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Mark Gomes
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With over 20 years of professional experience, Mark Gomes has grown to become one of the world's most experienced technology stock analysts. He is also a Masters Track & Field world record holder and U.S. Gold medalist (http://www.fasterthanforty.com/hello-world/). Currently, Mr. Gomes is... More
My company:
PTT Research & Pipeline Data, LLC
My blog:
Poised To Triple
My book:
Faster Than Forty
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  • Good news for OCNW
     
    If we look at this deal and extrapolate across the $12B in eventual government stimulus funding, $1.2-1.8B will go to equipment. Based on 30% market share, OCNW will get 360M-540M of this. Gvt expiration date for use of funds is 2+ years from now (Sept 2012), so we're talking about $36-54M per quarter between now and then. They currently do low-20s per quarter.

    ...and this is just in the U.S. FYI, there are similar stimulus programs happening all over the world.
     
    Beyond that, there's the issue of pent-up demand to consider. Business has been slower than usual for OCNW, as carriers have delayed purchases, anticipating stimulus funding. Those that do AND those that don't get the funding will be playing catch up. Finally, some carriers have cited that one of the reasons they are sticking with the incumbant eqpt supplier is that they are going to be busy enough trying to cram 10-years worth of capital deployment into a 3-year stimulus window.
     
    All this confirms that OCNW (and comps) should see a big pickup in revs for the next 10 Qs...and then see a sharp drop-off.
     
    This is like IVAC during the PMR upgrade cycle all over again...and that was a 4 to 30 to 4 round trip. Similar timeframe as what I'm looking for with OCNW. 7 Qs to peak #1, 3 more Qs to double top, 7 Qs to fall back.
     
    I can envision OCNW continuing to go up to 20 before reversing course...a fun ride up for now and a juicy ride down later (for those of us who short stocks).
    Jun 21 3:47 PM | Link | Comment!
  • Mark's Instablog for June 18th

    Hi,

     

    FYI, you can follow me on Twitter. My handle is BostonGekko.

     

    Also, I've started publishing my updates on SeekingAlpha. You can find past and present alerts here: http://seekingalpha.com/author/mark-gomes. This way, you can watch my winners AND LOSERS over time. You can see my first write-up of LIOX there (which I recommended at $1.23 and sold at $5.50). You can also see my write-up of VOLT, which I published when the stock was $6.50. They posted a good quarter, as I expected, but not good enough. The stock dropped the next day and I sold at $5.75 a share.

     

    There are two takeaways here:

     

    1) I'm not always right. In fact, I'm wrong VERY often (30-40% of the time). I'm only right 60-70% of the time. The key is to win big  (LIOX from 1.23 to 5.50) and lose little (VOLT from 6.50 to 5.75). Let's say you buy two stocks at $1 each ($2 total). If one doubles and the other drops 50%, you have $2.50, a 25% gain. Simple, but effective.

     

    2) When I buy a stock for a specific reason (i.e. VOLT's earnings), I sell after the event takes place unless I have a very good reason to do otherwise. In the case of VOLT, sticking to that plan netted me a loss, but only a 75-cent loss. The stock is now 4.85. If I had held on and hoped for it to rebound, I would have lost another buck a share and had my money tied up instead of chasing the next potential winner. Moral of the story -- don't be afraid to take losses. Let it go. The next winner awaits.

     

    Speaking of which, this week, I bought shares of Intermap (ITMSF or IMP.TO on Yahoo), ATEA, EPAY, ORCL, MDRX, NOVL and OCNW. I sold shares of GSB, AZPN, ACTI, OESX, CALD, and IPAS.

     

    Of these, only ITMSF and ORCL were notable. ITMSF is a high-risk, high-reward play so be careful. ORCL is a lower risk and lower reward play that I hope will pay off when they announce earnings on Thursday evening. Win or lose, I will be selling ORCL on Friday morning.

     

    Have a great weekend!

     

    Mark

    Jun 18 8:31 PM | Link | Comment!
  • Lessons From My Biggest Winner Ever

    My biggest winner ever was Absolute Software Corporation (OTCPK:ALSWF). I bought it in late-2005 as the stock rose on the promise of their "Lojack for Laptops" business. Data privacy was a big issue and they had a solution that could track down stolen laptops and also erase the data on them.

    I thought it was speculative, but a great find...or so I thought. Much to my chagrin, the stock dropped 25% over the next 9 months.

    I learned the hard way that great finds can take a long time to develop. However, my homework continued to tell me that the company was on a winning path.

    I rarely doubled my investment in Speculative picks, but in this case I did. I felt that Wall Street was simply unaware of this Canadian company.

    Sure enough, within a month or two, the company started executing against its opportunity. As they did, the stock became less Speculative and more of a reality (Core). With the lower amount of perceived risk, I increased my position again and prepared for the ride.

