Sometimes A Chart Tells You Something

If you’ve missed my Live broadcasts on Marin Software (MRIN), be sure to check them out before sending questions my way. Most of the most common questions have been answered (often more than once) in the videos.

You can see the first one here (MRIN is discussed at the 28 minute mark), the next one here (MRIN is discussed at the 15 minute mark). Finally, I did an in-depth Q&A session on MRIN (at the 33-minute mark) during last week’s Live broadcast.

As always, be sure to read my disclosures / disclaimers below. Cheers!

 

Sometimes A Chart Tells You Something
I’m not a fan of relying on charts. Yes, it can be a helpful tool, but the stats show that 95% of traders fail to achieve market returns. If you haven’t been beating the market, you are almost assuredly among the “normal” humans who are not wired to trade stocks successfully.
I’m one of them.
If not for educating myself on professional fundamental research*, I wouldn’t have retired a multi-millionaire at age 38. You wouldn’t be reading this.
* not the b.s. they teach in college, on CNBC, or anywhere that extols the virtues of P/E ratios, revenue multiples, etc.
But sometimes a chart tells you something. For example, take a look at the two 5-year charts below:
IMG_2079.jpg
They look similar, right?
In fact, these companies are not similar (in what they do) at all.  However, both are microcap companies in the Information Technology industry. Further, both have been in the midst of a multi-year turnaround. Finally, both have been dragged down with the rest of the market.
However, their KEY DIFFERENCE illustrates what I’ve been preaching about owning what you love and shorting what you hate.
In both cases, a continued market decline could be expected to knock these stock down further. However, THAT’S NOT GOING TO HAPPEN to the stock on the left.
The reason is simple. They (UQM Technologies – NASDAQ: UQM) GOT ACQUIRED today.
On the news, the stock was up nearly 50%, closing at a 4+ year high. Meanwhile, the markets plunged nearly 2%.
The reason for this was simple — VALUATION.
In the midst of market declines, many stocks’ valuations reach ridiculous levels. Unless enough people realize it (and act), panicky sellers will just keep driving them down.
In this case, someone DID notice and DID act — a larger company named Danfoss. THEY saw the value, made a bid, and will now take the entire company out. If you sold UQM because of the ongoing market correction, you missed out on a stock you liked and owned.
Ouch.
In contrast, if you focused on the source of your concern (the market) by shorting IWM, FXI, SPY, etc., you made great money on your short AND A KILLING on UQM today.
THIS IS THE POWER OF VALUATION.
This is also proof that a chart doesn’t tell you what a stock is WORTH — it only tells you what people are willing to pay for it today (and most people are not trained in how to evaluate what a company is really worth)…
…but the CFOs of many companies are trained (and they are liable to acquire your favorite company while you’re sitting on the sidelines in fear of a market correction).
Obviously, nobody wants that.
So, learn the lesson. Own what you love and short what concerns you.
Incidentally, if you didn’t notice, the other chart belongs to Smith Micro (SMSI). I’m not saying that they’re going to be acquired next… but the chart didn’t warn us about UQM and likely won’t warn us about SMSI, MRIN, GAIA, USAT, or most any other stock that you or I love.
And, as I learned long ago, companies tend to get acquired when they’re undervalued… and companies tend to become undervalued during market corrections.
Enough said.
As always, be sure to read my disclosures / disclaimers below. Cheers!

 

More Research:

 

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

Advertisements

17 thoughts on “Sometimes A Chart Tells You Something

  1. Why is UQM still trading below the 1.71 buyout cash offer? Could this be due to investors pricing in the risk/possibility of the deal being rejected by CFIUS or UQM shareholders?

    Like

    1. Partially that, but also for the wait until the deal closes. You won’t get your $1.71 for months, so the lower price compensates.

      I handicap deals like this. When the risk of deal breakup is low and the profit is attractive enough, I buy the acquired stocks for the small profit.

      Last year, I made 12% on my cash this way… but that’s because of a high hit rate. Some deals DO break up, so beware. I’m VERY picky.

