140 characters to get certain views across. To hear from a smart, thoughtful, high value stream participant, who we’d call a “friend,” the importance of the PERCEPTION one gives off on their feed, regardless of one’s ACTION, and how it’s “valued” on the feed was eye opening.

RESULT: We’ll use the insights gained from this great share in attempt to avoid future MISPERCEPTIONS, while still sharing as honestly as always. Perhaps we’ll post less, as we often only have time or care to share ACTIONS & resultant PnL contributions that come from the trades we make as that’s all that really matters. Alternatively, we may post more & if we do so, we’ll pay more & particular attention to make sure that clarity & solid follow up – especially when our opinions or views are wrong – is done to alleviate a PERCEPTION that’s different from REALITY or ACTION.

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ON THE STARBOARD SIDE

TAKING A LOOK AT QUANTUM

There’s very little in this market we’re interested in positioning SWING L. $AAPL might be attractive under 383 and we still like SWING L: $INVN but only in small 2.25% AUM size ahead of the May 2 EPS. A new name we have interest in, however, is SWING L: $QTM

CHART CHECK

Nothing special here, this is a just a cheap name that will likely hold $1 (to maintain it’s listing requirement), offering an “easy to see” multi-month channel 1.20 – 1.45 following the late October 2012 collapse. We want to participate below 1.25 & have no problem scaling up to a 10% AUM size down to the 52 week low of $1. Yes, that’s scaling a name prospectively DOWN 20% from “starter entry,” however, when one targets realistic returns of 100%+, the risk : reward ratio (R:R) of -1 : +5 doesn’t appear quite as “bad.”

FUZZY FUNDAMENTALS

Make no mistake, we’re not buying this thing because the fundamentals are stellar; this is no barn burner on FA. The Company expects to lose -$0.05 this year, however, forecasts FY14 will show a return to profitability, +$0.02, albeit an estimated figure that’s been cut in half over the past 90 days.

Earnings History Mar 12 Jun 12 Sep 12 Dec 12
EPS Est 0.02 -0.04 -0.02 0.00
EPS Actual 0.00 -0.04 -0.02 0.02
Difference -0.02 0.00 0.00 0.02
Surprise % -100.00% 0.00% 0.00% N/A
EPS Trends Current Qtr.
Mar 13
Next Qtr.
Jun 13
Current Year
Mar 13
Next Year
Mar 14
Current Estimate -0.01 -0.01 -0.05 0.02
7 Days Ago -0.01 -0.01 -0.05 0.02
30 Days Ago -0.01 -0.01 -0.05 0.03
60 Days Ago -0.01 -0.01 -0.05 0.02
90 Days Ago 0.00 0.00 -0.05 0.04

INSIDER ACTION

Smarter, larger & able to do far deeper due diligence than we can, Starboard Value, LP holds a 10%+ position & has made recent buys between 1.22-1.25. The name offers ample liquidity w/ over 1.5MM shares a day trading and wicked to a 52 week low of $1.00. Do bear in mind an EPS report is due from $QTM on May 9th. Nevertheless, we’ll start doing some INSIDER PIGGYBACK BUYING, positioning with just a 2% holding ahead of the EPS report, and gauge price action following the report for any ADDS. Ultimately, regardless as to whether we’re able to take down “full size” or not, the expectation & target for this name is 100%+ on a SWING position, which warrants a time horizon of 9 to 12 months.

**Disclaimer: We are working 2% AUM sized scales L: $QTM orders between 1.19 (heavier) & 1.25 (lighter), target basis 1.20.

