Long-time readers should note some significant changes in how I communicate in the public domain. The primary purpose of this forum is now to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.
Accordingly, this document should not be construed as an endorsement or recommendation of the companies or securities discussed herein. I am not an investment advisor and this is not an investment thesis. It is merely one part of the story, which I present for debate in hopes of determining all risks and upside potential. The disclosure at the end of this piece is critical to understanding the content of this document. Further, I frequently trade my positions and may buy, sell, or short the securities mentioned herein at any time, regardless of the facts or perceived implications of this article.
Before we jump in, I want to thank everyone for joining me here. Readership and participation have both been accelerating in recent weeks. If we include my MailChimp email subscribers (see below for more on that), the visitor count here has just topped the 10,000 mark.
We had thousands of hits on Wednesday alone (without anything particularly exciting to drive it). 79 countries are represented here, including places like China, Turkey, Oman, Malaysia, Kazakhstan, Kenya, Moldova, and my family’s home country of Cape Verde.
It’s truly humbling and motivational, especially in light of my 2015 run in with the SEC:
The episode certainly delivered a blow to my credibility. However, in hindsight it was one of the greatest blessings of my life… and readers who have observed the situation (and my actions over time) form the foundation of what we’re building here.
Most importantly, we’re seeing a great increase in collaboration and dialog… to everyone’s benefit.
That’s what it’s all about. Coming together to form something as strong as the big Wall Street firms. It’s a beautiful thing.
OK, getting down to business…
In recent weeks, I used the correction to increase my exposure to stocks. However, I remain cautious on the broad market. The current reigning bond king, Jeffrey Gundlach, is my favorite person to follow on this topic. I highly recommend that you do the same.
Following my own advice from Wednesday, I continue to focus on increasing the quality of my portfolio. That means trading in my more-speculative positions for companies that are poised for a strong 2018/2019 regardless of the economic / geopolitical backdrop.
My “Top Ten” from last month remains largely the same, but I’ve added a lot more SMSI and AEHR. If you were on their most recent earnings calls (or read my analysis) you probably know that both stocks are now in the best position they’ve been in years. Both appear to be at an inflection point and both are sitting at risk/reward lows. It’s a perfect set up.
So, why are they down? Simple:
- SMSI is still working on improving its app and investors are over-focusing on the negative reviews. As I stated in past posts, 1) software is easily improved, 2) the app has improved greatly — I’ve tested it personally, 3) the reviews are improving in response, 4) the remaining negative reviews are few in number compared to the 100,000+ downloads, and most importantly… 5) they are now generating revenue from these downloads, 6) Sprint is fully-committed to them, 7) that means that Sprint’s 300,000+ customers will soon drive SMSI to profitability, and 8) Sprint will be ramping up its marketing efforts to its millions of other customers.Next week’s investor meetings in NYC will help get that word out.
- AEHR is almost completely unknown and its numerous (albeit small) insider sells are keeping retail investors away. I’ve also covered this issue in depth. The insider sells are nothing to be concerned with. They are small and represent a diversification of wealth for employees who have never built a decent nest egg. Intel is set to ramp their order flow in the coming months and those press releases won’t give investors time to react (the stock gaps up on big news). In short, the stock should rise ahead of the Intel ramp, but I’m fine if it follows instead. I’ll be happy to load up on the first Intel production announcement. It’s all good.
I also repurchased QADA on the dip, which adds yet another subscription business to my portfolio (joining the likes of WDAY, RDWR, GAIA, and to a growing extent, RDCM). I love subscription businesses when they’re done right. They’re trickier to understand than most investors think, which gives a big advantage to those who have professional experience with them.
FYI, I’m also heavily focused on shorting low-quality names and writing call options against stocks that I don’t expect to rise markedly over the next few months. This strategy has paid great dividends by producing profits in a diverse list of companies like CGIP, NVDA, FIZZ, SBH, MDXG, etc.
I’ll try to share more of these tickers proactively (before they drop), even if I don’t have time to explain my theses in depth.
As a reminder, HMNY is notably absent from both sides of my ledger.
Since starting this blog, I’ve thought about trading HMNY (long and short), but have opted to stay away in order to maintain my objectivity in this situation. As it states in my disclosures, neither I nor anyone I know (to my knowledge) is short the stock. In fact, I actually have a relative that owns a few shares (and have ridden them all the way down, despite my pessimism on the stock).
Avoiding the stock (long and short) is meant to give everyone an unbiased voice on the situation.
When coupled with my 20 years of experience with analyzing subscription-oriented stocks, my goal has been to be the most knowledgeable analyst on MoviePass and HMNY. That focus has attracted rapid growth in the readership here, which has fostered my ultimate goal — building a strong forum for research collaboration.
As one of the people credited with discovering HMNY, I’ve been extremely close to the story. This enabled me to go long at $3, ride it up, “drop interest” in the 30s, and turn outright bearish at ~$12.
All have proven to be profitable for readers.
To be clear, I remain hopefulthat they can eventually build a profitable business! However, I have no choice but to remain negative on the stock because of the amount of cash, dilution, and time that will be required to get there.
My research has explained why earlier shareholders won’t benefit if MoviePass is successful. That being said, if MoviePass does become successful, there will be a class of future shareholders who will benefit greatly. Key word: future.
The bulls (almost entirely retail investors) haven’t taken the time to understand that a company and its stock aren’t always tied at the hip. Balance sheet, capital structure, and financing (which often requires institutional support) are often more important than the underlying business.
This is why many longs might ultimately be right about the business, but still get crushed on the stock.
I’ve said it before: Being optimistic about the business is ok, but only if you’ve made every attempt to understand every facet of the machine, both good and bad (while being 100% honest with yourself). When it comes to stocks, getting rich isn’t about being right… it’s about finding the truth and investing accordingly.
That’s why my goal is to foster collaboration here. I welcome the notion of being convinced that I’m wrong on a thesis… because all I care about is being on the right side of the trade.
So, if you’re bullish on the stock, please try to read and understand the research and models I’ve presented here. Thus far nobody’s been able to crack the implications for shareholders (on the way up or down)…
…and you can be sure that if/when the time comes to turn bullish on the stock, I’ll write it up, loud and proud (and surely take heat from the bears)!
- AEHR Grows 175% — Beats On The Top & Bottom Line (Buying More)
- GAIA vs. MoviePass: CAC Shows Which One Is A True Mini-NFLX
- Major Update on SMSI
- SMSI’s Safe & Found App: 100,000 Downloads & Counting
- MoviePass Projected To Burn $600M In 2018
- SMSI: Riding A New Trend & Making Its Latest Comeback
- Mark Gomes Research
To get my posts in real-time, just subscribe to this free blog. If you don’t want to get all of my posts via email, just sign up for my MailChimp mailing list instead. For that list, I only send key articles and occasional recaps of all the work I’ve recently done.
Disclosures / Disclaimers: I am long SMSI, AEHR, QADA, WDAY, RDWR, GAIA, and RDCM. I hold bearish positions (via shorts or options) on NVDA, FIZZ, SBH, and MDXG.
I have no position in HMNY, nor have I traded the stock since launching this blog. Further, I am not aware of anyone who has been short HMNY or its derivatives since launching this blog.
This is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article.
I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article.
I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter. Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.
I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.