UBNT - A new small position

Investment Analysis Clubs Saul’s Investing Discussions
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Well, I retook a small position in UBNT. Why? First Ant reintroduced it to the board http://discussion.fool.com/interesting-perspective-on-ubnt-shop-… and linked to a nice presentation by fahmy. It got me interested.

So what did I do?

  1. I looked back through my old notes and why I got out: Flat results and a disengaged CEO. Someone wrote The basketball theory is really nonsense. Anyone who thinks that either wasn’t there or wasn’t paying attention. The company had been cratering, but the CEO clearly obviously had no idea what was going on with the company (read the conference calls), seemed annoyed that analysts would dare to ask him questions, but had been spending all his time on the other side of the country with his basketball team, chewing out the manager for individual decisions, threatening to fire managers, wanting to manage the team himself, arguing with individual players, challenging players to one-on-one basketball games, etc.

  2. I read the last 100 posts on the MF RB Ubiquiti board.

  3. I went through earnings and revenue history for about three years back.

  4. I read the last couple of conference calls

  5. And here are the notes I made to myself.

Aug 2016 – My take (brought to my attention by Ant)
They had eight quarters of stagnation from Sept 2013 to Sept 2015, but have finally got it going again.

Here’s what the **earnings** looked like for eight quarters:
48
50
56
48
53
47
50
51
And here are the last three quarters:
58		up 9.4%	        year-over-year		
63		up 34.0%	year-over-year
69  		up 38.0%	year-over-year

Here’s what the **revenue** looked like for eight quarters:
138
148
156
150
153
147
145
151		
And here are the last three quarters:
162		up 5.9% 	year-over-year		
167		up 13.6%	year-over-year
186  		up 28.3%	year-over-year

And on the conference calls Pera sounds much more knowledgeable, grown up, and involved. Says he will triple revenue in three years.

I’ll take a small position again. At the current price of $52.25 they have a PE of 21

Hope this is of interest to some of you.

Saul

For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.

A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board

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Baseball has managers. Basketball has coaches.

Robert

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Baseball has managers. Basketball has coaches.

Actually each sport has managers and coaches although their roles are different.

In baseball the one in charge of in game decisions is the “manager” whereas in basketball it is the “head coach”.

Both sports have managers in the front office who are in charge of player personnel and hiring the “head coach/manager”, at the front the one in charge is usually designated the “general manager” although sometimes the one in charge is team president or vice president. In rare cases the majority owner takes on this role.

Both sports also have various coaches which are assistants to the in game decision maker.

As far as UBNT CEO Robert Pera - I don’t know if his off court follies affected the company but it definitely did not help. He clashed with their head coach and wanted him fired. He challenged one of the Grizzlies players to a 1v1 game:

They have a basketball-crazed owner in Robert Pera with deep pockets and a willingness to dig into them.

Sounds great, right? Well…

In truth, the Grizzlies are a mess. They have a coach, Dave Joerger, who wanted to be the coach, then didn’t want to be the coach, then wanted to coach Minnesota, then, on Sunday, decided to come back and coach Memphis. They have an owner that hired Joerger, then wanted to fire him, then let him interview with Minnesota, then welcomed him back. They have no CEO, no assistant general manager and the front office is being run by a GM, Chris Wallace, who has not been involved in the day-to-day operations of the team for more than a year.

You got all that?

The genesis of the Joerger-Pera problems, according to league sources, dates back to last September. Pera – who fancies himself a pretty good player – challenged Tony Allen to a game of one-on-one. Allen, on Twitter, accepted. Pera, a Silicon Valley billionaire who bought a small controlling interest in the Grizzlies in 2012, poured tens of thousands of dollars into producing the matchup. He invited the media and instructed the public relations staff to issue a press release promoting the event.

The problem? Allen had lost interest. Joerger, a first-year head coach, didn’t like the idea of the game – like many in the organization he found it goofy and unbecoming of a professional team, according to sources – but it was Allen’s indifference that caused it to be called off. Yet Pera directed his frustration at Joerger and, according to a source, directed upper management to fire him.

Said a source familiar with the situation, “He absolutely wanted Dave out.”

http://www.si.com/nba/2014/05/26/memphis-grizzlies-dave-joer…

Sincerely,
Charlie

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I was looking at them back in May, when the share price was under $32. If I remember right, I first found them on the “magic formula” website.

5

“Well, I retook a small position in UBNT. Why? First Ant reintroduced it to the board http://discussion.fool.com/interesting-perspective-on-ubnt-shop-…… and linked to a nice presentation by fahmy. It got me interested.”

