I don’t have many stocks hitting new highs at this point, but AFOP is hitting new highs, for me, at least. We started discussing it 3 months ago when I was buying it between $11.40 and $12.40 and it closed yesterday at $17.32 which is up 45.5% from the midpoint of my range. I hope that some of you have enjoyed the ride with me.
Saul
Thank you Saul, I did. Any change in your assessment of the company or the current price?
Andy
Thanks for sharing this one Saul. I have been along for the ride.
Sameer
Any change in your assessment of the company or the current price?
Hi Andy,
They pre-announced early this month: For the first quarter of 2014, the Company expects to report sales of approximately $24.8million, which represents 104% revenue increase from the year ago quarter and is 10% higher than the $22.5million revenue guidance issued on Feb 03, 2014. With this record quarterly sale, the Company expects to report record quarterly profits as well.
I figure that’s worth at least a strong hold (for me, anyway).
Saul
Thank you, Saul. I appreciate your insights
Andy
Thanks Saul for this one.
I agree that the preannouncement is worth a hold…at least. For me, I’ve previously been buying trading shares and also selling cover calls against the trading shares and also selling naked puts.
My core position is 4% and I am comfortable with that level.
Since the shares traded above $15, I’ve continued to sell naked puts that are 1 month away from expiration. I’ve been able to pick up $1.20 in premium for the Apr14 $15 puts which expired worthless today. A few days ago I was able to sell the May14 $15 puts for a $1.05 premium. I expect that these puts will also expire worthless but if not then I’ll likely sell covered calls (June expiration) against any assigned shares from the naked May puts.
I still view AFOP as cyclical and may still liquidate my position in 5-6 quarters from now. But for now, I’d think a good entry point to buy shares has moved up from the $11-12s to the $13-15s given the increase in earnings.
Chris
Saul,
I bought in with half a position at $12.14 on Feb 4. Thank you again for the recommendation and insight.
I also grabbed a small position in APPY at $2.04 earlier this week. I thought the entry point was attractive given their status and proximity to FDA decision. Will monitor w/ interest from here. Thank you for bringing this one to our attention as well.
Vic
Saul,
How sweet it is to be enjoying a stock that is gaining value in a mild (in my estimation) downturn of the market. Up 51% in 2 portfolios, it has quickly grown to a nice mid size position.
The earning growth portends well.
Thank you, Saul, for bringing this under valued company to our attention.
Jim
PS Have you noticed the awfully nice movement in PSIX in the past 3 months? This is another classic Saul Pick that is up a lovely 60% since you first started sharing it (and receiving huge criticism) in the WPRT board last year. I hesitate to share how poorly WPRT has done the past year.
I thank you as well for the insight about AFOP. It is not the type of stock I would have found on my own.
Your generosity is appreciated.
Have you noticed the awfully nice movement in PSIX in the past 3 months? This… is up a lovely 60% since you first started sharing it (and receiving huge criticism) in the WPRT board last year.I hesitate to share how poorly WPRT has done the past year.
Hi Jim,
I don’t hesitate to share how poorly WPRT has done because I got so roundly denounced and attacked by the true believers on the WPRT board a year ago for pointing out that WPRT couldn’t possibly make a profit any time soon (at least with the business model they then had).
I asked why would anyone buy WPRT when they could buy PSIX and I got screamed at by people who felt a MF recommendation couldn’t go wrong.
At the time, WPRT and PSIX were both at $29. Now WPRT is at $13.50 and PSIX is at $79.75. I guess I still feel resentful at the pummeling I got.
Saul
I also grabbed a small position in APPY at $2.04 earlier this week.
Hi Vic,
Just remember that this is a very small company so keep your position small. (Mine is a quarter of an average position).
Saul
At the time, WPRT and PSIX were both at $29. Now WPRT is at $13.50 and PSIX is at $79.75. I guess I still feel resentful at the pummeling I got.
No need to feel resentful. You’re a great investor which is in part due to your ability to focus on what’s important rather than to the many voices who disagreed. The measure is really the impact that PSIX has had on the Saul balance sheet. You seem to have an ability to ignore your emotions when make stock trades. It is also useful to ignore your emotions with respect to what others say about you and your analysis.
Saul,
The resentment you still feel is completely understandable. The pummeling was ridiculous and over the top.
However, I’d love to have some of the scars inflicted on you knowing now how spot on correct you proved to be over the past 12 months.
