Wednesday, January 25, 2012
1/25/12 This lonely place
I'm looking for a girl who has no face
She has no name, or number
And so I search within this lonely place
Knowing that I won't find her
Well, I can't stop this feeling deep in inside me
Ruling my mind
What's my self image? A calm, experienced trader who understands human nature- not least his own? Let's see:
(a) At approximately 120 pm pst I click on my Fidelity watch list, and notice the indexes have spiked to intraday highs.
(b) I buy 4500 shares of DANG @ 7.028, and 7000 shares of IRE @ 6.1138- a highly emotional decision. The impulse is best described as 'capitulatory buying.'
(c) For half an hour, I remain confident both stocks will spike further in price.
(d) At 205 pm pst, my confidence begins to wane. In fact, my sixth sense tells me that rather buying the Fed announcement, I should have faded the announcement.
(e) I sell 4500 shares of DANG @ 7.002, and 7000 shares of IRE @ 6.102.
(f) My only claim to being 'calm and experienced' lies in closing both trades immediately upon review of Id panic by the Ego.
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2nd - Take a look at the trading action in these:
ReplyDeleteMGIC
RLD
ANW
DTLK
NOIZ
I think these are all great trades here. I'm thinking I like MGIC the best...check out these fundies:
Revs (last 5 quarters)
$22 MM
$25 MM
$25 MM
$27 MM
$30 MM
EPS (last 5 qtrs)
$.08
$.09
$.09
$.10
$.11
FCF (last 5 YEARS):
-$1 MM
+$5 MM
+$7 MM
+$7 MM
+$14 MM
Balance Sheet:
$35 MM, no debt
Mkt Cap: $230 MM
Technically, a break above $6.4 and it's game on. And look at that weekly chart...huge spike in Q4 2010 / Q1 2011 from $2.5 to $9.7 on massive vol. Since then it has basically just consolidated those gains and pulled back on lower and lower volume until it bottomed at $4 in the last summer 2011. Since then any vol increase has boosted this sucker up big. It looks poised to get more volume and another big move up. I bet it goes to $10 soon.
Industry Comps:
CRM and RNOW (bought out) at 50+ P/Es. RNOW bought for 50+ Free Cash Flow. MGIC is at 15 multiples.
Tough to watch the markets explode higher with no position and easy to get played.
ReplyDeleteLike you say though, you have to know your style and I find I make better decisions by gradually buying and selling positions and knowing I will be wrong (either I should have bought more faster or bought less).
Right on. I got played big time.
ReplyDeleteJust pointing out that in spite of decades of practicing self-control, our psyches can unexpectedly make highly emotional (and detrimental) decisions at any time.
ReplyDeleteBB - You're bullish on MGIC right? What can you tell me about it? I'm trying to listen to conference calls but they don't have any on their website.
ReplyDeleteIn fact, here's a great example I came across in this afternoon's edition of the online Chronicle:
ReplyDeletehttp://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/01/25/BAQJ1MU9RQ.DTL
I would be willing to bet the 63-year-old driver of the minivan was a pretty responsible, laid back guy 99% of the time. And allowing his emotions to get the better of him this morning cost him his life.
Man that's awful 2nd. Glad I work from home.
ReplyDeleteDavid- Congrats on holding AUMN through what must have been a harrowing sell off last December. Given your position size, I would have to say in all honesty I couldn't have done it.
ReplyDelete2nd, know that feeling and have made a lot worse decisions than you made today - you were at least smart enough to recognize what you id and correct the situation.
ReplyDeleteBeen long MGIC since late 2008.
I like it a lot as they've got a good, solid business doing application integration, eg. getting your SAP ERP system to work with your Oracle Financials. They get new customers every quarter and are growing.
They've taken this solution and repackaged it as a "cloud computing solution", and gotten good press and so it can get moving with the mo-mo guys. Plus, over half the company is owned by Formula Systems (FORTY), so the float is small (18 million shares), so when you get demand it moves like it did a couple of years ago.
It would really make sense for a company like IBM to buy them as they do a lot of integration work and could use their tools, but not sure that FORTY would go for this.
I think we could see $10 - $12 or higher, but would probably start selling some in this range.
Emotions are a powerful force. Best harnessed/channeled toward higher goals.
ReplyDeleteAlso, don't think MGIC does concalls - not sure if it is because it is an Israeli company or because they don't have to because of the ownership structure.
ReplyDeleteThey also gave us a $0.50 special dividend a couple of years ago when they had too much cash, so may do something like this again as FORTY probably wants access to their cash.
2nd, agreed.
ReplyDeleteMGIC - man look at this steady growth. I don't quite understand how this is trading at the valuation it's at. BB - I think you might have a true multi bagger here. I would just hold it man. The cloud momo crowd is gonna take hold of this one again and send it up to $20. Then you could probably sell for a 10 bagger.
ReplyDelete(U.S. dollars in thousands, except share and per share data)
Income (loss) before taxes on income
2006 (6,102)
2007 1,613
2008 4,715
2009 6,510
2010 9,273
Anger can often be quite useful as a motivator. If I'm tired, it wakes me up. It can also help me take care of stuff I've been avoiding/putting off, often in record time.
