A very interesting week, and what I did

Saul, now that we’re mostly through earnings season, what are your thoughts moving forward with the companies you own? Are you happy with your allocations given the progress we’ve seen, or are you thinking about shifting things around or even bringing onboard some new trial companies? Neil

It was a very interesting earnings season and a very interesting week.

First, there was a lot of volatility this week, in the true meaning of the word. My portfolio was up one day and down the next. Up more than down though.

Second, I noted in my end of July summary, last Friday, that I was up 48.8% while the S&P was up 2.2%. At the end of this week, I was up 51.6% and the S&P was up roughly 0.9%. Thus I added 2.8% while the S&P was losing 1.3%.

How could that be in a week where I had some big losers, like:

CRTO down from $53.20 to $46.75 (down 12.1%),
SWKS falling from $95.70 to $88.35 (down 7.7%),
SEDG falling from $30.87 to $28.59 (down 7.4%),
EPAM falling from $74.10 to $70.85 (down 4.6%).

Well, because these losses were overwhelmed by some amazing rises, precipitated by good earnings results. Note that the percentage rises in BOFI and SKX were smaller, they moved the needle as they are my two biggest positions:

ABMD rose from $77.40 to $95.70 (up 23.6%)
INBK rose from $29.77 to $35.93 (up 20.7%)
BOFI rose from $122.80 to $131.40 (up 7.0%)
SKX rose from $150.40 to $153.90 (up 2.3%)

Let’s look at some of the moves.

Why did CRTO fall so much? Well, it was somewhat deservedly as it was an unexpectedly “weak” quarter. Not weak for some other company, but for a company that had been hitting it out of the ballpark, it was indeed weak. Whether you look at revenue, revenue ex-tac, adjusted EBITDA, or adjusted earnings, it was below my expectations, and obviously below the market’s. There are also worries about Apple allowing ad-blockers, and I am not techie enough to be able to tell how much this may or may not affect CRTO, so it worries me a bit.

Why did SWKS fall so much? After falling the week before too? Because some other chip companies reported weak earnings or outlooks, not because SWKS reported either. They did great, and gave a great outlook. They are also down because of macro issues, worries about China, etc. But with a PE of 18 and a rate of growth of earnings of 76%, they have a helluva cushion!

Why did SEDG fall so much? When the price of oil falls, the price of solar related companies fall, although they are not really in the same business. (Electricity isn’t produced by oil for the most part).

How about EPAM? Just not very exciting earnings, held back by currency fluctuations.

Why did ABMD rise? They broke through with earnings, FDA approvals, DOJ dropping suit, etc.

INBK? People are starting to take them seriously. They made 96 cents in the last two quarters.

BOFI? They just keep doing it.

SKX? Maybe people are thinking that if SKX can get to half of UA’s price-earnings ratio (which would be a PE of around 52), just half, mind you, with five times the rate of earnings growth, they’d have a stock price of around $220.

Third, So what did I do this week? Well:

I sold a bit more than half of my CRTO, and a little of my EPAM, and

Added to my ABMD at $88.80 and $90.10 (after buying some at $77.00 last Friday, before earnings). Closed at $95.70.

Added to SWKS at $86.05. Closed at $88.35.

Added to my small position in ANET before earnings (at $82.20 and $84.60). Closed at $84.10.

Added to my small position in SEDG (at $27.46 and $28.05). Earnings will be out this week. Closed at $28.59

Added a little SNCR.

Hope this helps


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