Bear's Portfolio at the end of April

Investment Analysis Clubs Saul’s Investing Discussions
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Another month has flown by, and it was full of ups and downs (especially this last week).

I was a LOT more active in April than March. Of the 28 positions I held at some point during the month, only 8 remain unmolested since the end of March. Mostly just adding or trimming, but I did sell out of seven altogether, and started five new ones.

If you did the math, you’ll see that I still have 21 current positions. I really, at heart, do think that 20+ positions is too many. But my small positions, though I have 11 of them, only make up about 20% of my portfolio. These are low conviction positions, but companies that interest me, and most of them have the potential to grow into significant positions, if and when I become better acquainted with (and more comfortable with) the company.

3 of my positions have grown to “very large” positions. SKX (14.6%), FIT (12.4%), and LGIH (12%).

I have 7 medium to large positions (4% - 7% of my portfolio), in order they are INFN, PERI, PN, INBK, SSW, SEDG, and XPO.

Lastly I have 11 small positions (3% or less of my portfolio). In order, they are SWKS, DY, HRTG, GBX, LC, SCMP, CYBR, ERI, GDEN, TPLM, and INVN.

I have 6.6% in cash, mostly because I haven’t yet reinvested all of the proceeds from my recent sale of TWTR.

Previous Month Summaries

January: I didn’t start doing this until February
February: http://discussion.fool.com/bears-portfolio-at-the-end-of-februar…
March: http://discussion.fool.com/bears-portfolio-at-the-end-of-march-3…

April Performance

At one point this month, I was up almost 6%. Then TWTR and INFN gave their quarterly results, and the picture got much less rosy. And after the last couple days of April were down in general, I sit with a monthly gain of just 0.66%. Still beats the S&P’s 0.27%, but I gotta tell ya, that doesn’t make it feel much better.

Also, I’m still down 4.56% on the year, and the S&P is up 1.05%.

It’s almost embarrassing posting these results when I know Saul is going to report a killer April and I’ll feel even more like a dunce, but it’s not a competition, and if it were, I wouldn’t pick Saul to compete with.

Changes this month, and why I made them

I sold a bunch of stuff.

I sold out of Arcos Dorados. I made a little money on my value play, great. But by no means is this company doing well. I was happy to take my profits, and put the money in things that are growing rapidly, and have more short- as well as long-term potential.

I sold out of Energy Focus. This is a company that could do just about anything. They haven’t had any exciting announcements in the last couple months, so unless there are some great surprises, there could be an opportunity to buy back in even cheaper after earnings. It strikes me that this is the opposite of a “Saul stock.” They do NOT have predictable and growing earnings. Very hard to predict. There’s a lot of potential, though. They’re still on my radar.

I sold out of LABU. I want to invest in actual companies, and there are so many good ones to focus on.

I liquidated the tiny bit of Aeropostale I owned. They’re on the way to bankruptcy.

I got out of Spirit Airlines. Just not a business I feel like I need to be in.

I finally got rid of all of my AHGP. Coal isn’t exactly growing. I still think there might be a little value there, but it just isn’t worth the risk/trouble. Plus after they pay out their (reduced) dividend in a couple weeks, they’ll probably go down a bit.

Lastly, I sold out of Twitter. This was a tough one for me. I was hoping they would have a good Q1 and guide high for Q2. Instead, they are really struggling. Q2 especially is looking dismal. The growth story is just off here, and I’m out until I see signs it might resume.

I decreased my position in GBX – it’s another I don’t want to follow too closely, but it’s such a good bargain right now, I couldn’t quite bring myself to part with it. I’m just keeping my position tiny because I don’t want to focus on companies that aren’t growing rapidly.

I also trimmed my position in INFN ever so slightly…on a day when it was up around $16. Wish I would have trimmed it more…might not be back to 16 for a while. Lesson I took from earnings is just that it will continue to be volatile. Lumpy sales, future margin growth…it’s still a growth story and it’s risky. I still like it and haven’t sold any of my shares since earnings came out…not a good point to sell, in my opinion. But I wish it wasn’t my 4th largest position. I may trim bit by bit…or not. I’m young.

