My Reviews continued

I’ve done three more of those brief informal reviews of the stocks in my portfolio (in reverse alphabetical order), and I thought I’d share them too, so here are all eight I’ve done so far. As I was doing them for myself they will vary in quality, thoroughness, and length. I haven’t brought yesterday’s prices up to date on those I published yesterday. Please remember that my conclusions may change anytime.

Apr 2016 – LGIH - My Review
You don’t get much better than this. Annual Revenues of $143, $241, $383, $630 million dollars. Annual Earnings of 43, 107, 138, 250 cents. It’s my biggest position now at 15% of my portfolio and with a PE of 11. It fell from $35.50 to $19.50 amid fears that the oil crunch would kill the market for houses in Texas and the west. That hasn’t happened at all, and the price is back up to $28. I have added as recently as this week, but as it’s at 15% I probably won’t be adding more right now.

Apr 2016 – MITK - My Review
This is even a smaller company than PN. It has some great things going for it and it is expanding as fast as it can. In fact, that expansion and hiring new sales teams for cross selling will cut earnings growth to zero or less this year. The good news is that they keep signing up large new clients. The bad news is the expenses mentioned above, and the constant legal expenses that they are now taking out when figuring their adjusted earnings. I bought at $4.10 up to $4.70, and to my amazement they are now at $6.12 (it’s been as high as $6.70). This means their PE has grown to 24.5! Granted, they have a huge open field in front of them, but a PE of 24.5 with little or no earnings growth expected for this year, is a bunch. My position is small (3rd smallest at 3.3% of my portfolio). I’m not sure what to do with this one either. I’ve been tending to add a tiny bit when it gets down to $5.85 or $5.90, and it usually finishes the day over $6.00. I’m probably going to just hold now and see how everything comes out.

Apr 2016 – PN - My Review
I’m not really sure what to do about this one. It seems to be an interesting company which has found its niche and is growing like a weed (annual revenues of $56, $103, $210 million dollars!). That’s pretty amazing even if a part is by acquisitions. And it’s profitable. The price had fallen to $3.65 in early March in connection with manipulation over warrant exercises, and now, in April, is at $8.86, which is up 143% although the PE is still at just 11.4. PN has grown to almost 8% of my portfolio with that price rise. With a tiny company like this, and management which is clearly doing a good job, but who I don’t know anything about besides that and I’m thus not sure I entirely trust, I don’t want my position to get too large. I sold one-twentieth of my position at $8.45 to keep my position size in check. If I suddently see the price at $10 in a couple of days I’m sure I’ll sell some more.

Apr 2016 – SBNY - My Review
This remains one of the best banks in the world. (By the way, I’m not exaggerating about this. Forbes rated them 2nd best in the Americas in 2014, first in the Americas in 2015 and 6th this year. They’ve been in the top ten for six years running.) March quarter earnings were announced. Very good (but not outstanding) earnings (which were up 23%), great growth in Book Value, incredible Efficiency Ratio of 32.2%. Some concern over their exposure to Taxi Medallion loans, but those are only about 4% of their total loans. They are my 4th biggest position at 8.7% of my portfolio, with a PE of 19 at the current price of $147. (Price has been as high as $162 and as low as $120 in Feb). I’ve been in since January and I bought from $140 to $120 and back. I’ll hold now.

Apr 2016 – SKX - My Review
This company is doing wonderfully, with no obvious threat in sight. It sold off for no particular good reason, except that the price had risen a lot this year. I’m comfortable with it as one of my big three largest, and oversized, positions. It’s currently about 13% of my portfolio, at a price of $29.50, and a PE of 18.7. This is a great company, and selling at a very low price when compared to other companies in the same field. I may add a small amount but it already is a quite large percent of my portfolio.

This may be slightly out of date, but I cut and pasted it from my Mid-Quarter Review in February: SKX had a PE of 19 and was growing trailing earnings at 65%. For comparison, NKE whose revenues last quarter were up all of 4% (compared to Skechers up 32%!), and whose trailing earnings were up 22% (compared to Skechers up 65%), has a PE of 29.

Apr 2016 – SHOP - My Review
They have been doing wonderfully, doubling revenue every year compounded: 24, 50, 105, 205 million dollars. Still no earnings but ttm losses are shrinking every quarter (40, 33, 21, 15, and 13 cents). Revenue seems to be all recurring. They dominate their space. Even AMZN closed their competing product in 2015 and told people to use Spotify. It’s quite expensive with a P/S ratio of about 12.5 (but of course if sales come anywhere close to doubling again, that will be cut in half). It’s very atypical for me, so I’ve kept my position fairly small. It’s my 12th largest position out of 15. Current price is $32.00. I started buying four weeks ago at $26.50 and added up to $30.00. I might add tiny little dribbles more, as it goes up.