Insider Relationship Date Transaction Cost #Shares Value ($) # Shares
Starboard Value LP 10% Owner Apr 04 Buy 1.23 250,000 308,050 2,675,000
Starboard Value LP 10% Owner Apr 03 Buy 1.23 300,000 369,660 2,425,000
Starboard Value LP 10% Owner Apr 02 Buy 1.25 625,000 779,213 2,125,000
Starboard Value LP 10% Owner Apr 01 Buy 1.25 500,000 625,000 1,500,000
Starboard Value LP 10% Owner Mar 13 Buy 1.22 1,000,000 1,220,000 1,000,000
Posted in $AAPL, $INVN, $QTM | Leave a comment

TRACKING INVENSENSE’S MOTION

SOMETHING FUNNY HAPPENED ON HUMP DAY

Since our ejection from StockTwits last June, it’s rare that we see stream posts from Venture Capitalist & StockTwits co-founder of Howard Lindzon. Howard’s got some great insight on MACRO trends he’s seeing in the VC world – as it’s his core competency & his insight is both deep + valuable – which he rarely shares. Thanks to a finely groomed stream filled only with folks who posts high value -actionable blogs or trading ideas with a thesis & plan inclusive of an entry, stop & targets few of his posts make it to our feed.

Yesterday, however, we had CNBC on while Howard was talking stocks. From San Diego, a “hot bed” for biotech companies (and stock + brokerage scandals), biotech was a big topic throughout the interview. Howard admitted he’s not a trader of biotech stocks (nor are we) but one interesting & notable “theme” he mentioned – quality insights that played right to his core competency of “tech’s future” – was his view that $NKE & $UA are “pseudo biotech plays” due their weaving of technology into apparel that measures & records all sorts of medical & performance related information.

Howard’s view was a smart one (not just because we agree with it, which we do), supported by data which reveals explosive growth & advance in the very segment of the market he spoke to …. and that brings us to $INVN.

TAKE THE CALL WHEN YOUR STOCK IS DOWN

- A MEASURABLE PLAYER: The mood was somber across the $SMH landscape today, much due poor PC data from $HPQ (INVN itself was down a cool 3%) but it’s always important to know – unless you’re a chartist – what the Company you own actually does & how it “fits in” to a sector. In the case of $INVN, it’s focus isn’t in the PC space. InvenSense makes motion & tracking interface solutions in consumer electronics based on its multi-axis gyroscope technology by targeting applications in video gaming devices, smartphones, tablet devices, digital still and video cameras, smart TVs, 3D mice, wearable health and fitness monitors, optical image stabilization products, and portable navigation devices. While not a player in PC’s (good) but a name that participates in high growth areas – despite MACRO economic contraction – like SmartPhones, SmartTV’s, smart appliances, smart apparel, etc. (very good), Howard’s inadvertant “blessing” of the very pond that INVN plays in motivated us to share a more robust take on whether or not INVN looks “smart” on FA & TA.

CHARTS-’O-TRASH

- THE DAILY: Trading just 9% above it’s 52 week low while having cascaded nearly 47% off 52 week highs, the name looks like a dog with fleas to the common crayon. While a SCALP trader type of TA pro may make a case that @ 9.15 may serve as a “triple bottom,” thus defining a fairly low risk STOP, there’s not a whole lot to get excited about if all one does is scan charts.

- THE WEEKLY: Since coming public in late 2011, this chart shows INVN’s been a lackluster performer. In the camp of “anything you can do, I can do better;” the weekly chart bests it’s daily chart brother & offers up the unicorn-esque “quintuple bottom.” We’re not sure what the probability & statistic records are on “quintuple bottoms holding” so we’ll have to peak in on the FA to get a better handle on the name.

FUNDAMENTALS MAKE YOU CASH – Dash For This “Trash”

- WHAT’S TO LIKE: There’s a lot of smart people on the stream that talk about corporate fundamentals & everyone seems to have their own favorite metrics. In a broad market that, for three years, hasn’t traded with any correlate to fundamentals, individual stock selection still has no greater contributor to a trade’s success or failure than FA (unless you’re L: as seemingly any long “works” at some point, you know, “set it & forget it” like Eddy Elfenbein suggests with his model portfolio).

INVN has some “snap shot” components that made us do a deeper due diligence (DD) dive into SEC filigns; Debt: $0, Cash per Share: $1.89, a Price to Earnings Growth Ratio (PEG): 0.92, a Price to Free Cash Flow (P/FCF): 23x, Gross Margins: 54%, Net Margins: 23% and most importantly, a Forward Price to Earnings Ratio (fPE): 13.5x versus Forward Earnings Per Share Growth Estimates (fEPSe): +29%.