Saul, I saw the Fahmy video as well. I noted his statement that UBNT is overextended presently, but would be good to place on a watchlist.
So my question to you is, if you are wiling to share the answer: was there a reason you purchased shares now, as opposed to waiting for a pullback?

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I just assumed that EverettRuess was Robert Pera with his comment.
Ant

7

Well, that’s ironic, I just sold mine recently after a nice run up. And yes, a run up from an “IBD” breakout :wink: It has had a rapid and steep run up, so do keep it a small position for now.
http://stockcharts.com/freecharts/gallery.html?ubnt

In the technology sector, Ubiquiti Networks (UBNT) was forming a base during the early days of July. On July 20, the stock broke out past a 41.31 buy point. Shares accelerated their advance with a solid earnings report Aug. 4 and now are more than 20% past the buy point

MANUFACTURES RADIOS, ANTENNAS AND NETWORK MANAGEMENT TOOLS FOR RF SPECTRUM SERVICE PROVIDERS

Great IBD ratings/rankings:

ChecklistRating
Composite Rating 99 Pass
EPS Rating 97 Pass
RS Rating 94 Pass
Group RS Rating B Pass
SMR Rating A Pass
Acc/Dis Rating A+ Pass

RANK WITHIN TELECOM-INFRASTRUCTURE GROUP:
1UBNT UBIQUITI NETWORKS INC
2BSFT BROADSOFT INC
3DY DYCOM INDS INC
4COMM COMMSCOPE HOLDING CO INC
5NSR NEUSTAR INC

Very strong overall…

EPS Rating 97
EPS % Chg (Last Qtr) 38%
Last 3 Qtrs Avg EPS Growth 27% (prefer 30%)

Qtrs of EPS Acceleration 4

EPS Est % Chg (Current Qtr) 35%
Estimate Revisions
Last Quarter % Earnings Surprise 7.8%

Annual Earnings
3 Yr EPS Growth Rate 26%
Consecutive Yrs of Annual EPS Growth 1 (prefer 3 years)
EPS Est % Chg for Current Year 15% (prefer 25%)
Sales, Margin, ROE
SMR Rating A
Sales % Chg (Last Qtr) 28%
3 Yr Sales Growth Rate 20% (prefer 25%)
Annual Pre-Tax Margin 35.1%
Annual ROE 47.9%
Debt/Equity Ratio 44%
TECHNICAL PERFORMANCE FOR UBNT

Price And Volume
Price $52.36
RS Rating 94
% Off 52 Week High 0%
Price vs. 50-Day Moving Average 19%
50-Day Average Volume 492,100
Supply And Demand
Market Capitalization $4.3 B
Accumulation/Distribution Rating A+
Up/Down Volume 2.5
% Change In Funds Owning Stock 0% (prefer increases)
Qtrs Of Increasing Fund Ownership 0 (prefer increases)

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Interested but a bit discouraged by shorts a massive 32%, difficulty inventing a likely growth rate, competition and very high CEO ownership with a degree of disorganization and eccentric mistakes. Hmmm.

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Saul, I saw the Fahmy video as well. I noted his statement that UBNT is overextended presently, but would be good to place on a watchlist.
So my question to you is, if you are wiling to share the answer: was there a reason you purchased shares now, as opposed to waiting for a pullback?

Sure,
First of all, after the rise the PE is only 21 something.
Secondly, if you’ll remember I posted


And here are the last three quarters:
58		up 9.4%	        year-over-year		
63		up 34.0%	year-over-year
69  		up 38.0%	year-over-year

Now for next quarter they predict 68-74 cents. I’d guess they come in at 75 cents (not excessive as the previous quarters were up 7 cents, 5 cents and 6 cents sequentially ). That 75 cents would be up 47% from 51 cents y-o-y. I thus don’t see that there is going to be any reason for a fall-off. I think Fahey was just covering himself, just in case, because the stock had just risen quite a bit after the recent earnings. But it seems to have turned a corner, and I was very willing to invest a small amount.

Saul

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And yet… it is not often that a company comes up here with characteristics both Saul and I like but this is one, by which I mean it features not only growth but also those fundamentals that give a company characteristics of quality. However, the aspects I referred to above mean only a small position in case the shorts know something very germane which I don’t, the debt becomes a problem, the competition spells doom or the owner of the company buys a ladies’ beach volley-ball team. In due course I hope to thank you Saul for bringing it to my attention! Here’s a toast to an upcoming short-squeeze!

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Everett Ruess died in 1934.

Robert