You were persuasive enough for me to sell out of WPRT and place the same funds in PSIX. Modesty prohibits me from sharing the financial bonanza that move has been in 3 different portfolios. I shudder to think how negatively WPRT would have impacted my portfolio if I had continued to add shares as so many were advocating as it continued its painful decline. Instead, I’ve profitably added shares to PSIX over the past year.
Lesson learned is that we should be quick to abandon obvious money losing ventures, even if it is a MF stock, when a stock with great earnings is begging to be bought in the same energy category.
So many thanks for being unafraid to stand alone when following your conviction. Blindly following the crowd can be very damaging to our portfolios.
Independent thinking based on common sense and experience trumps hope and wishful thinking.
May God continue to bless you this Easter season,
Jim
Saul,
What made you pick PSIX? It is Cash flow negative, doesn’t make a profit but I see that its Revenue is going up and it does have an operating profit. But won’t it need to raise revenue soon if it doesn’t become profitable or at least cash flow positive? Could you give me some insight on why you picked this company?
Thanks,
Andy
Saul,
I am going through your posts on the SA WPRT board so there is no need to respond. Its giving me a good idea on why you invested in it.
Thanks,
Andy
Saul, What made you pick PSIX? It is Cash flow negative, doesn’t make a profit but I see that its Revenue is going up and it does have an operating profit. But won’t it need to raise revenue soon if it doesn’t become profitable or at least cash flow positive? Could you give me some insight on why you picked this company?
Andy, I got interested in PSIX about a year ago, in early 2013. At that time the relevant statistics were from the end of 2012. Their revenue from 2010 to 2012 had gone up 100% in 2 years (from $101 million to $202 million). Their adjusted earnings had quadrupled in the same time frame from 19 cents to 81 cents.
They have outstanding warrants (I believe from their IPO). This means that when the stock price goes up GAAP reprices the warrant “obligation” and the GAAP earnings go down. It’s another example of how ridiculous GAAP earnings are and why I ONLY use adjusted earnings (or “real” or “cash” earnings).
Here’s an explanation from the most recent earnings announcement.
Other expense for the fourth quarter includes a non-cash charge of $6,373,000, or $0.60 per diluted common share, resulting from an increase in the estimated fair value of the liability associated with the warrants issued in the Company’s April 2011 private placement. The increase in the estimated fair value of this warrant liability was primarily related to the increase in the Company’s stock price in the fourth quarter.
The net loss for the fourth quarter of 2013, which included the warrant revaluation adjustment, was $3,752,000, or $0.36 per diluted common share. This compares to net income of $745,000 or $0.08 per diluted common share for the fourth quarter of 2012, which also included a warrant revaluation adjustment.
Net income for the fourth quarter of 2013, adjusted to remove the warrant revaluation impact was $2,621,000, or $0.24 per diluted common share.
Now if that’s not enough to make you never pay attention to GAAP earnings again, I don’t know what would be. And to think that GAAP was originally supposed to be to help investors get a clearer picture of what’s happening in the company!
Saul
You were persuasive enough for me to sell out of WPRT and place the same funds in PSIX. Modesty prohibits me from sharing the financial bonanza that move has been in 3 different portfolios. I shudder to think how negatively WPRT would have impacted my portfolio if I had continued to add shares as so many were advocating as it continued its painful decline. Instead, I’ve profitably added shares to PSIX over the past year.
Lesson learned is that we should be quick to abandon obvious money losing ventures, even if it is a MF stock,
Jim, Thanks for your kind words. Glad that my comments paid off for you, and thanks for the support you gave me over there.
Saul
Other expense for the fourth quarter includes a non-cash charge of $6,373,000, or $0.60 per diluted common share, resulting from an increase in the estimated fair value of the liability associated with the warrants issued in the Company’s April 2011 private placement. The increase in the estimated fair value of this warrant liability was primarily related to the increase in the Company’s stock price in the fourth quarter.
Thanks Saul,
Looks like they can’t win as long as their share price keeps going up LOL. I am only laughing at the ridiculousness of the situation. That’s a great reason to know your companies.
Andy
Note also that if the price of PSIX shares craters for some reason, repricing the warrants will make it look as if they have HUGE earnings. (GAAP earnings, that is). That’s GAAP for you.
Saul
Thanks Saul I see it is about a mid size piece of your portfolio is there a reason you don’t give it a large piece?
Andy