Index - P/E 20.30 EPS (ttm) 0.50 Insider Own 0.71% Shs Outstand 84.19M Perf Week 1.40%
Market Cap 854.53M Forward P/E 13.53 EPS next Y 0.75 Insider Trans -93.58% Shs Float 61.69M Perf Month -16.18%
Income 44.02M PEG 0.92 EPS next Q 0.14 Inst Own 55.86% Short Float 15.59% Perf Quarter -21.38%
Sales 186.50M P/S 4.58 EPS this Y 1713.57% Inst Trans -9.38% Short Ratio 4.27 Perf Half Y -17.95%
Book/sh 2.73 P/B 3.72 EPS next Y 29.31% ROA 20.57% Target Price 17.06 Perf Year -36.08%
Cash/sh 1.89 P/C 5.37 EPS next 5Y 22.00% ROE 22.50% 52W Range 9.06 – 18.46 Perf YTD -8.64%
Dividend - P/FCF 22.93 EPS past 5Y 0.00% ROI 22.03% 52W High -46.70% Beta -
Dividend % - Quick Ratio 11.51 Sales past 5Y 127.65% Gross Margin 54.46% 52W Low 8.61% ATR 0.43
Employees 263 Current Ratio 12.63 Sales Q/Q 42.93% Oper. Margin 26.78% RSI (14) 28.56 Volatility 2.78% 3.96%
Optionable Yes Debt/Eq 0.00 EPS Q/Q 86.15% Profit Margin 23.61% Rel Volume 0.66 Prev Close 10.15
Shortable Yes LT Debt/Eq 0.00 Earnings Apr 29 Payout 0.00% Avg Volume 2.25M Price 9.84
Recom 2.10 SMA20 -7.32% SMA50 -19.42% SMA200 -17.38% Volume 1,479,606 Change -3.05%

FORWARD PE vs. FORWARD GROWTH – With A Side of Check The History: Coming up in the business as fans of Jim O’Shaughnessy, Scott Black, Michael Price & Peter Lynch, men who made their billions identifying & buying value, we like when we can buy growth companies trading at a discount to their peers & their own above average growth. The last metric noted, INVN’s fPE vs. fEPSe is especially appealing to us; the Company trades with a fPE of just 13.5x and their expectations for FY14 fEPSe growth of +29% (multiple reflects a 50% DISCOUNT to current & forward growth). Further, consider that INVN sees FY13 EPS of $0.58, following FY12′s posted $0.37 per share, +56.7% growth, our interest was peaked. Next, we took a “snap shot” peak at how a Company has performed historically & pair it to what they forecast looking forward. That looked great. Finally, we dug through the SEC filings, which we advise you do as well, and noted that in FY12 the INVN – Samsung relationship accounted for just 2% of INVN’s FY12 REV (we’d guess the most recent Q FY14 guidance raise stems from increased visibility & expanded business with Samsung).

- Here’s what a good EPS history, EPS trend & Growth History looks like:

Earnings History Mar 12 Jun 12 Sep 12 Dec 12
EPS Est 0.07 0.08 0.16 0.17
EPS Actual 0.07 0.09 0.16 0.19
Difference 0.00 0.01 0.00 0.02
Surprise % 0.00% 12.50% 0.00% 11.80%
EPS Trends Current Qtr.
Mar 13
Next Qtr.
Jun 13
Current Year
Mar 13
Next Year
Mar 14
Current Estimate 0.14 0.15 0.58 0.75
7 Days Ago 0.14 0.15 0.58 0.75
30 Days Ago 0.14 0.15 0.58 0.75
60 Days Ago 0.14 0.15 0.58 0.75
90 Days Ago 0.14 0.14 0.54 0.73
Growth Est. INVN Industry Sector S&P 500
Current Qtr. 100.00% -9.20% N/A 10.50%
Next Qtr. 66.70% 15.20% 1,005.70% 16.30%
This Year 56.80% 2.80% 17.80% 8.20%
Next Year 29.30% 39.60% 37.30% 12.80%

LOOK BOTH WAYS – No Stock or Trade is Without Risk

One of the things most on the stream are horrible at is “looking both ways” when sharing their FA, TA, ideas & trades. Trust this; if you like a stock long, there’s likely a bright person who could make short case and, likewise, God forbid you like or trade a stock from the short side, you’ll most certainly hear from a bull. Additionally, STOPS nowadays are rarely, if ever, mentioned in posts. Finally, insightful Q&A by and between two trading professionals who have opposing views – a proper exchange which is void of cursing & backed + supported by facts & data – is even more rare. Today’s stream trader, rather than engage & treat the stream to what could be an insightful and revealing exchange, reaches immediately for the “BLOCK” button while muttering “that guy’s a fucking idiot.”

