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Sumeet Vatsa's  Instablog

Sumeet Vatsa
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I have been investing for over four years and have gone through booms, busts and flat cycles of the market. Yep, decent experience in short duration. I am an avid student of market and analyze almost all of the trades that I make, especially the ones that go belly up. I have gone through the... More
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  • Four Growth Stories – SWKS, SWI, EQIX And SCSS


    Skyworks designs and manufactures several types of chips that enable wireless capabilities in cell phones and tablets. The company's circuits are used in the devices of Apple, HTC and Samsung. Long known as a Power Amplifier (PAs) manufacturer, the company now offers the full range of analog, radio-frequency (i.e., RF), and power management circuits between the handset transceiver and antenna. It has recently added power management circuits to its portfolio.

    SWKS reported solid fiscal third-quarter earnings and gave investors a bright fourth-quarter outlook.



    SolarWinds has been on a tear for the last year and a half; the company's second-quarter sales increased by 40% year over year to $64 million-the fifth straight quarter that SolarWinds' year-over-year sales growth has accelerated-and beat management's first-quarter guidance of $59.0 million-$60.2 million. SolarWinds' performance is particularly impressive because the company is focused on growing its operations in a tough European market.

    Break out buyers - $48 was break out point, but in this market just initiate a 50% position.

     EPS ChangeSales Change


    Equinix is the largest network-neutral provider of data centers in the world. Equinix's customers have the ability to plug into a host of network providers to speed up connections to content partners, financial exchanges, ad servers, and the like. As Internet traffic grows as a result of cloud computing, video streaming, and continued enterprise outsourcing of data centers, managing bandwidth and network connections becomes more complex.

    This company serves 4000 clients and routes almost 90% of world's internet traffic.

    Only concern I have is the slowing growth.


    Market generally doesn't like slowing growth specially for high multiples company.


    I have owned this company in the first quarter of the year and again started a position last week. No, I don't have a crystal ball, I bought it after the earnings. The company makes sleep number mattress and has been on a roll for over last 6 quarters.

    I have buy orders in place at $25.5.

    • Sales were up 27% YoY.
    • Same store sales were up 25% YoY, unchanged from the 25% for the same quarter last year.
    • The company was able to achieve an EPS of $0.3. This was 11% higher than the Street's estimate of $0.27.
    • The number of stores is being increased from 381 last year ending December 2011, to the 408-412 range at present.


     EPS ChangeSales Change

    For additional information please visit my blog.

    Disclosure: I am long SWKS, EQIX, SCSS.

    Jul 30 12:33 PM | Link | Comment!
  • Didn't I Tell You?

    Before we move forward -

    • First thing that I did on Sunday night after posting "Deja Vu!" is - I followed my instruction.
    • I sold 60% to 100% of my holdings in most stocks. The ones left untouched were - QCOM, STX and APA.
    • I will add some APA around $85 and some QCOM around $63.9
    • I even parted ways with some of AAPL and PCLN shares. I plan on adding some of these after they correct by 5%.
    • I sold a major portion of my most profitable stocks of the quarter such as AAPL, PCLN, SCSS, CLR, SXCI, HLF, GNC, ALLT, FFIV, F and RHT.
    • I will wait to see the action of top stocks before I add them. Top stocks that I will be eyeing -
      • SXCI
      • AAPL
      • PCLN
      • ULTA
      • TSCO
      • SCSS
      • TPX
      • HLF
      • GNC
      • KORS
      • LNKD
      • FFIV
      • CMI
      • RHT
      • PII
      • ALXN
      • UA
      • STX
      • WDC
      • URI
      • FOSL
    • I sold all the shares of LNKD (a minor portion), WLL (took a major hit), URI and FOSL (recently opened). Last two had gone under water prior to sale.
    • I bought TLT, BLV and RWM as mentioned on Monday morning. First thing in the morning ;)

    So this is where we stand today.

    (click to enlarge)

    • The market averages fell sharply as the Dow dropped for the fifth day in a row losing 214 points -1.65%. The S&P 500 lost -1.71% and the NASDAQ was down -1.83%.
    • Down volume swamped up volume on the NYSE by a 13 to 1 margin and by 12 to 1 on the NASDAQ. Declining stocks outnumbered advancing issues by a 5.6 to 1 margin on the NYSE and 4.6 to 1 on the NASDAQ.
    • Number of stocks above 50 DMA are on a decline.(click to enlarge)
    • Let's look at the sectors -

     Sector namePrice from 52 Week highPrice from 3 month high
    SPYMarket Index-4.22-4.22
    XLYConsumer Disc-4.12-4.12
    XLVHealth Care-2.99-2.99

    (click to enlarge)

    • The market is approaching oversold territory. Below is the graph of overbought vs oversold stocks.(click to enlarge)
    • The number of stocks declining to 52 week lows have started to exceed the number of stocks new 52 week highs.(click to enlarge)
    • Let's look at some of the declines encountered by the leading stocks.