I also bought a lot!

I added to Skechers. FOUR times, actually. My position went from just 3% of my portfolio at the end of March, to almost 15% now. It is my largest position.

I added to FIT. I expect them to crush earnings/guidance next week.

I added to LGIH. This is a powerhouse selling like a sour mouse. See what I did there?

I added to PERI twice. This company went on sale after Q4 earnings. They had a big goodwill write off for an old acquisition. But they also have some new acquisitions which I think are working out much better. I even wrote to Investor Relations about the likelihood of future write downs, and was pleased with the response. Looking forward to the quarterly report.

I started 5 new positions! Yikes! They’re all quite small, though, and very much on a try-out basis. I don’t know the companies very well yet.

I started a small position in Sucampo Pharmaceuticals (SCMP), after invain brought it to the board here: http://discussion.fool.com/newbie-help-evaluating-scmp-32179669…

I started small positions in Cyberark (CYBR) and LendingClub (LC), and really small positions in Eldorado Resorts (ERI) and Golden Entertainment (GDEN).

My Current Allocations


Skechers USA	              14.6%
Fitbit	                      12.4%
LGI Homes	              12.0%
Infinera	               7.0%
Perion Network Ltd	       5.5%
Patriot National	       5.5%
First Internet Bank	       4.9%
Seaspan	                       4.4%
Solaredge                      4.4%
XPO Logistics	               4.0%
Skyworks Solutions	       2.9%
Dycom	                       2.3%
Heritage Insurance	       2.2%
Greenbrier Co	               2.0%
LendingClub	               1.8%
Sucampo Pharmaceuticals	       1.8%
Cyberark	               1.7%
Eldorado Resorts	       1.3%
Golden Entertainment 	       1.2%
Triangle Petroleum	       1.2%
Invensense	               0.5%

CASH                           6.6%

Random Thoughts and Conclusions

I think what I’ve learned from April is that I really need to listen to myself regarding large positions. I knew INFN was too big, but I only trimmed 10% of it. Now it’s still too big, but I can’t bring myself to sell at the (hopefully) bottom.

TWTR is a very different story. I had exactly the amount of TWTR I wanted. It didn’t work out, and I sold immediately. I actually think I handled it well.

As always, I welcome your thoughts! Here’s to a May full of great returns, monetary and otherwise!

  • Bear
27 Likes
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FIT is a dangerous play. I don’t like them for three reasons:

  1. They compete with AAPL. Very few companies have managed to survive that fight.

  2. It is a device-maker in a market that hates HW manufacturers.

  3. One-trick pony.

Any one of the above would give me a pause, let alone all three.

5 Likes
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Hi Bear,
I have a question for you about Twitter: I know you indicated that the growth story just isn’t there right now, and that perhaps you’ll buy shares again at some point down the road, but have you essentially given up hope that the folks at Twitter will ever learn to monetize, ie- the way Facebook has? I recall that it took Facebook awhile to figure it out…just curious as to your thoughts on this.

Thanks,
Speedy

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have you essentially given up hope that the folks at Twitter will ever learn to monetize, ie- the way Facebook has?

I haven’t given up – which is why I said I might get back in at some point. But Q1 results and Q2 guidance were very disappointing. Not because they failed to meet analysts expectations, but because they failed to meet mine. And for Q1, Twitter didn’t even meet their own stated expectations. To use a banal sports metaphor, they simply don’t seem to be blocking and tackling.

I actually think they will figure it out eventually, and I think they’ll be fine. Twitter isn’t going anywhere. But the company has now told me, at least for Q2, that revenue growth will be much slower than I was hoping, so unless that growth speeds back up, I’m out for now. Plenty of good opportunities elsewhere.