Foolish, all of it, but we’re not in that camp. We’ve begun a L: INVN and we acknowledge it has some issues;

- The charts are horrible AND the name has cascaded from $15 to below $10 AFTER it posted a “beat REV, beat EPS, raise forward Q REV, raise forward FY14 EPS.” That’s alarming.

- INVN has an open & ongoing patent lawsuit with STM. They call the claims “frivolous” & INVN recently “won” a motion but let’s keep it real; lawsuits are risks.

- Since February, the stock has faced consistent & steady liquidation, again, despite a very strong historical performance & forward looking views relative to FA.

- The stock has very little Institutional coverage or sponsorship & there’s – perhaps – only one person on the stream who knows INVN’s largest shareholder (Partech US Partners). The biggest “name” holder, FMR, LLC., holds (for them) a throw away position of just 5.5% in INVN’s outstanding shares.

SUMMARY & DISCLAIMER

We very much enjoyed Howard’s commentary on the “transformation” of some mainstream apparel names into potentially “pseudo biotechs” & view $INVN as a “pick & shovel” play across multiple sectors, not just apparel. Whether it be closing our curtains from the Nexus 10, our maid having the capacity to start laundry from her SmartPhone or being able to monitor biomechanics from our sports watch during & following a work out, the future for “device development & integration” to make life more efficient & robust should be amazing with $INVN an embedded beneficiary in that expansion.

We’re aware of the risks & are building a SWING L: INVN position, which is currently sized @ 1.75% AUM with a basis of $10.10. We’ve yet to note a STOP because this is a name we’re looking to build up to 12% AUM. Our view that the stock offers exceptional growth at a discounted value is key. The expansion of the Samsung relationship is a potential catalyst. New business opportunities abound & should the $STM lawsuit be resolved, one notable risk removed. We have open orders representing a .5% AUM add & we’d be looking to put on another 1.75% to 2.25% AUM should the name trade below $9.60. Scales would likely be taken between $9.10 – $9.50 but we’ll post specifics, as we always do, live to our Twitter feed. Our opinion is that INVN offers an excellent entry into a name with a strong FA history, amazing FA growth prospects & patents + technology that position it well within one of the most exciting & high growth sectors in the market today.

 

Posted in $HPQ, $INVN, $NKE, $SMH, $UA | Leave a comment

CODDLING AN ORPHAN

ORPHAN ON THE RADAR

One of the area’s in the market that’s paid us well over the years is finding some gems amongst a class of stocks known as “Orphaned IPO’s;” companies discarded by investors after seeing the stock price plummet post offering, subsequently abandoned by their early institutional sponsors & unattended to by formerly ass kissing Bankers. On such name is ACTV - The Active Network, Inc., a provider of organization-based cloud computing application services to business customers in North America, Europe, and internationally. The company offers ActiveWorks, an organization-based cloud computing platform, which consist primarily of business mapping, project management implementation services – including system set-up and configuration – & data conversion. It serves a range of customers, including community and sports organizations, large corporations, small and medium-sized businesses, educational institutions, federal and state government agencies, non-profit organizations, and other related entities.

TIME HORIZON & TA – A Differentiated Look @ The Charts

There’s absolutely nothing pretty about anything below … and that’s exactly what we like, as it gives us time to do the deeper digging to learn about a companies prospects when a stock is out of favor, unfollowed by the masses. Here’s some thoughts on different time frames & how you might play it;

THE SCALP TRADER’S VIEW: At a glance, the chart below shows an equity that’s recently “stopped going down,” putting in a 52 week low @ $3.83 right before – finally – breaking it’s downtrend line from February highs @ just a peak over $6 that stymied the early March run toward $5. The range thus far is April is from the aforementioned 52 week low of $3.83 and $4.27, a range of $0.44.

