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Jay Unni
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I previously worked as an analyst in Dallas, Texas. I have read a number of books about value investing, growth investing, speculating, and trading. I currently engage in value investing and speculation in rare situations where I detect a self-reinforcing trend. In my value investments, I have... More
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  • Update On Tesla Motors Position

    On my Tesla Motors (NASDAQ:TSLA) speculation, my fundamental thesis is still intact. However, I have also closed my position on this.

    Paul Santos wrote an article detailing the precarious position of short sellers of Tesla Motors - it costs too much to initiate shorts, and those who had previously initiated a short are being forced out their positions simultaneously.

    However, I drew an additional conclusion from the article: the shares short are rapidly decreasing. Once the majority of the shorts who are being forced to cover are driven out of the market, there will be a sudden drop in demand for shares. Simultaneously, Tesla has announced its biggest offering ever, which will flood the market with supply. Thus, I believe these two forces will combine to drop the share price in a correction.

    I will likely buy on a pullback, as I believe the bull run has long legs. This offering will likely be soaked up by new long investors, and the tremendous injection of capital should allow Tesla to far exceed its previous expectations of sales.

    I cannot justify holding my long position, as I believe that the pullback will cause the price to dip lower than its present position. I may be wrong, but I am willing to pay to see the effects of the end of the short covering. I believe that Tesla will see much higher prices than $92 in 2013 - the fervor surrounding this company is capable of doubling the shares yet again.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TSLA over the next 72 hours.

    Tags: TSLA
    May 22 2:31 AM | Link | Comment!
  • Update On 3D Systems Position

    I had written an article arguing we were now in an acceleration of the boom phase of 3D Systems (NYSE:DDD), and I am beginning to doubt my own investment thesis. I had been expecting analyst upgrades, based on the 250 basis point increase in the gross margins that 3D systems was generating. These have manifest, at both Canaccord and Janney Capital.

    However, 3D Systems was recently downgraded by William Blair's analyst Brian Drabb. Mr. Drabb had appeared very anxious about organic growth on the previous conference call, and it seems the CEO's answers were unable to satisfy his concerns. This event is important because it indicates a possible shift in perception.

    One analyst downgrading is not indicative of a whole market shift, but it does show a weakness in the bull thesis. What I am questioning now is whether we are really in a twilight phase - where both investors and analysts don't truly believe in the underlying thesis anymore, but they continue to play the game. If this is true, we could be in for a catastrophic downward acceleration soon.

    An addition weakness in the thesis comes in the form of a technical sign of a reversal. There was a doji on May 14, a downward hammer on May 15, and a down-day to confirm the hammer signal on May 16. This is a pretty strong reversal sign.

    (click to enlarge)

    The stock is still quite popular with retail investors, who don't seem to be doubting the thesis. But a second downgrade could mark the beginning of a sudden catastrophic downward acceleration (Stages 7 and 8 of the reflexive cycle, as outlined in my article), which increases the risk/reward ratio enough to make my position dangerous.

    I hate to change my position so soon after arguing for a continuation of the boom phase, but if my investment thesis has been weakened, I have no business staying long the stock. Thus I have closed my position.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in DDD over the next 72 hours.

    Additional disclosure: I have recently closed a long position in DDD.

    Tags: DDD, 3D Printing
    May 20 1:31 PM | Link | Comment!
  • Investing In Undervalued Banks: BNCCorp And Bank Of Birmingham

    (as posted on my blog,

    I have spent so much time speculating that I have been neglecting the more long-term investment side of my portfolio. Here are two purchases that I made today to rectify that situation.

    BNCCorp (

    Since I wrote about, a lot has changed with the company: the stock price has nearly quintupled, the assets and equity have both skyrocketed, and the company has been increasing earnings at unfathomable rates (year-over-year earnings growth was 505%). (Read the article for the whole story on this investment idea.)

    BNCCorp still remains undervalued. The Price/Book ratio sits at just under .58. For such a fast growing area as North Dakota, I would expect most banks to be trading above their book values, not significantly below it. Therefore, it is probably a safe investment until it reaches .80 or so. At that point, it will begin to look significantly less attractive.

    I am regretting selling out 80% of my position when the stock went up by 150%. I thought the move was largely over, and was eager to invest in other areas, but I neglected to check the real value of the company's earnings potential and equity in relation to the market capitalization.

    I am glad however, that I decided to let 20% of the position run. I have since purchased more shares, though it is always painful to buy back a stock you sold at a lower value.

    The bank has increased its equity-to-assets ratio to 8.9%. Thus it is no longer a "cigar butt", but instead is a well-capitalized bank in the fastest growing area of the nation. (For reference, Peter Lynch recommends an Equity-to-Assets ratio of more than 7.5% to qualify as a well-capitalized bank.)

    North Dakota has exploded in population, and as these people settle into more permanent arrangements, the need for home loans and commercial loans will continue to be enormous. The Bakken Shale will remain attractive as an oil play at WTI prices above $80, and now that the European crisis fears are on the decline, oil prices have stabilized in the $90 range. They will likely remain high until the next financial crisis threatens global demand.

    Though most of the explosion in the Bakken region is already played out, and though a large portion of the oil workers in the region have already found permanent housing situations, I expect the growth in the Price/Book multiple coupled with steady earnings (if not growing earnings) to secure the safety of this investment for the near future.

    Bank of Birmingham (OTCPK:BBBI)

    In addition, I have begun a new investment in the Bank of Birmingham (OTCPK:BBBI). The company has been sitting at a price/book ratio just under 1 for a few weeks, but a recent pre-announcement by the company suggests that the current Price/Book is closer to .58, suggesting the company is undervalued.

    The Equity/Assets ratio is 11.1%, indicating that the bank is significantly under-leveraged. This is a good thing: a less leveraged balance sheet makes a less risky investment. In addition, the extra equity means that the bank has significant room to expand its loan portfolio and increase earnings in the future.

    With these low amounts of leverage, the bank was able to increase earnings 54% over the course of 2012 (excluding a deferred-tax asset recognition in 2011). This rapid earnings growth rate is a testament to the earnings power of this bank.

    So why has this bank been growing so quickly? The answer is simple: the rebound of the car industry.

    The Bank of Birmingham is located in Birmingham, Michigan, on the outskirts of Detroit, so it is dependent upon the comeback of the auto industry. As Birmingham is a wealthy suburb, it is less-exposed to pullbacks in the U.S. automotive market than urban Detroit. As long as the auto industry comeback is not derailed by a significant U.S. recession, we should expect more suburban migration and an expanding population in Birmingham, leading to more deposits, loans, and mortgages issued.

    Disclosure: I am long OTCQX:BNCC, OTCPK:BBBI.

    Feb 15 5:35 PM | Link | 3 Comments
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