First off, I’m adding another tranche of FFIV while it’s down today at near 52-week lows. The company is becoming an increasingly important player in the network security industry and has refreshed updates in its product lines about to hit in 2016 which should really drive growth in 2017 after their customers test out and start implementing the F5 product refresh. F5 is one of my smallest starter positions and I’ve been patiently waiting for an opportunity to scale into more of it. I’m adding another 1/3-sized tranche in FFIV today, just slowly building it up some more here while I can.
Next up is Fitbit, oh fitbit. Yesterday in the Trading With Cody Chat Room, I’d noted, “The sell-off is a bit of a vicious cycle for $FIT investors. I want them to get maximize the amount of cash they raise with the highest possible selling price but the further this stock falls, the less helpful the secondary is. Purgatory for now.”
And as it played out, Fitbit priced its secondary offering of 17 million common shares at $29 today. Of the offering, 14 million shares are to be sold off by certain shareholders. Previously, Fitbit was planning to offer 21 million shares of common stock of which 7 million shares would go to the Fitbit balance sheet. So now Fitbit sold only 3 million of its own shares and with the stock about $10 below where it was when it first announced this secondary a couple weeks ago, that means the company raised only $90 million instead of the $280 million it would have raised had it sold 7 million shares closer to $40 per share. I’m not impressed with how this whole transaction went down and I’m not impressed with the $90 million for the company’s balance sheet. I’m not going to sell it into the panicky 11% drop today but the stock does go into the “penalty box” meaning that I’m not looking to buy or sell it for now as I step back and make some fresh analysis on it after this secondary.
On the other hand, Applied Materials reported a strong quarter with strong profit margins. I’d like to see more growth overall in the semiconductor equipment industry and AMAT sees revenues heading down a bit quarter over quarter into the year end here. Looking ahead to next year, AMAT says they expect industry equipment spending to be flattish which is more positive than sell-side consensus view of down 5-10%. AMAT continues to talk up 3D NAND prospects as all six of the NAND suppliers are ramping up on 3D NAND production which should offset declines in DRAM spending. We’re up about 20% on this position since we added it and I’m letting it ride for now.
Meanwhile, there are so many individual stocks and several sectors that are crashing relentlessly. I spent last night going through a lot of charts of random companies on my quote screens and was rather amazed at how many stocks I could think of that are down 70% or more in the last year or two.
As an opportunist and as a contrarian, I’m digging in to a lot of these hard-fallen former high-flyers to take a look at some of the wreckage out there in so many sectors and see if there’s anything in the rubble worth picking up. For now, though my biggest positions remain the four horsemen of tech, as I’d started calling Google, Apple, Amazon and Facebook as you guys know. But if you’ve got a beaten down stock you want me to look at, please shoot me an email to firstname.lastname@example.org.
Random note into the weekend: Back in 2003 right around the time I started investing in Apple, Steve Jobs traded 55 million share options with high strike prices for 10 million shares of Apple stock outright. Specifically, Jobs traded his 15 million share options that had strikes (adjusted for splits) of $1.20 and another 40 million share options that had strike prices of $3.20 for for 10 million shares when the stock was at $1 per share. Those ten million shares are now 140 million shares since Apple has done a 2-for-1 and a 7-for-1 in the years since and are today worth $14 billion or so. If he’d just kept those options, the 55 million shares they’d have tuned into would today be worth $42 billion to his heirs. A $28 billion difference. The good news is that money went into us shareholders’ net worth instead. Get all my Latest Positions, which still includes Apple, here. And have a great weekend.