PROSPECTIVE ACTION: The stock, in the past two days, has begun to retrace some of those gains & a target entry @ the 50% retracement level of this range – or $4.05 – isn’t inappropriate vs. a STOP of break & close below the current year’s low, downside risk of $0.25 or -6%. One might target “profit scales” from a $3.95 to $4.05 entry @ $4.27+ en route to a second target of $4.47 for returns of +5.4% & +10.3% respectively. A break over $4.50 may result in trades up toward $4.63 to $4.83, returns on your “SCALP tail” of somewhere between +14.3% and +19.2% in relatively short order.

 
THE SWING TRADER’S VIEW: Our practice is much more focused on SWING trading & when taking a peak at the daily & monthly charts – as well as taking into considering more top down analysis coupled with FA – we’d take a more cautious view. Although in the immediate term ACTV may have “stopped going down,” one notes that March trading actually saw this name fall out of a 4 month (November ’12 through February ’13) “bottom basing channel” which ranged from the prior 52 week low @ $4.47 and a high of $6.30 while the monthly chart shows that there’s still selling volume despite the late FY12 cascade from $12 to below $6 for an ugly 50% valuation haircut. The action on both charts – for SWING players – suggests one should look more closely at FA factors when mapping their trade plan OR simply wait until, at a minimum, ACTV reclaims entry & holds it’s bottom basing channel at prices at or above $4.47 before considering any action.
 
THE SWING TRADER’S VIEW – Add The FA: The first thing we ask ourselves when looking up a name for a SWING trade is “do we like the sector & does that sector allow for outsized growth given the data & our current MACRO economic outlook?” In the ACTV case, we can answer “yes,” as the cloud provides efficiencies across corporations that are always looking for ways to trim fat & manufacture EPS for their businesses. Next, we take a look at the FA & it’s here that we find company specific data that suggests “there’s no rush to own this name.” On the surface; the fPE (forward PE): 22x vs fEPSe (forward PE estimate) growth of +290% is appealing, as is a P/S (price to sales): 0.6x, P/B (price to book): 0.8x and a P/C Ratio (price to cash): 4.3x. The Company carries an unmentionable sliver of debt and GM (gross margins) have been maintained at a robust 54% … they just haven’t yet figured out how to drive money to the bottom line (resulting in NM – net margins – and subsequent EPS – earnings per share).

 

Index - P/E - EPS (ttm) -0.74 Insider Own 8.16% Shs Outstand 60.95M Perf Week 1.96%
Market Cap 253.55M Forward P/E 21.89 EPS next Y 0.19 Insider Trans -14.30% Shs Float 48.82M Perf Month -13.69%
Income -43.03M PEG - EPS next Q -0.18 Inst Own 71.57% Short Float 8.53% Perf Quarter -24.09%
Sales 418.89M P/S 0.61 EPS this Y -42.85% Inst Trans 2.54% Short Ratio 5.67 Perf Half Y -64.69%
Book/sh 5.45 P/B 0.76 EPS next Y 290.00% ROA -7.53% Target Price 8.92 Perf Year -74.94%
Cash/sh 0.96 P/C 4.33 EPS next 5Y 27.50% ROE -12.67% 52W Range 3.83 – 17.24 Perf YTD -15.27%
Dividend - P/FCF - EPS past 5Y 0.00% ROI -11.74% 52W High -75.87% Beta -
Dividend % - Quick Ratio 0.75 Sales past 5Y 32.68% Gross Margin 54.21% 52W Low 8.62% ATR 0.18
Employees 3036 Current Ratio 0.77 Sales Q/Q 23.18% Oper. Margin -9.46% RSI (14) 38.15 Volatility 3.50% 4.39%
Optionable Yes Debt/Eq 0.02 EPS Q/Q -51.29% Profit Margin -10.27% Rel Volume 0.32 Prev Close 4.17
Shortable Yes LT Debt/Eq 0.01 Earnings Apr 29 Payout - Avg Volume 733.78K Price 4.16
Recom 2.10 SMA20 -4.19% SMA50 -14.44% SMA200 -51.42% Volume 232,465 Change -0.24%
THE CONCERNS: Typically, we want to see a Company have a positive EPS history (beat, beat, raise types) & names that are raising forward FY EPS estimates, as they’re signs of corporate growth & robust business. Unfortunately, we don’t see that YET in ACTV & that’s – in large part – why, when coupled with the TA, there’s no rush to buy this stock. Note that, although ACTV’s posted EPS “beats” in 2 of it’s last 4 Q’s, it’s only “beat” in terms of lighter losses. When it comes to the Q’s where ACTV is expect to generate positive EPS, they’ve only “met or missed.” This reinforces the statement above … “they just haven’t yet figured out how to drive money to the bottom line.”