    That ride was greater than I could have imagined. In just 15-months the stock rose more than 1,000%...a ten-bagger.

    (click to enlarge)

    The lesson came in loud and clear. 1) Do you homework. 2) Trust your homework. 3) Be prepared to wait.

    The last lesson was the most important. Just because other investors don't acknowledge your pick doesn't mean you're wrong. In fact, if you're the only one who is right, you reap a greater reward.

    STOCK PICK

    For those of you who have never seen one, see below for an example of a Wall Street report. Actually, it's just a summary, but it'll give you the idea. I happen to know this guy and respect his work. Beyond that, I happen to agree with his analysis of EPAY. I've been up to visit the company a few times and coincidentally went to Northeastern University with the CFO (Kevin Donovan - he's a great and intelligent guy).

    Needless to say, I own the stock and bought some more on its recent pullback.

    Bottomline Technologies (NASDAQ:EPAY)

    Reiterate Strong Buy. Estimates Adjusted to Reflect Recent Follow-On Offering and Currency Impact. No Change to Fundamental Outlook.

    We have updated our revenue and EPS estimates for Bottomline Technologies to reflect the impact of EPAY's recently completed follow-on offering as well as to adjust for currency changes. We are confident in Bottomline's ability to execute M&A transactions that will drive incremental shareholder value. From a business fundamental standpoint, our outlook is unchanged.

    · Bottomline completed its follow-on offering and we expect a substantial portion of EPAY's cash to be allocated to the firm's M&A effort. Bottomline Technologies issued 4.2 million shares at $14.50 per share on June 4th 2010. Approximate net proceeds to the company are $57.6 million (assumes no exercise of the 630,000 share overallotment option). We expect EPAY to allocate a significant portion of the proceeds toward executing M&A. We are confident in Bottomline's proven ability to execute M&A transactions at reasonable valuations. We are equally confident in Bottomline's ability to integrate acquisitions from a technological and people standpoint without disrupting the core operation.

    · Estimate changes due to currency impact and follow-on offering. The USD has appreciated by approximately 5% versus the GBP since Bottomline reported March quarter results on April 22nd (approximately 30% of EPAY's revenues are denominated in GBP). As a result, we have modestly haircut our June quarter, FY'11, FY'12 and FY'13 revenue estimates by approximately $300 thousand, $3.0 million, $3.3 million and $3.6 million respectively. We have haircut our June quarter, FY'11, FY'12 and FY'13 Non-GAAP EPS estimates by $0.01 (due to shares issued in follow-on offering), $0.16 ($0.14 due to follow-on and $0.02 due to currency impact), $0.19 ($0.18 due to follow-on and $0.01 due to currency impact), and $0.22 ($0.19 due to follow-on and $0.03 due to currency impact), respectively.

    · Valuation. Our 12-month $25 price target implies a CY'11 EV/FCF multiple of 14x versus a 16x median multiple for the peer group (peer group includes 100% recurring revenue firms, thus the discount). This valuation implies a PEG ratio of 1.0x.

    · Risks. Bottomline faces economic risk, execution risk, integration risk and competitive threats that could cause our estimates to be incorrect and the value of EPAY shares to decline.

    THE EASIEST WAY TO OPEN A STOCK ACCOUNT

    I've been flooded with questions about the easiest way to open an easy-to-use stock account.

    I personally use Ameritrade and E*Trade. They were both created to be very easy to use for anyone. If you have the impression that buying and selling stocks is hard, these sites will prove your preconceived notions wrong.

    For the purposes of this group, I've negotiated a deal with Ameritrade.

    All you need to do is call 800-513-4221 and ask for David Lucas. He's my personal account rep at Ameritrade (great guy). He and one of his colleagues will set up the account for you over the phone. If you're opening a regular (non-retirement) account, be sure to request a "margin account". This will allow you to short stocks. FYI, retirement accounts are not eligible for shorting.

    They will list you as being associated with me, making you an "Elite" customer. This has definitive advantages. For example, you will only pay $8 commissions for trades you make on their web site, instead of $10. It adds up over time. In the spirit full disclosure, they will also be giving me a handful of free trades (not something I requested, but I wasn't about to turn the offer down!).

    _________________________________________________________________________________________________________

    EMPLOYEE STOCK PROGRAMS

    Following Friday's employee stock program discussion, I received this from one of the readers:

    I always heard the expression, "Beg, borrow or steal...but put as much as you can into such plans."

    I did...and built my house in NH from it.

    People might say that they don't put the stocks/certificate into their account until 5-7 days after the closing of the plan for that period. So yes, the stock could go down...but I used to short it to lock in the 15% + gain for six months work…it came out to 30%+ for the year.

    This is what I'm talking about. He built a HOUSE from the profits on this investment strategy. Awesome story, Pete. Does anyone still question if this is a good idea?

    Jun 18 8:02 PM | Link | Comment!
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