Apr 2016 – SNCR - My Review
This isn’t a company that is going to take over the world, but it’s an interesting, relatively unknown, boring sounding, but surprisingly innovative little company that is quite profitable, moving into new areas, and consistently growing earnings and revenue. It’s at a very low PE of 14.5 at its current price of $32.50. It also has started positive Free Cash Flow, which went from $0 in 2014 to over $60 million in 2015. Its cloud revenue, which is recurring, is now over 50%, and growing more rapidly than the legacy activation revenue. They are spending money building out products with Goldman Sachs and Verizon, which will affect EPS negatively in the first quarter especially.

What worries me is whether they will be able to compete with the big boys in the cloud area (AMZN, MSFT, GOOGL, AAPL, etc). The price dropped from $52 to $22.50 on these fears, abut it’s now back to $32.50. I added at $27 and $24 and sold some back at $32. It’s just a 4% position, and I think I’ll hold for now.

Apr 2016 – SWKS - My Review
Although I really like the company, its prospects, and the management, I decided I had had too much in SWKS so I reduced the size of my SWKS position by a third from 21% to 14%. I will now just hold it, especially as the price is only $72, and the PE is 13.

41 Likes

I don’t know about everyone else, but I am getting A LOT of information on the thought you go thru with these mid month Reviews. It is very helpful to understand the thinking of how you adjust weightings among your portfolio. This truly is a great forum and I thank you Saul for sharing this with us.

I have to admit I was partially surprised by
If I suddently see the price at $10 in a couple of days I’m sure I’ll sell some more.

Not by the typo (which I laugh because I didn’t even notice it till I pasted it here), but it is a parameter of the stock analysis this board has not really addressed. Size of the company. I believe it is because there are more retirees than younger people (I’m guessing) and it really is higher risk to have a microcap stock. For younger people or those with higher tolerance though, it represents a fantastic opportunity to stay with it. Most spectacular gains are loss by selling too early, but I do understand it keeps a cap on the overall risk of the portfolio.

The company is growing very well, and unlike INFN, the price is reacting accordingly. I think this one is good AT LEAST back to it’s IPO price of $14 which was a mere 13 months ago. HIGH RISK though which more than addresses your reasoning to keep the weighting small. Thanks again Saul - you are a great teacher.

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which more than addresses your reasoning to keep the weighting small.

Hi F1Fun, Thanks for the kind words, but I don’t think of 8% of my entire portfolio as keeping the weighting “small”.

Best,

Saul

Not trying to troll you, F1, just wondering why you say this?

I think this one is good AT LEAST back to it’s IPO price of $14 which was a mere 13 months ago.

How did you come up with $14? Any rationale? Just seems kind of arbitrary, why not Saul’s $10…or $12…or $16?

How did you come up with $14? Any rationale? Just seems kind of arbitrary, why not Saul’s $10…or $12…or $16?

foodles - $14 was the IPO price. That’s all. I did not do any analysis to calculate a target price. I always think the fair price is the price the market is willing to pay which OFTEN does not correlate with actual company performance. I was merely pointing out that after the underwriters spent a lot of time figuring out what the right price should be for this company they came up with $14. It is now at $8.83 per share which is 37% below the IPO price and would be a 58% increase to get there from now. I know it may never return there and the company might fail, but every indication since then is they are accelerating faster than they expected and their industry is accepting their product more quickly than the goals they set.

You bring up a good point though. On other message boards there is often posters that say things about their favorite stock like …this stock is going to be $60 by next week. I don’t think I’ve read anyone here claim to know a stock price in the future about any company. Every stock analyst publishes target prices for the companies they follow which seem to move as quickly as the wind. I give very little consideration to the published price targets that people create. With the right assumptions you can make any forecast you like.

As for ‘Saul’s $10’ sell price, only he can say why that would be a sell point for him. I took it merely as he doesn’t want it much more than 8% of his portfolio. I won’t sell until the fundamentals change or new information is presented that gives me a reason to sell no matter how much of my portfolio it becomes. I would sell part of it if a better opportunity is presented though. For those who lost track this is about Patriot National, PN (and NOT the bank).

Cheers.

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As for ‘Saul’s $10’ sell price, only he can say why that would be a sell point for him. I took it merely as he doesn’t want PN to be much more than 8% of his portfolio.

Hi F1Fun, I thought I was very clear about this. Sorry if I was confusing. What I wrote was:

this position has grown to almost 8% of my portfolio. With a tiny company like this, and management which is clearly doing a good job, but who I don’t know anything about besides that and I’m thus not sure I entirely trust, I don’t want my position to get too large. I sold one-twentieth of my position at $8.45 to keep my position size in check. If I suddently see the price at $10 in a couple of days I’m sure I’ll sell some more.

I have NO plans at all of selling OUT of PN at $10 or any other price at present. I was just saying I don’t want a tiny company, just a few months out of its IPO, to get to be too much of my portfolio, so I’m trimming if it gets too big, and I just plucked $10 out of the air to illustrate my thought.

Best,

Saul

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Hi Saul,
I thought it was clear too - you don’t want it to get too big in your portfolio. I was only answering foodles question about a specific price.