INFN fork in the road

Friends,

Monkey’s banana pile is disconcertedly diminished after INFN’s recent poop job. But will the future replenish the stash or rot the rest of what little remains?

The Fork in the Jungle

Option 1) Those who invested in INFN were wrong. About the best technology winning. About management’s enthusiasm for the company translating to revenue. About competition not standing a chance. About the demand. About the timing of the demand. About pretty much everything. Maybe Infinera was the worst of all possibilities: a banana tree mirage, full of plump juicy golden fruit that was somehow always in the next jungle.

Option 2) Patience. We were not wrong, but patience, lots and lots of patience (but at what opportunity cost, though?) will be required and the market likes to poop and pee first and be patient never. So this option claims that though competition might have nibbled at profits more than we’d like, the technology is best in class, the demand will (eventually) be there, the R & D continues, and there’s a huge market just waiting to take Infinera’s money. Are they gonna take it? Are they Monkey enough to take it?

Option 3) Infinera now officially belongs in the “too hard to tell pile” so if you like gambling, place your bets. Remember, rational thinking and deep scouting reports and all kinds of intelligence got us here to disastrous investing results. Who can honestly tell what the future will hold? Especially because Monkey does believe Infinera has the best technology, other than, apparently, in the yellow submarine business. So if that alone isn’t a guarantee of success, then what other possible insights could help us invest with confidence? This is now a gamble in the dark within a cut-throat business environment. Yikes.

Monkey usually favors option 2 (patience)––true for SKX and SWKS, for example–– which is how fortunes are made. Buy when others are panicking, and then be patient. But in this instance, the other two options appear quite viable, too.

Thoughts?

Which option tingles your tummy and why?

Humbly Yours,

A starving, sad Monkey
(Long INFN)

p.s. If option 2, then when the selling stops, next question will be how long do we wait? (Though, of course, the Suits themselves have no idea, so good luck to us, right?) Because then the call options will start looking intriguing if we can surmise with some degree of accuracy how long the flaccid sales will take to erect themselves. Sorry. Not sorry.

24 Likes

Monkey,

Let me offer my disjointed thoughts at this late hour. Because I have the same questions (unfortunately no answers though).

I originally bought Infinera at right around $20. Yep, bought dang near the peak. But don’t worry though, I doubled down at $15! Because, hey, why let an opportunity like that go to waste!

When Saul exited INFN, I understood his thought process completely. It looked like it might be option #2 (patience), and why wait around at a potentially great opportunity cost. Since I can add funds to my portfolio every month, I thought I could afford patience more and stuck around. Why not? How much worse could it get? :frowning:

Is selling now the height of folly? After all, we all “know” not to buy high and sell low.

Or is holding now the height of folly? After all, we all “know” when the thesis is broken, its time to sell.

Is buying more now genius? Or insanity (e.g. doing the same thing over and over…)?

I don’t know.

What I do know is I don’t like basing investments, not even speculative ones, on “ifs”. E.g. If Infinera gets Google’s contract, earnings will skyrocket. When I am considering an investment, after all due diligence, and I find I am basing my thesis on an unknown “if”, I immediately abandon the process. I don’t think “ifs” are valid arguments for an investment. To me, those are gambles, not investment. Not my style.

I just don’t know where INFN falls or what the best course of action currently is.

Matt
Long INFN
MasterCard (MA), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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The best it yet to come.

https://www.youtube.com/watch?v=UVDg8fVC4EQ

Andy

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Another investor’s rationale for buying more:

"The buildout of the Internet backbone proceeds in cycles. Right now, there’s a slowing. Companies are proceeding cautiously. They’re worried about the economy. They’re worried about pricing pressure from the likes of Google Fiber and others. But long-term, investment in the backbone will be huge. Faster, cheaper Internet access will drive demand for better, faster Internet. VR, 5G, streaming video, etc. will keep pushing investments.

Infinera is selling at a market capitalization that is a bargain even if their revenues and profits were to stay flat. But, they’ve got market leading products serving a market that will inevitably cycle up again – whether in a quarter, a year or two years, I don’t know. There aren’t too many opportunities that come along like this: a market leader, cheap valuation, and tremendous growth potential. The time to buy is when there’s blood on the street. I bought!"

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The time to buy is when there’s blood on the street. I bought!"

Great advice, but difficult to follow when that blood that in the street is your own.

KC, who needs stitches

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