    (click to enlarge)

    Read More at -

    Apr 10 7:59 PM | Link | Comment!
  • Deja Vu!

    Before we move forward let's review the market -

    If you look at the half-hourly chart of S & P 500 for last few weeks you will observe a lot of indecision. This can stem from a market that is awaiting a jobs report or the one that has rallied almost 25% since October bottom but bumping into some bad data or a market that is just waiting for earnings to come out. This is a typical sideways movement that needs just one or two catalysts to either jump up or break down.

    Till Friday morning, we were all hunky dory - raising toast to the best quarter since 1998.

    But by now, you guys must have heard, read and pondered about the jobs report that came out on Friday morning. Entire market was expecting creation of 205000 jobs with lowest estimate being 193K but to everyone's disappointment the number came in at 120000. This is exactly the catalyst that I mentioned above. Following is the S & P 500 futures -

    Going Forward -

    The question is where are we heading from here. Let's look at the slightly bigger picture -

    We will definitely get temporary support at 1375-1370. But that floor might not last long if Alcoa comes out with bad numbers on Tuesday after close. I personally expect the floor to crack on Monday itself. This market might turn into a sideways market or 5-7% correction if this is just one-off jobs miss and not a trend.

    The real correction will start if -

    1. We get more of such job reports.
    2. The companies fail to meet Q1 numbers.
    3. Manufacturing margins start contracting.
    4. The inventories start piling up.
    5. Europe's problem resurfaces.
    6. Israel goes after Iran.

    All these events individually have the capability of turning a flat market in to an intermediate/full blown correction. A correction that can go beyond 12-15% - That's spooky.

    In terms of technicals if we fail to hold on to 1336, we are looking at lower lows and lower highs. This means that we are in correction. The breakouts will fail, the industrial sector & commodities will sink and we will stare at repeat of 2011.

    Deja Vu!

    There is a stark resemblance between job numbers & rally at the beginning of 2011 and the similar macro economic data points in 2012. All of them fizzled out, making 2011 one of the worst trading year in last 20 years. In case 2012 tries to follow the suit of 2011, I suggest that please sit on the sidelines unless you are nimble (like really really nimble) or you are willing to take 15-20% loss or you want to buy stocks such as QCOM,APA, EMC, etc for long-term. The top traders have always said that it's good to sit out when market goes sideways and hop in when the direction is confirmed.

    This is the kind of summer where I would use the old adage -"Sell in Summer and go away".

    Question is why side ways and why not a full fledged correction?

    Never underestimate the Printing Press. One off job report might not bring back QE3 from dead but few of such reports will definitely get Feds going.

    Lastly what do we do with current portfolio?

    As not all fingers are of same size different kinds of stock in a portfolio deserve different treatment.

    1. Such reduce all the momo stocks such as LULU, ALLT, SCSS, TPX, HLF, ULTA, CLR, ALXN, etc to 1/3 of original position. A risk averse investor might sell all. The reason is the panic grips the owners of such stocks with higher multiples faster than does the rest of the market. Just a reminder, small cap stocks corrects more than larger cap stocks during a correction.
    2. Stick with oldies such as HAL, APA, STX, WDC, PG, COV,etc unless the fundamentals show a major shift such as margins contraction trend,etc. Some of them have already seen fair share of correction.
    3. To defend your portfolio you can buy long term US treasury bonds such as BLV, TLT, etc. They tend to be haven during such corrections.
    4. A very active trader might try putting in shorts such as SH, HDGE, RWM, etc.
    5. Keep an eye on the leaders of this bull and see how they perform during the correction. By leaders I mean - AAPL, ISRG, CMG, SCSS, ULTA, LULU, TSCO, FFIV, etc.
    6. Start running scans to look for stocks with excellent fundamentals that are holding up well. They might be the future leaders.
    7. Lastly add to your existing value positions or buy new ones (after fishing for course) after market has gone corrected by 10%. But remember an oversold market can become more oversold!
    8. Again, In case 2012 tries to follow the suit of 2011, I would suggest that please sit on the sidelines unless you are nimble (like really really nimble) or you are willing to take 15-20% loss or you want to buy stocks such as QCOM,APA, EMC, etc for long-term.

    I believe that capital preserved is the capital created for future investment opportunities.

    If you are really, really lost, I will talk more about correction, handling of stocks during corrections and going short later on in the week.

    Apr 09 12:04 PM | Link | Comment!
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