"Be fearful when others are greedy. Be greedy when others are fearful."
-Warren Buffett
Intelligent Speculation
for the small investor
My name is Phillip Lyon and I have created this website to help the small investor. My investment philosophy is to invest in undervalued stocks that also have a speculative aspect. My website contains free stock picks and stock market commentary so check back often and tell your friends about my site.
DTLK Q1 08 Results
Datalink announced Q1 08 results today and reported nice results.
Datalink reported 47.73 million in revenue and diluted earnings per share (EPS) of 0.04. Revenue was up 17% YOY and EPS was up from a loss of 0.06 in Q1 07. Datalink also reported its highest gross margin since the fourth quarter of 2004. The company gave guidance for revenue between 48-52 million and EPS of 0.05 – 0.09 for next quarter.
Datalink is continuing to show improvement in its financial numbers and I would continue to hold your shares. I think the stock price of Datalink will rebound quite a bit over the next few quarters as it reports further improvement.
How To Enter A Short Order
I received a comment on my previous post about how to short a stock through a broker so I will describe it here in case other people are confused.
When you go to enter an order you probably have a few options to choose from. I use Scottrade and I have the following options to choose from: Buy, Sell, Sell Short, and Buy to Cover. When you short a stock you would choose “Sell Short”. You would then enter the rest of the order: number of shares, stock symbol, order type (market or limit), and duration.
When you short a stock you are actually selling the stock. Therefore, if you want to place a limit order you would set your limit price higher than what the current price is. If you place a market order your order would get filled at whatever the bid price is (Unless your market order was for more shares than the bid offered. In that case you would take out more bids until your order got filled.) If you are confused about market and limit orders leave me a comment and I will write a post about them. (more…)
Should You Short Stocks?
If you are an experienced investor shorting stocks should be part of your investment strategy. Shorting allows you to profit when a stock goes down in price. In a declining market, such as the current one, it is a lot easier to make money shorting stocks than buying stocks.
When you short a stock you are actually borrowing shares of a stock from your broker and selling the shares. You owe the shares you sold (shorted) to your broker so you have to buy them back and repay them (cover) at some point. If you are able to repay them (cover) at a lower price than you sold them (shorted) you make money. If you buy (cover) the shares at a higher price than you sold (shorted) the shares you lose money.
I tried to explain that as clearly as I could but I will also use a rough analogy that I have read elsewhere to help explain what shorting is. Let’s say your friend has a bike that is worth one hundred dollars. You know that the same bike is going to be on sale the next week for eighty dollars. Therefore, you decide to borrow the bike from your friend and sell the bike for one hundred dollars (you just shorted the bike). The next week, when the bike goes on sale, you buy the bike for eighty dollars and give it back to your friend (you just covered the bike). You make twenty dollars. That is roughly how shorting works. (more…)
Any Stock Suggestions?
Every month or two I will have a post dedicated to stock suggestions.
If you know of any stocks that are undervalued or overvalued feel free to mention the company and why you think the share price will go up or down.
I would be particularly interested in any company that is quickly growing earnings and has a low valuation (based on PE ratio or book value). I would also be interested in companies that are not profitable yet, but are quickly cutting their losses and headed for profitability in a few quarters.
The comments on my site are moderated and I have to approve or disapprove them to show up. Therefore, they may not show up immediately. However, as long as your comments don’t have spam I will approve them.
SWIR Announces Acquisition of CradlePoint and Share Buyback
SWIR - Sierra Wireless (NASDAQ) - (Closing Price - $18.43)
Yesterday, Sierra Wireless announced it agreed to buy privately held CradlePoint Inc, which develops and supplies wireless networking products, in a cash and stock deal worth about 30.2 million.
The company expects the deal to add to earnings by the end of 2008, excluding restructuring and integration costs. The deal is expected to close in July.
Two analysts who follow Sierra Wireless said positive comments about the acquisition.
The company also announced that it would seek regulatory approval to purchase up to 1.56 million shares of its common stock on the Toronto Stock Exchange and the NASDAQ, representing approximately 5% of the common shares outstanding.
