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  #1  
Old 04-29-2007, 06:11 PM
Scorpion Man Scorpion Man is offline
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Default First good idea

Krishan and I think we have found our first juicy stock idea since we have been working together. Very leveraged company, so not for the faint of heart...but we think its at least a double.

I am not posting any details yet. I am simply giving the forum a heads up so people can understand the background when/if we decide to talk about it more...we believe they will put up a pretty bad first quarter. Difficult call is whether to buy before or after this event...current conclusion is I have about 20% of my position on now, rest will happen post Q1 call in a couple weeks.

I strongly am considering making this equivalent to my largest current position or larger. We may visit the company in the next couple months.

Jump in, Krishan, if you think there is anything else to say now.
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  #2  
Old 04-29-2007, 06:18 PM
Evan Evan is offline
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Default Re: First good idea

I guess this could be a good thread but you leave something to be desired here. Maybe you could talk about how you found the company, why you like it, why you decided to buy 20% now....anything?

I'm not really sure what anyone else can add to this besides "hope to hear more" kind of things.
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  #3  
Old 04-29-2007, 06:36 PM
Scorpion Man Scorpion Man is offline
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Default Re: First good idea

[ QUOTE ]
I guess this could be a good thread but you leave something to be desired here. Maybe you could talk about how you found the company, why you like it, why you decided to buy 20% now....anything?

I'm not really sure what anyone else can add to this besides "hope to hear more" kind of things.

[/ QUOTE ]

This was meant as more of a preview. I am not going to talk about the stock yet because I have a lot still to buy and it is not super liquid (although not wildly illiquid like some of the ideas I have seen here which literally don't trade).

My main goal was to get it out there now, explain that we actually think a miss is coming, explain our strategy going into the call...I do this to avoid looking like a Monday morning qback later.

The 20% worked like this...a friend suggested this idea...I bot a modest position as a starter because it sounded interesting...then we got worried because the short term read sorta ugly and upon further investigating with my friend's primary source, realized that even that guy thought the stock was not a buy ahead of the Q. So I was pissed I even bot the starter. We then spent over an hour with CFO on the phone and both came away saying this is the one.

BUT Q1 sounded ugly. They have signalled this to some extent, but it is very difficult to guage the market's reaction to the actual release. On the one hand, it is hard to imagine the stock going up on this bad a release. ON the other hand, it is possible that people who understand the situation well are taking the same approach I am and we could be surprised by the reaction.

In addition, the amount of stock I want to buy is not trivial compared to the average daily volume of this stock. Actually, as I write this and look at the daily volume I am seriously considering buying more before the earnings, even though I don't expect them to be good, because there are many days where my appetite would equate ot 5x the daily volume. This is a very tough call from a trading standpoint.

That said, anticipating Desert Cat's commentary, this should be a good idea whether I handle the trading well or not. It's just one aspect of trying to maximize the profitability of the investment.
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  #4  
Old 04-29-2007, 07:03 PM
Evan Evan is offline
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Default Re: First good idea

[ QUOTE ]
I do this to avoid looking like a Monday morning qback later.

[/ QUOTE ]

I know that. I'm just saying there's not much here now other than you saying you're buying a stock. Okay, cool.
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  #5  
Old 04-29-2007, 08:40 PM
wiseheart wiseheart is offline
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Default Re: First good idea

What percentage of your investments is going to go into this stock?

Is Q1 just historically a bad quarter for this company? If not, why are you confident that this bad quarter isn't going to negatively affect the company, is it a short-term trade off for long term profit kind of thing?
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  #6  
Old 04-30-2007, 12:18 AM
Scorpion Man Scorpion Man is offline
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Default Re: First good idea

[ QUOTE ]
What percentage of your investments is going to go into this stock?

Is Q1 just historically a bad quarter for this company? If not, why are you confident that this bad quarter isn't going to negatively affect the company, is it a short-term trade off for long term profit kind of thing?

[/ QUOTE ]

I am considering around 10% of the $s I control for this investment....that is large for me, as I run with about 30 stocks (which is too many, but that is a different discussion).

Q1 is seasonally weak, but it is bad even taking out that effect. There are some specific macro reason that the Q is poor...but we believe there are specific, controllable opportunities for the company to create value - both in operations and in the capital structure.

It is a fairly steady business with macro exposure to public works, commercial and industrial capital spending. I am not 100% sure what you are asking, but its not really a tradeoff, just a bad Q for some idiosyncratic reasons that do not seem to be relevant to a two year view of the company's future (or even a 6 month view).
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  #7  
Old 05-08-2007, 03:15 AM
jumbojacks jumbojacks is offline
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Default Re: First good idea

Any updates?
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  #8  
Old 05-08-2007, 01:24 PM
Scorpion Man Scorpion Man is offline
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Default Re: First good idea

[ QUOTE ]
Any updates?

[/ QUOTE ]

Yes. The company reported its first Q, it was not quite as bad as I thought it would be. I bought aggressively that day and took the stock up 5%, but still was not close to being full on my position. With what I bought ahead of the Q and on the Q I now have a little over half of the position on and have eased off to see if the stock comes in a little. It has just a little, but its not trading big volume. I think it will take me another 2 weeks or so to get the rest, but its unpredictable.

There are no sellers. It's always hard to be confident in the stock market, but I will be very surprised if this not up at least 50% in 9 months.

When I am done, Krishan and I will figure out how to communicate it here. I don't want to be accused of trying to get others to follow me. It's easier if I don't have people following me...

I am strongly considering visiting the company (In a non exciting midwest town). This would probably happen in early June and also give me a chance to meet Krishan in person and thank him for his good work.
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  #9  
Old 05-18-2007, 11:11 PM
krishan krishan is offline
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Default Re: First good idea

[ QUOTE ]
[ QUOTE ]
Any updates?

[/ QUOTE ]

Yes. The company reported its first Q, it was not quite as bad as I thought it would be.

[/ QUOTE ]

Heh, I think we blew it. We knew the first quarter was going to be bad from a revenue perspective but didn't take into account how much of the bad news the models had already incorporated. The 10% stock price drop we were hoping for never materialized making it much harder for SM to fill his position. I took a 15% position right away. (small portfolio).

If we had read Q1 correctly I think buying half the position in advance of the release would have been better. The week preceeding the release was much more liquid than recent days. That said, the market has not caught on to the strength of the first quarter. Stock is up modestly. I think though top line was weak as expected, progress on gross margins in a seasonally weak quarter was exceptional. This corroborates our story which we will give in detail eventually.

Krishan
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  #10  
Old 05-19-2007, 12:40 AM
DesertCat DesertCat is offline
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Default Re: First good idea

It's so hard to predict price action. I found a nice company trading at a low valuation, but before I put any money in I did some clever research using housing starts data that told me they were going to tank their quarter. I didn't care, it's really just short term bad news and I like the companies longer term prospects. But I didn't want to pay the then current trading price of $7.50 a share, so I thought I'd be clever and buy after the earnings release and get a nice discount.

They released two weeks ago. Earnings were down substantially, caused by the exact same effect I had predicted. Stock shot up to $9 that day and has worked it's way all the way to $11 per share now. Clever me.
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