 

Earnings History Mar 12 Jun 12 Sep 12 Dec 12
EPS Est -0.31 0.15 0.05 -0.11
EPS Actual -0.19 0.11 0.05 -0.10
Difference 0.12 -0.04 0.00 0.01
Surprise % 38.70% -26.70% 0.00% 9.10%
Another issue plaguing ACTV is forward guidance. One is much more prone to act when you see a depressed stock price yet forward Q & FY EPS guidance being boosted. We don’t have that here, in fact, it’s quite the opposite (another reminder that “there’s no need to rush into this name”). As noted below, it’s not so much the two near term Q’s that are the problem. ACTV reports on April 29 & they expect ($0.18) – an estimate that’s a little worse than it had been a couple months ago – BUT that downward adjustment to the March ’13 appears to be a contract push out that the Company expects to recapture in the Jun ’13 Q, as noted by a guidance raise from $0.09 to $0.11. The real problem that exists is the forward FY14 guidance slash to what could have been a VERY healthy swing from annual losses to positive EPS. Moving the needle from estimates of ($0.08) to ($0.10) as they’ve done for the current FY13, that’s not so bad. The Street can handle that, however, following it up with a view for the following year that previously pitted you making $0.72 of annual EPS & shaving that down to just $0.19 as noted below … that’s a tough pill to swallow.  Nevertheless, companies that morph their business from money losers to profitable enterprises can & do often yield massive gains in stock price BUT such a guidance slash a) mutes upside to a degree & b) confirms a “no rush” trading approach. We’d instead opt for a more “prove it to me” stance over the next 4 months (enabling one to evaluate both EPS prints for the current March Q & the forthcoming June Q).

 

EPS Trends Current Qtr.
Mar 13
Next Qtr.
Jun 13
Current Year
Dec 13
Next Year
Dec 14
Current Estimate -0.18 0.11 -0.10 0.19
7 Days Ago -0.18 0.11 -0.10 0.19
30 Days Ago -0.18 0.11 -0.10 0.19
60 Days Ago -0.15 0.09 -0.08 0.63
90 Days Ago -0.15 0.09 -0.08 0.72
PROSPECTIVE ACTION: Love the sector & ACTV already has some specific attributes that are interesting, relative to peers on FA, but this stock likely trades sideways over the next 4 months. That said, $4.27 is a key area to watch, as is $6.30, well above current prices. If one had to guess, noting the continuance in selling volume even following the name’s 50% decline from $12 to $6- during September & October ’12 AND it’s recent “bottom basing channel” breach below $4.27, we’d only begin to consider light scales on a re-approach of current 52 week and all time lows – call it $4-. We’ll be looking for seller exhaustion & enhancements to corporate execution to, hopefully, occur in lock-step and target a full size holding of 8% AUM at a cost basis under $3.50, preferring $3.15-. Will it get there? No idea. Why $3.15? As with all our SWING trades, we target 100% returns in 12 – 18 months. It may sound outsized & fanciful but it’s not. The target % return does, however, have to work in parallel with realities as defined on both the chart & on the balance sheet. Alas, as the stock’s traded to $6.30 this year (with FA that should trail the forthcoming 12 – 18 month period) we don’t think it’s a stretch to have it revisit that level … and hopefully it does so AFTER allowing us an entry @ $3.15, yielding a cool 100% return for our work.
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