If the approval goes through the share buyback will obviously be a positive development because the share count will go down and EPS will increase. The potential share buyback also shows that Sierra Wireless feels its stock is undervalued.
These announcements provide two more positive reasons for owning Sierra Wireless.
Disclaimer: I have no position in SWIR.
Free Stock Picks April Update Part 2
Here are the rest of my current stock picks:
SILC – Silicom Limited
The stock price of Silicom Limited have been erratic since my initial buy recommendation but the stock price is currently trending up. Silicom is set to report first quarter earnings on April 28 and I expect there will be a run-up in price before earnings. I will provide another update after earnings are announced.
SWIR – Sierra Wireless:
The stock price of Sierra Wireless has also been erratic since my last update but the stock price is currently undergoing a pretty strong rally. Sierra Wireless is heavily shorted and a short squeeze is already underway. The fundamentals of Sierra Wireless didn’t merit such a huge selloff and I think the stock price could easily rally to 20 - 25 dollars after earnings. Sierra Wireless reported first quarter results last year on April 26 so they should report earnings later this month. (You should also check out NVTL).
Short Recommendation:
SWC – Stillwater Mining Company:
Both Stillwater Mining Company and PAL have sold off since my initial short recommendation but they haven’t dropped as much as I expected. I still think there is further downside left and I would continue to hold your short position.
Disclaimer: I have a long position in SILC. I don’t have a position in the other stocks mentioned.
Free Stock Picks April Update
I usually don’t write about my stock recommendations unless they report quarterly earnings or some other important event happens (press release, news event, etc). However, I am going to start updating all my recommendations at the beginning of each month to keep you better informed on how each stock is doing and report on any important news.
Buy/Hold Recommendations:
CAAS – China Automotive Systems:
China Automotive Systems reported sound Q4 results on March 25 and the stock price has rebounded quite a bit from its lows. Today, the company announced that it completed its 35.5% acquisition of Henglong Automotive Parts and the transaction will be immediately accretive to earnings. China Automotive Systems is trading at a nice valuation and the company’s fundamentals should continue to improve in the coming year. I still think the company is a good buy. (more…)
Wall Street Humor
China Automotive Systems Q4 07 Results
CAAS - China Automotive Systems (Nasdaq) - (Closing Price - $5.73)
China Automotive Systems reported fourth quarter results on Tuesday March 25 and reported sound results.
China Automotive Systems came in with revenue of 37.71 million and earnings per diluted share of 0.09. Revenue for the quarter was up 36% year over year and up 21% sequentially. EPS was up from 0.06 last year but was down from the prior two quarters. The company said EPS in the fourth quarter was hurt by higher R&D and SG&A expenses. For the full year diluted EPS improved 76% to 0.37 from 0.21 last year.
The stock price of China Automotive Systems hit a 52 week low of $4.40 just before earnings but has rebounded nicely since. At Friday’s closing price the company is trading at a trailing PE of 15. This is much cheaper than the company has traded at in the past two years. (more…)
The Fed Shouldn’t Bail Out Financials
The Federal Reserve has pandered to Wall Street demands and drastically cut interest rates this year. The Fed has also used Depression Era rules to lend directly to investment banks. Now there is talk that the Fed may start to buy mortgage backed securities that other banks don’t want to touch. I feel the Fed has already gone too and if the Fed takes this measure it will send a terrible message.
Financial companies got themselves in this mess by extending way too much credit for their own greed. In addition these companies lent out money without much concern for the credit worthiness of the applicant. Now these loans are turning sour as delinquencies and foreclosures are climbing. Instead of letting financial companies pay for their actions, the Fed has been bailing them out with taxpayer money. This is simply unacceptable.
First, the average hard working taxpayer shouldn’t have to pay for the greed and stupidity of financial companies. These companies own actions left them overextended with bad investments and it shouldn’t fall on the regular person to pay for that.
Second, if the Fed bails these companies out what will prevent financial companies from making the same bad decisions in the future? There will be no deterrent. The message that the Fed is sending is that financial companies can profit from excess risk when times are going good and not have to pay the consequences when times go bad. This is an egregious message to send.