ReplyDeleteMan everything I'm looking at with MGIC is just solid:
ReplyDelete2006 >> 2007 >> 2008 >> 2009 >> 2010
(U.S. dollars in thousands)
Working capital $ 15,584 >> $ 28,737 >> $ 33,851 >> $ 28,021 >> $ 48,815
Cash, cash equivalents, short term deposits and marketable
securities 11,653 >> 16,446 >> 32,588 >> 41,868 >> 46,542
Total assets including discontinued operations 71,172 >> 82,298 >> 81,164 >> 87,551 >> 111,950
Total equity 47,644 >> 61,244 >> 66,755 >> 57,188 >> 88,865
Alright, enough of that crap. I'm going to take a look at MGIC.
ReplyDeletehttp://www.magicsoftware.com/en/company/?catID=6
ReplyDeleteRISKS to MGIC from what I see:
ReplyDelete*Looks like Ericcson is a major customer...what financial shape are they in?
*Gross margins are significantly lower than RNOW / CRM and other cloud plays so that's probably the meaning for the discount. But the growth is tremendous and steady.
*Also they announced a distribution agreement with Asseco today but it seems like that's not an arms-length deal as Asseco holds a stake in MGIC if I'm not mistaken.
Hope you're right TOF. The one other point I forgot is the CEO, Guy Bernstein, is a solid guy and he helped turn MGIC around back in 2006 and has been directing the company since.
ReplyDeleteA stock I am looking at now is New Millenium Iron Ore. It's on the pinks for you, but it's a great story http://www.nmliron.com/data/attribute/upload/201109%20Corporate%20Presentation.pdf
It's going into production this year, has a partnership with Tata steel, port access, huge deposits. It could be a multi-bagger this year as it should get revalued with the move to production and could be a takeout like the Freeport-mac takeout of Consolidated Thompson.
The chart had a big run up, has pulled back and now turning up. Jennings Capital has it as one of their top stocks for 2012 and a $8.00 target on it (it's $2.00).
Only trades 14,000 share a day in the US, but likely one you could buy and hold for the year.
Yeah Asseco owns FORTY which owns 53% of MGIC.
ReplyDeleteMGIC is a company with an understandable story. Much more so than DANG or IRE.
ReplyDeleteThe MGIC chart looks like MAGIC. :) If it breaks above its Jan 18th high (at $6.32) tomorrow, then it will have a classic "cup-and-handle" shape. Given the general support from the "Risk ON" environment, all cups with handles should be bought. So I just placed a buy stop limit for 1K shares at $6.33/$6.35. You might wonder where I get the money from to keep buying stocks, but the answer is simple: with the recent surge in AUMN my margin buying power has expanded greatly, and so I just keep buying stuff on margin as it expands and hoping that it won't contract. :)
ReplyDeleteAs for SVM being the next stock to break out, it looks like I was wrong -- it had underperformed GDXJ by the end of the day today. So the "next breakout" happened elsewhere...
ReplyDeleteWell, in mid-December I bought calls both on SVM and GDXJ, so the rally in the broad ETF suits me just as well. :)
2nd_ave -- the December sell-off in AUMN was a shocker indeed. I was *sure* that AUMN will hold the $7 support, which was its lowest point *pre-QE2*, when SLV was trading at $18 and AUMN had no producing Velardena property. I am glad that my 2008 experience helped me recognize the complete irrationality of this situation and the fact that it will inevitably be corrected by AUMN zooming up... If it weren't for the fist-hand experience of junior mining stocks like UXG going up 15X after bottoming in December 2008, I would not have had the balls to keep buying AUMN as it was going down...
ReplyDeleteInteresting take from Bruce Krasting on today's FOMC announcement:
ReplyDeletehttp://brucekrasting.blogspot.com/2012/01/bernanke-goes-all-in.html
LOL! The next breakout happened in my short, IAG! Good thing I was looking forward to the Fed announcement and got out with a profit.
ReplyDeleteMGIC is a top pick of Leon Cooperman. I rate him WAY above just about any one you'll ever see on the boob tube.
ReplyDeleteMark - I think that's the wrong MGIC...there's a mortage insurer MTG that Cooperman is bullish on I believe. Symbol is MTG. I believe that Bass guy that's always bearish is bullish on MTG too, which is what got me interested in RDN.
ReplyDeleteMark - Cooperman got waxed in 2011 if this is any indicator:
ReplyDeletehttp://www.cnbc.com/id/43007817/Halftime_Where_Is_Leon_Cooperman_Putting_6_Billion
TOF- No, Leon has MGIC as a top pick. Promise. I do know Kaas is long MTG though. Too lazy to get the link. Scalped it the day he mentioned it on CNBC when they were interveiwing him regarding his open letter to POTUS.
ReplyDeleteI don't know bro...I find it hard to believe he would have interest in a company of this size.
ReplyDeleteYeah, Cooperman has been involved with MGIC investments (MTG).
ReplyDeleteHave to be careful searching on Google as if you enter MGIC, it usually thinks you are talking about MTG.
Also, did a search just to be sure and it lists MTG as 1 of his top picks, but also says "Correction: An earlier version of this story incorrectly listed Magic Software."
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