Stocks up nicely again this week and now up pretty huge from those panicky Ebola lows a couple weeks ago. Have you trimmed anything? Should you? Now’s the time — sell when you can, not when you have to.
Yelp took a 15% hit last week, after they guided for next quarter to be about 2% than the analysts had expected but that full year guidance might even be better than expected.
My analysis says that both YELP and TWTR are probably headed much higher than their current sold-off prices. Yelp is doing a much better job of monetizing but Twitter has a much better chance of being a 5-bagger from here over the next five to ten years — if Twitter can figure out a better monetization scheme. Yelp has a much better chance of being a takeover target. That said, think about this for Twitter — if WhatsApp is worth $20BB to FB wouldn’t TWTR be worth at least double that? TWTR’s market cap right now at the after hours quote of say $44 is about $27 billion. Not that I expect it, but if I were Zuckerberg running FB with a $200BB market cap and if my own stock survives its earnings report better than TWTR has tonight, I might throw 20% of my company’s shares at TWTR at $60 per share and try to buy that sucker hook-line-and-sinker.
Twitter is trading much worse than I’d have expected had you told me before what would be in the earnings report and on the conference call last night. Unlike YELP, the topline growth was actually a bit better than consensus and up more than double from last year.
We’re still up from our initial tranches and I’d mentioned the idea of trimming YELP at highs a while ago and we’ve been waiting patiently to add the Twitter to the portfolio. The upshot of this analysis is that even though I think both stocks are probably going higher over the long-term, I want to trade out our Yelp long for a Twitter long for our long-term Revolution Investing approach. Twitter’s more outright “revolutionary” but neither are as good as Facebook.
Meanwhile, I think it’s time to remove one other position — Calgon Carbon CCC. This is one of two remaining plays from our Water Revolution investments and it’s just not delivering the growth and giving us the returns that I want to see. Lindsay is executing very well and pays us a nice dividend so I’m going to just stick with Lindsay for our Water Revolution play for now. I’m looking at some new names in this sector so stay tuned. Neither company is growing their topline like I’ve had modeled for the last year. I’ve been looking for up to 10% revenue growth and it’s just not there. I’ll keep all the water stocks on my radar and try to scale into a name or two if and when some double digit topline growth kicks in.
So, to review — I’m going to scale into some TWTR common, about a 1/3 position, up from about a 1/10th position. And I’m going to add sell my YELP entirely. And I’m going sell my CCC entirely. To be clear, I’m putting less cash to work than I’m raising today, if you understand my approach.
We continue to clean things in the portfolio up while things are going well. Sell when you can, not when you have to, as always.