Let’s run through some of our positions to update our analysis.
Barnes & Nobles (Short) – I have a soft stop-loss in my head at about $24 in this short that has gone against us from the start this go around. Barnes & Nobles knows it can’t be a brick and mortar retailer of books and CDs so it’s trying desperately to figure out how to become a tech company. Or a toy company, yeah, that’s the ticket. The problem is that it’s a staid old brick and mortar retailer of books and CDs and it can’t escape its own DNA. Fundamentally, our analysis points to a much lower stock over the next year or two as that reality plays out. On the other hand, there’s some activist interest in BKS and the stock’s had some momentum in the last few months. So, technically-speaking, the technical analysis is bullish. I’m keeping this short position in the portfolio for now with a soft $24 stop-loss or so. I don’t want to let any losses grow as portfolio maintenance remains of key importance always.
Invensense (Long) – The stock’s been hit hard the last few days for two primary reasons. First, the markets have trashed most high-beta high-tech stocks and Invensense was part of the carnage. Second, the markets focusing on whether or not Invensense chips will be in the new iPhone 6 and iPhone 6 plus. Analysts are dying to get their hands on one of the new phones so they can take it apart and see what companies have won supply contracts with Apple for the huge sales that the latest iPhones will generate in coming years. I think Invensense has a lot of other products, smartphones, tablets, phablets, drones, robots and wearables to sell their components into so I’m not hinging my Invensense investment on the iPhone 6. That said, if the iPhone 6’s doesn’t have any Invensense chips in it, I think the stock could get back down to our $20 initial entry level in the near-term. If Invensense chips are in the iPhone 6’s, the stock will likely run to $30 in a hurry. I have no idea and neither does anybody outside either or those two companies whether or not Invensense chips are indeed in the iPhone 6’s for now.
JDSU (Long) – Well, that was a quick roundabout, eh? JDSU was down about 10% since we’d added it to the portfolio in February and then it popped right back above our entry level on one press release. That press release outlined JDSU’s plans to split its company into two and issue new shares to reflect the changes. The market loved the announcement and for good reason, as the split might enable the company to streamline and generate more earnings growth for shareholders of both new stocks. I’m less comfortable in this investment while the company’s figuring all this out. Furthermore, I’m not an arbitrage trader, and I want to stick to what I do best, which is finding Revolutionary Investments while navigating the broader markets and economic swings. So I’m going to take our small profits on JDSU for now and will revisit it when the split is over.
Ciena (Long) – I don’t understand how Ciena’s management mishandled their investor relations so badly on their most recent earnings report. Last quarter’s earnings and growth were strong, but the company freaked investors out when they talked about “variables” impacting their next quarter. Their explanation on the conference call didn’t clear up my questions either. I do think Ciena’s selling into a Revolutionary Growth Industry that’s on the upswing part of its growth cycle right now as carriers around the globe race to accommodate ever growing bandwidth demands. But I’m not going to sit around and wait for management to figure out how to navigate their own cycle if they can’t figure out how to do it right here in the part of the cycle. So I’m also selling our Ciena for less gains than I had at its top a few months ago, but for a nice gain since we entered the position nonetheless.