      Like

      1. Presumably, showing progress in the training of Sprint employees to better sell Safe and Found. I would guess that this solely relates to call center staff training and not the in-store staff. Does Sprint engage in tele-marketing or offer specific call-center services for Safe and Found?

        Liked by 1 person

  2. Thank you for what you do as always, been a big fan of your work for > 5 years.
    Quick questions if you don’t mind.
    1) How would you classify MRIN at this point? Great find or gold mine?
    2) Even if SMSI, MRIN, or GAIA gets acquired, wouldn’t it still be a bad deal for shareholders at this level?
    Say SMSI gets acquired with 50% premium at current level or lower ($1.80 + $0.90 = $ 2.70), it’s still pretty lower than the potential gains when SMSI comes to fruition.
    Of course, any gain is better than no gain and it’s not within our control.

    Like

    1. 1) transitioning from Wait Time to Gold Mine. The 4 year wait for their transformative platform is over and anyone who didn’t buy MRIN before is getting the platform for a fraction of what it cost to develop.

      2) With a gun to my foot, I would confidently say that NONE of these companies would get acquired today at these levels. I honestly believe that the management team of each company would except nothing less than a 100%+ premium above their current share prices. In fact, that’s a quality I seek in small cap investments (it equates to lower risk — witness what happened to UQM this week).

      3) 100% true on SMSI. I’d be shocked if the took a 50% premium, but I’d take it… only because I could redeploy that cash into other names. I like SMSI and MRIN similarly at there levels, but if either goes up 50% and the other stays behind, I will obviously like the cheaper one more.

      I don’t fall in love with companies. I work on the basis of my risk/reward math (which incorporates my “love” for the company).

      Liked by 1 person

  3. I have been following some tabulations of ratings for Sprint Safe and Found Reviews on Google Play that are tabulated every week or so by a guy on Yahoo message boards. I know that Safe and Found recently pushed through a new update which seems to have improved the reviews quite a bit. Its still early but looking at the last five updates that Diogenese did on Safe and Found ratings, they have improved somewhat dramatically. The number of five star reviews covering his last five updates by percentage ratings were 63%, 45%, 50%, 70%, and 74%. I did not go back and look at all his tabulations but the last two figures cover the last 15 days or so, to me it looks like the beginning of a trend. Hope it continues. This last revision I think was pushed out late December (21st or 22nd) so as more people update it maybe it will continue to get good numbers like it has started to do.

    Liked by 1 person

    1. I don’t trust the ratings (good or bad). A LOT of them (good and bad) are fake — IMHO — the good, by Smith and the bad, by Location Labs to keep customers as long as possible.

      I trust my experience with the app, as as that of the families I recruited to use it. From THAT standpoint, the reviews have ALWAYS been about 4 of 5 stars.

      Lesson: Don’t trust what you read. Learn from experience or the experience of people you can trust. It’s your MONEY. It deserves the best care. 💯

      Like

      1. I don’t trust reviews either after having worked for an AI based fraud detection solution to protect social and e-commerce companies. Our solution supported some very large and well known (not going to reveal) players where trust and safety of their platforms was being compromised on an hourly basis. Fake accounts and reviews were being created by bad actors with the aid of bots, and this is very common and at huge scale. Think about all the misinformation on Facebook and Twitter, and it applies to any review site as well.

        Like

          1. Who can you trust indeed…. YOU!!

            Research can’t be lazy. Gotta get out there and do some real research. Done right, you should feel like an investigative journalist.

            Like

      1. They have a staff/dept trained to deal with S&F. However, the call center people, in my experience personally calling them, were, at best, hit and miss on their knowledge of S&F. I view this as a quite positive development for that reason, and likely a step towards sunsetting FL.

        Liked by 1 person

        1. It’s good that they’re taking the initiative to effectively train Sprint’s staff – would expect an improved customer service/support to increase retention rates.

          Liked by 1 person

Leave a Reply to Mark Gomes Cancel 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