How does it work?

To get an idea how my method of evaluating stocks works, here’s a post I made on the XONE board on June 27 last year, when MF was touting XONE as the next greatest thing. The price was $59.

Frank, I’m just commenting about why a stock with negative earnings, that has never had a profitable year, would be selling at such a huge inflated price. Granted, some is about prospects for the future, and some is the 3D hype, but some must be hopes of the company being acquired. (The price took off after SSYS just acquired MBot (or whatever the name was)).

Look, last year they lost $10.2 million on $28.7 million of revenue. That’s a negative margin of 35.5%. It means they lost 35 cents on every dollar of sales!!!

In the first quarter of this year.they lost 20 cents the first quarter in spite of great revenue. Say that by magic they overcome the loss in the next three quarters and finish the year with 25 cents profit. I’m not rejecting the possibility. With that miraculous result, they’d then be selling at over 200 times earnings. (220 times to be exact).

What can I say? I think the technology and the company have great futures, but the stock may be miles ahead of itself. Miles and miles and miles. I may be totally wrong, and greatly underestimating, but it’s worth considering those figures.

That post got all of 2 rec’s. XONE’s price at yesterday’s close was $25.70, well less than half its price of $59 when I was writing. Lest you think that XONE is just down because of the current sell-off, let me compare it with UBNT, one of my stocks which has been absolutely pounded in this sell-off. On the same date, June 27, 2013, UBNT was at $17.43. It closed yesterday at $32.40, up 86%. Or Ambarella! It’s hard to find a stock that’s been killed more than AMBA has been in the last couple of months. It was at $16.18 on June 27, 2013, and closed yesterday at $24.20, up 49.5%.

Intelligent stock picking does pay off.

And, by the way, in the quarter just reported, XONE had a loss of 38 cents, increased from the loss of 20 cents a year ago. And it’s still a misleading “Buy” in MF RB. Eventually, even some time soon, for all I know, it may turn around and start making money (or be acquired), but there was a lot of opportunity loss for anyone who has held it all this time. And it’s minus 54% compared to its benchmark according to MF. Tell me again how it’s always a mistake to sell out of a position.



Very good post, Saul. Thank you.

I 'm thinking hard about some of the non-performers in my portfolio. I got rid of QGEN. Its revenue growth over the past 3 years has been lousy. And, sometime back, I had removed TXRH … because I wasn’t really keen on following another steak house. BJ’s is currently under my option plan (I have a written call on it and wouldn’t mind it been called away. It too has not moved on the revenue front.) That’s a start for me …

BTW, if you get some time to review my post on CAMP that would be great. It looked like a promising company.