Q&A: Buy HMNY? SMSI’s New Filing, Chart, Trading Action & My Buying

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.

 

I’m going to answer some Q&A in this post.

Sorry for flooding you folks with HMNY and SMSI research, but this is how professional analysis is done — comprehensive and in-depth.

If my writing does nothing else, let it serve to demonstrate how much work professionals do on their investments. From this, you can see the information disadvantage that most investors are working under.

You can also understand why a stock doesn’t quickly move to fair value. Many professionals do all of their homework before buying into a stock. I know many people who have been steadily buying into SMSI. In other words, they are not “all rushing in”.

Investing is a serious process and requires serious work to do optimally. Making seven figures annually isn’t easy work (but counting the money sure is fun!).

It can be sad too. I try not to say “I told you so” on days like this, when a stock like HMNY falls 40%. I feel bad for people who lose money, especially in avoidable situations like that one. Getting in and out of HMNY at the right time wasn’t about luck. Heavy research told me exactly what was going on there and everything has played out, NOT “as I predicted”, but “as my research told me”.

Cheers

 

HMNY’s Offering: The #1 question coming in pertains to my thoughts on the HMNY offerings. As of last night, this was my thought on how HMNY might react today:

hmny2

Now that the cat is out of the bag, the thoughts I presented in this morning’s post were just been updated a few minutes ago. If you want the short answer, it’s “continue to stay away”.

I believe that trading $2 HMNY shares for $2 SMSI shares will produce a much better outcome than holding on to HMNY shares. Speaking of which…

 

Did SMSI Announce An Offering Too? In a word, “NO!”. This morning’s SEC filing simply registers the shares that SMSI issued in a previous offering. This is normal, was expected, and isn’t news. This is pretty clear from reading the filing, but many folks are either too busy, lazy, or daunted to read them.

In conjunction with this morning’s filing, many folks are wondering why SMSI is pulling back instead of shooting straight toward its 52-week high of $3+. There are a few reasons, most of which can be tied back (directly or indirectly) to the filing:

1. The stock dropped more than 5% this morning. I saw many posts inferring that it’s a new offering.

2. That drop broke the stock below the flag formation (a technical chart pattern) that I expected to form. Those who trade of technicals may have chosen to sell out. This is why I don’t like technicals — they cause people to make the wrong fundamental move in favor of a technical move (and miss out on profits, as a result).

Back in the early-90s, I learned this the hard way. Nonetheless, many people still focus on technicals, so I keep an eye on them. For those interested, here’s how I see it now:

SMSI2

Assuming that their recent business momentum continues, I still expect the stock to make its way toward the upper end of this risk/reward channel.

3. Some of the investors who participated in the offering were clearly in it for the quick buck. You could see it in SMSI’s trading action when the deal was announced. The offering involved about 3 million shares and the stock traded 3 million shares over the 3 days that followed.

For the record, I strongly believe that this is the source of the 700,000 share spike in short interest that occurred in March. Participating shareholders often short a stock against the shares they purchase in an offering. They are not supposed to do this, but it produces a quick-flip profit, so many find sneaky ways to do it without getting caught.

In any case, what we’re seeing in the stock now is a normal shifting of ownership from quick-flip shareholders to those who are excited by the story. Assuming SMSI’s business momentum continues, the latter should soon overwhelm the latter, leading to the next leg up in the shares.

In the meantime, I’ve been buying some more shares almost every day since April 11, including today. In fact, the only day that I haven’t bought more shares was Tuesday, when I spent the day volunteer-coaching athletes on the Miami Beach High School Track & Field team 🙂

buying

It adds up to 33,500 shares over the course of the past 8 days. It doesn’t put a dent in my overall portfolio but it’s a welcome addition to the 100s of 1000s of shares of SMSI that I already own.

Cheers.

 

Coming Up: Could SMSI Become A Ten Bagger (Again)?

 

More Research:

 

To get my posts in real-time, just follow/subscribe to this free blog.

If you only want to receive my most critical reports, simply sign up for my MailChimp mailing list instead. If you’re on that list, you will only get key articles and occasional recaps of all the work I’ve recently done.

 

Disclosures / Disclaimers: I am long SMSI. However, 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.

6 thoughts on “Q&A: Buy HMNY? SMSI’s New Filing, Chart, Trading Action & My Buying

  1. Hey Mark,

    Thanks for the recent posts recently. I think you are doing us retail investors all a great deed by providing us with your insight and your knowledge. I hope one day that I will be able to contribute to the next generation of investors, once I have accumulated enough to also reach that retirement realm ;).

    Quick question for you though – how much of your portfolio now is SMSI? I know you’ve mentioned you’ve been continuously adding to your position throughout the past couple of months, but how do you know how much of your portfolio to allocate to such a play? Myself, I’ve allocated about 20% in to this, but I’ve set a rule to only go up to 20% on each individual play. What are your personal benchmarks for position sizing?

    Thanks again, looking forward to your thoughts.

    Like

    1. As a guideline, your maximum allocation to anyone stock should be determined by your total net worth.

      When I had $25,000, my maximum allocation was 80%. Now, it’s obviously lower. 😂 every person needs to decide for themselves. Cheers.

      Like

      1. well said… I use a similar but slightly different guide. Allocation should be determined by your income. For example, if you can generate $50,000 in net income per year to put towards stock (call it “replacement cost”), then your replacement cost of losing $4,167 is one month of work. Now if my portfolio size is $10,000… I may be willing to go 100% in, because my replacement cost is 2 1/2 months of work.

        But if say 10% of portfolio is $100,000 that’s 2 years of work to replace a loss and 20 years of work to replace it all! I don’t have a clear formula I can share but you get the ideal… when my net worth far exceeds my income, I play it more carefully but when net worth is a fraction if income, you can play it much riskier.

        Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s