a philosophical investing question

Hi Saul,

Can you tell me if you have ever seen a company, like SZYM, with so much potential and yet pricing going in the wrong direction as resolutely as this one?

Your perspective, which has taken you out of the stock, was created from years of experience. My perspective, (investing seriously for 1.5 years now) does not have that wealth of history to fall back on and so when I see potential like nothing I’ve seen so far, I tend to get over excited and that probably affects my objectivity.

Even though I own the stock about 3 times higher than where the price sits today, I can’t say the original premise has changed much. Just a delay in nameplate capacity (that I blame Bunge for) and maybe some doubts about their management’s decision to go after volume in the first place, rather than the corrected path they are headed on now.

I’d love your philosophical comments on this. Yours and of course, any other investor here that wishes to share.

I’m probably buying some long term, Jan 2016 call options so that I don’t go over my position size yet keep a foot in the game, should this path be the right one.
Mykie

Can you tell me if you have ever seen a company, like SZYM, with so much potential and yet pricing going in the wrong direction as resolutely as this one?

Mykie,

Off the top of my hat, how about AOL which TOTALLY dominated the internet in the early years and now is just an afterthought. Or Yahoo, which was also a dominating force and hit $500 a share in 2000, and has never come back (even if you erased two 2-for-1 splits). However, Westport, a darling of the Motley Fool, is a better comparison. I got involved with it (critically) at about $29. It got up to $33. When it got to $25 lots of people were adding to their positions. At $18, people were “doubling down”. At $12 it was “an incredible bargain”. Now it’s at $6 and a lot of people threw good money after bad.

Remember that Westport and Solazyme aren’t profitable companies that went down just because growth slowed a little (hopefully temporarily), like, for instance, UBNT. These are companies that have never been profitable and lose lots of money every quarter. That doesn’t mean a lightning bolt won’t come down and touch them and all of a sudden they’ll turn it around and shoot up, but that’s what people hoped for all the way down with WPRT.

Look, we bought SZYM on a totally different premise. They said Clinton was coming on line in the first quarter, and much more importantly that Moema would come on line early in the June quarter. That was the big one, where the hopes of breaking even and maybe making a profit were. Well Clinton is running, and that’s nice, but it’s small potatoes. Moema was put off, and put off again, and now seems put off indefinitely. The hope was for large volumes and “making a profit”. Now the company is trying to put the best face they can on it and is saying, small volumes but higher margin products, and cutting expenses to “reduce losses”. That’s a whole different ball-game and not what we bought in for.

I strongly urge you to read Maxx Chatsko’s article, referenced earlier on this board in Post #4101. Here’s a quote from it

…While the transition to produce higher-value products will help somewhat in the meantime, investors must realize that neither the Moema facility nor the company’s production plant in Clinton, Iowa, are designed to run profitably at the low capacities planned for 2015 with the higher-value products accessible by the platform. Consider that certain products are only high value because they have niche uses and smaller markets, which means the company will also be slashing production volumes for the foreseeable future. Investors should no longer expect Moema or Clinton to reach nameplate capacity in 12-18 months after start-up. Instead, the dates have been moved back indefinitely for when market conditions allow (offtake agreements and market development)…

That’s definitely a completely different company than the one I thought I was buying into. There’s no hope of them becoming that company again in the foreseeable future. Who knows? It’s a race between recharging the business and going broke (or selling out to a bigger company). I sold out and put my money elsewhere (adding a little BOFI and INBK. Adding a little SWKS. Adding a small position in SCTY, which isn’t clearly profitable but has at least doubled its sales every year for multiple years, compounded.

Saul

For FAQ’s and Knowledgebase
please go to Post #4020

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There’s no hope of them becoming that company again in the foreseeable future. Who knows? It’s a race between recharging the business and going broke (or selling out to a bigger company).

Saul,
Thanks for your perspective. It is very valuable and will help me form good habits that morph into profits.
Mykie
PS I think it was Charlie Munger that said, 80% of turnarounds do not turnaround so if one was to simply play the odds without concern for potential, dumping SZYM makes sense.

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