Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.
Since 2009, I've been introducing Seeking Alpha readers to stocks that have the potential to triple in value. This article will commemorate our latest triple and update you on the rest of our Core Portfolio (we will discuss our Speculative Portfolio at a later date).
To lead things off, we're proud to announce that our latest triple is Lions Gate (NYSE:LGF). Just 18 months ago, we introduced this pick to Seeking Alpha readers. The stock responded by rocketing from $12 to $36, becoming our latest 200% winner!
In fact, there has been a lot of action since our May update. The drama in Syria and concerns over Fed tapering were barely a blip on the radar back then. These issues are now front-and-center -- they have combined to send the market into a summer swoon. The S&P 500 is down 1% since our last update.
However, our picks are up an average of 21% (as of Sept 4):
Change Since May
Source: PTT Research
Assuming the market's downtrend subsides, we expect our picks to continue their upward march. To kick off this update, let's start with a portfolio performance-recap before drilling down into our constituents:
Source: PTT Research
As you can see, the portfolio has been doing exceedingly well. Historically, we have had our share of losers. However, our methodology sticks to the old Wall Street rule of thumb: "Sell your losers and let your winners run". Our complete pick history (winners and losers) is on public display.
The difference between our complete portfolio and our current one is notable, but both are impressive. Our current portfolio has a current average return of 113% with an average peak of 134%. Our complete history of picks has provided an 87% return and an average peak of 135%. The reason for the higher peak return in our historical portfolio is that we automatically retire our winners once they triple. Those 200% gainers are not included in our current portfolio performance chart.
Incidentally, our past triplers, along with picks that have been acquired before getting the chance to triple, represent 33% of the official picks we have made. This dates back to my very first selection on Seeking Alpha (which incidentally tripled).
Looking at the individual picks in our portfolio, there is only one that hasn't risen since the May update:
Seagate: STX was actually performing quite well until its June-quarter earnings report. Before that, the stock hit an all-time high of $47.82, 167% above our initiation price. However, its Q3 numbers "only" beat Street estimates by a penny. Guidance was also bit lower than investors were hoping for. As a result, the shares have pulled back to $39. Punk PC sales are cited as the culprit. However, when we unveiled our original thesis, PC sales were already stumbling.
Our original thesis still holds true. Specifically, according to the experts at Gartner Group, every GB of storage that doesn't get purchased for a laptop drives up to 3GB into the Cloud. This is because consumers are producing mobile content at a record pace. Much of that content gets stored in the Cloud (on the Internet). Cloud storage providers have to be more careful with customers' data than the customers themselves. As a result, they buy more storage for things like redundancy and ease-of-access from anywhere around the globe.
That being said, our original piece "cheated" a bit, stating that "we believe that shares of STX are poised to triple from its recent lows". Those lows were in the $9 range, so the stock fulfilled our promise at $27. For now, we're keeping STX in our portfolio, but we may choose to ring the register if we see its prospects decelerate.
The rest of our picks have done very well:
Lions Gate: I write this, LGF has become our latest official triple!
Because it has tripled, LGF is now officially retired from our portfolio. This is actually a sad day from our perspective. Barring a market crash, we see no reason for the stock's momentum to abate. The next chapter of the Hunger Games is coming out on November 22. It will be preceded by Ender's Game on November 1 and followed by Divergent in March. For those who haven't heard of Divergent, we'll say the same thing we said about Hunger Games 18-months ago: "you will".
Attunity: This stock has been on a roller coaster ride since we introduced it on Seeking Alpha in April of 2012. However, it's up 23% since our last update and 109% since our original recommendation. This has been driven by a reacceleration in its business momentum, as discussed in our analysis of its Q2 results.
All companies experience bumps in the road and ATTU is no exception. However, the company has navigated its way through the worst of it and has four quarters of easy comps (comparisons to the prior year) ahead of it. Accordingly, we believe the shares are back on track to triple.
Facebook: After spending a year as one of the most hated stocks on Wall Street, investors finally saw what we've been saying all along -- the transition to mobile was just a transition and they made it through just fine. The stock is up 66% since May and 131% since we first told you about it. The company is clearly the dominant social media platform and it doesn't matter how many platforms-du-jour kids tinker with - Facebook has the broadest audience and that is what matters most.
When someone asks, I sum it up thusly: "Google knows what you're searching for, but Facebook knows who you are". Anyone who has seen its chart lately can see that our thesis is playing out. Technically, the stock has broken out and should challenge its all-time high of $45. Becoming a triple will require a $54.18 share price, which will take a bit more time, especially since $50 may serve as a technical and psychological barrier.
QAD (NASDAQ:QADB): Ironically, not all of our "Poised To Triple picks" are picks to triple. At present, QAD is the lone exception. We make such exceptions when we see an exceptional opportunity for gains combined with exceptionally low levels of risk. QAD fits that bill.
We view QAD as a company whose stock could rise 50% or more with little downside risk. It is a value stock with several assets, as we have described in numerous reports. Most recently, the company announced a beat-and-raise quarter, which broke the stock out of a market-related funk. Ultimately, we believe this break could see its shares rise from $12 to $20.
It's not a pick to triple, but for a value play (which also offers a 2.5% dividend), 67% will represent a great return.
Himax: This pick requires no introduction. In March, we predicted that HIMX would be the microdisplay provider for Google Glass. This unleashed a maelstrom of accusations, casting our research as fraudulent. However, four months later, Google announced what our proprietary research (thanks in large part to industry guru, Karl Guttag) told us all along -- Himax was indeed the supplier to Glass. I was publicly credited by the media and the rest is history.
Himax has been our signature pick ever since, rising 114% in just 6 months. Most recently, Craig Hallum told investors something we have already been saying for some time...
Glass won't be HIMX's only major win.
Disclosure: I am long ATTU, FB, HIMX, LGF, QADA, QADB, STX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.