Another Day, Another Play: Out With Ceragon, In With Alvarion

Includes: ALVR, CRNT
by: Jano

This post is specifically catering to the group of investors that are sitting on some profits off the Ceragon Networks (NASDAQ:CRNT) play I recently discussed.

As of yesterday, the 07 DEC 10 Calls I recommended are trading at a price of 8 dollars though it dropped a bit in the afternoon. If you bought anywhere from when I recommended it, you should be sitting on profits of around 70 to 100%. I think its time to take your profits and run.

I'm beginning to think that there is definitely a crowd of followers that pump and dump a lot of the stocks that get listed as Number 1 on the IDB 100 list and guess who just made their debut on Monday? IF the curse is true, then CRNT will be following the same steps as NGA and BTJ did right toward a haircut!

You will definitely see CRNT trading even more volatile than it already does and you might get some profits trading it. I feel that the industry they are in is still strong, and there are still a lot of great opportunities in Israeli companies (of course this is my opinion) but I think that CRNT is overpriced at 17.

By taking that broad view, I think a company in the same overall industry that handles a different aspect of the WiMax and other Wireless Products will ride up off this positive momentum and will have a little bit less downside due to the fact that it isn't as exposed to the marketplace as much as CRNT. The ticker is Alvarion (NASDAQ:ALVR).

I called ALVR investors relations line and explained to me how CRNT and ALVR are complementary and do not necessarily compete for the same business, which is nothing but good for both especially when considering the industry is en fuego. CSCO came out with a strong quarter, CRNT came out with a strong quarter, and ALVR did as well. Though ALVR and CRNT are Israeli based (and oddly enough the IR manager told me their headquarters are actually across the street from another), they are taking on projects in the US and Asia.

I'm not going to get into the details of why ALVR is a strong buy in my opinion, you can read the latest news yourself on Yahoo!F, but what I will do is lay out a way to play it.

Take a look at the 08 JAN 12.50 Calls that are trading at 1.50-1.60 and also at the 08 JAN 7.5 Puts that are trading at .15-.20.

Buying 10 contracts of each will put your investment cost at 1800 plus whatever your broker fees are and you will have roughly 6 months time to trade this.

If the stock shoots up above 14 by JAN 2008 you will be in the money and depending on how soon that happens you might be sitting on a nice amount of profit without it even being near the 14 range.

A few days ago, First Albany upgraded their target price estimates to $14. To play it safe you can hedge your play by buying the Puts.

ALVR reported 1st quarter 2007 earnings of $0.02 per share and beat last year's 1st quarter results by .06

ALVR reported 2nd quarter 2007 earnings of $0.03 per share and beat last year's 2nd quarter results by .03

As always, I recommend you do your own Due Diligence before getting into any of my investment ideas.


Disclosure: author doesn't own any of the companies discussed.