I actually think that last sentence is a pretty good mantra for a lot of things lately. Why wait for some future time when things improve, turn around, or promises are make good? Invest in companies that are making good on their promises each quarter, where the machine is chugging along and the future is now.

3 Likes
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Bear,
I really appreciate you taking the time to post your end of the month summaries, and it helps to compare your actions to what I do, and what others do as well. Thanks to Saul and you - I have created a spreadsheet where I post the stock prices of my individual stocks every Monday morning. Very interesting.

Thanks again for sharing!
TracyK

1 Like
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Hi Bear,

I wonder if you would expand on PERI a little bit? I see it’s definitely on sale and I love the P/B. What first convinced you to give it a try? What’s your thinking on it since then?

Thanks,
Jackson

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Thanks, Jack. I appreciate the conversation. Happy to elaborate.

Here’s the simple way to put it: As you alluded to, Perion sure has a lot of sales. It is a micro-cap company but their sales are more than micro. They just haven’t made a lot of profit lately. They’re in the middle of a turn-around. My belief is that they have turned things around, and growth is starting to resume.

Let’s look at the profit side first.

Net Income:

Perion has always been profitable with good margins, but in the last 2 quarters, they have big GAAP net losses, and I believe that’s why the stock has been punished. When you look under the hood, it’s due to a couple large write downs of Goodwill & Intangibles. This is a bit nerve-wracking, because even after the write downs, G&I are up YoY as of December. This is because they made another big Acquisition - Undertone (http://www.businesswire.com/news/home/20151201005998/en/Peri…)

Revenue:

Their sales had fallen off a cliff, but the last 2 quarters, revenue has been up sequentially 8% and then 28%. They’re guiding for a 4% increase from Q4 to Q1, which would be a 35% YoY increase. The Undertone acquisition happened last Q, and if memory serves they only counted 1 month of Undertone revenue in their Q4 numbers. Basically they are headed back in the right direction.

Value:

But I’d have to say the most compelling thing here is the valuation. Even in a rough turnaround year last year, they made 38M in non-GAAP earnings. And the market cap is currently about 125M. So yeah, I’d say they’re pretty cheap.

Let me know what follow up thoughts and questions you have!

  • Bear
1 Like
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Thanks, Bear. I appreciate the response.

Speedy

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Thanks for the reply, Bear. I’ll dig in a little and may be back with more questions.

(Though at $1.64, a bite that went to zero wouldn’t hurt very much…)

Jack

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Yes, do tread lightly…I should have mentioned – I think this is clearly a much more risky and lower conviction position than many of my others.

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I added to FIT. I expect them to crush earnings/guidance next week.

I think the probability of that is low. You might put on a put spread to protect yourself a bit. Seems like a very risky company, why is it any different than GoPro? Are most of the sales made - we might find out.

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“I added to FIT. I expect them to crush earnings/guidance next week”.

Bear, what is your reasoning for thinking they will crush earnings/guidance?

thanks,
Speedy

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Hi Speedy,

Fitbit has been hitting on all cylinders with Blaze and Alta doing so well – check their press releases and other news sources. I think their guidance for this Q set up an easy beat, and the momentum from what they’re doing currently should lift guidance for the rest of the year, too.

Also, Pete asked why Fitbit is different than GoPro. In my opinion, the fact that this is a common question is creating a great opportunity for Fitbit investors. So many people got hurt by GoPro, and that is part of the reason Fitbit shares went from $50 in August to $12 in February. But at present the two companies couldn’t be more different. Fitbit is expected to grow 32% this year (and as I’ve said, this might increase). GoPro is expected to shrink 15%.

Obviously, as with any company, these numbers can change at any time. But think about the reasons why this might or might not happen to Fitbit, and the reasons it happened to GoPro, and I think you’ll be on the way to evaluating these companies on their own merits.

Of course, this is all my opinion.

Bear

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Bear, thank you for the response. As always, I appreciate it!

–Speedy