Good morning and welcome back to the pizza shop, where the pizza pies grow exponentially, so the larget size is always the best price per bite.
FIO got downgraded along with EMC from a smaller welfare sellside investment bank. EMC was hit a bit last week on concerns about this year’s growth, and FIO was hit in sympathy. The downgrade formalizes that sympathy and concern for both stocks. EMC is one of the oldest and best run data-storage firms in the world. FIO is taking data-storage/server-storage to the future with its flash drive technologies. The enterprise storage world in general might get pinged this year by firms continuing to migrate to the cloud, but that’s where FIO’s technologies are focused, so I’m not quite grasping the sympathetic connection here other than from a very high level view.
Search TradingWithCody.com for Secular vs. Cyclical for more on this concept, but the idea is that we are investing in a company that’s going to grow secularly within a cyclical data-storage marketplace. It’s the same concept of investing in smartphone companies like Apple and Google which will see growth in the overall cyclical cell phone market so we avoided Nokia and RIMM. Then again, FIO’s much, much smaller than either Apple or Google and as I’ve said from day one of this investment — it needs to be considered a Venture Capitalist Long Term type investment. It’s either going up tenfold (or getting taken out first) or we’ll end up selling it in the single digits some day. I still think this is a great long-term secular growth investment, so I’m buying some FIO common stock today, a big tranche buy, but still, of course, leaving myself much room to add more if it continues to crash and it’s still not a really large position overall in the portfolio.
The FIO action is frustrating after that huge recent growth quarterly report and subsequently huge pop. That’s why we trim the euphoria and spikes like we did after the report and why we now take advantage of the panicky downgrade.
No other trades for me today. We’ll be publishing our brand new book, 100 Stocks for the Clean Tech Revolution, later today, so stay tuned.