Wilson Wang's  Instablog

Dear Investors,

Today was one for the history books. The Dow closed at an all time high of 15056.20, so where do investors stand? Is now the right time to buy stocks or is it time to take the money and run for the hills?

To be sure that everyone understands, the economy is slowly improving and we are starting to see the housing market recover; however, there's still a sense of pessimism around, and there's a lot a bear could argue that could deter a bull.

What I'm currently seeing in the market place is that a lot of institutional investors are significantly under weight equities, and retail investors aren't even in the scene. This makes the case that if this rally is an all out bull run, unfortunately, it isn't (or fortunately.) The euphoria hasn't settled in yet, but I'm beginning to see the dramatic shift.

In an article today released by the Wall Street Journal, the writer interviewed several retail/institutional investors, and the common answer was, "I think we might start over weighting the equity allocation." Well, the argument could have been made when I first started piling into BAC like no other at the end of 2011 when the world thought Europe was going to blow up.

But nonetheless, I'm not going to make any crazy market forecasts right now, but I'm starting to feel that price valuations might get a little out of hand in the next year or so. We have equities at FAIR value. The implied risk premium being assigned to equity fairly compensates the regular investor for the risk taken. There are still undervalued securities in hidden corners of the market places, but not glaringly so.

I wish the market was brimming with ideas, but I unfortunately can't find any as of right now. Some ideas in the pipeline requires the stock price to fall so that I have adequate margin of safety, but like I stated, it requires them to fall.

A market correction would probably be extremely healthy for the overall market place right now, but I'm no fortune teller, so I really don't know what's going to happen. But if euphoria gets out of hand, you can be sure of whose going to get out first.

Disclosure: I am long AIG, DTV.

Ever since March 25, 2013, Sandridge (SD) has been down almost every single day. Barron reported on that day that Tom Ward (CEO of SD) sold nearly 3.6 million shares of SD. That news also caused the stock to crash nearly 5% in one day.

(click to enlarge)

My theory:

I don't think the recent selling pressure has anything to do with the intrinsic value of the company. The mere fact that hedge funds took control should actually propel the stock to the 52 week high, but what's stopping it?

Simple, the hedge funds are actually shorting the stock so that Tom Ward doesn't get as much if he continues to sell. If we think about it from Tom's perspective, to lose control on a company that he founded is quite disgruntling for any human being, and this lack of power could propel any prominent man to sell their stake in the company.

If this theory holds true, then we can reasonably assume that Tom Ward is slowly liquidating all of his holding. The continued selling pressure will depress the stock price, and if he wishes to liquidate then it would be at a lower price.

I believe that once Tom is dismissed from SD, investors will see a reasonable rebound in share price. The reason is due to TPG-Axon's speedy restructuring process. They recently promoted a manager as the new COO, and reduced advertising expenses. They also sold off the private planes and lowered board compensation. All this within just the last month tells me TPG-Axon is moving as fast as they can. Once TPG cuts all the fat, the company would be leaner for an acquirer.

Disclosure: I am long SD.

Additional disclosure: I'm long SD through naked puts.

It's not surprising that everyone in the investment community is bashing Research in Motion (RIMM.) The company recently came out with an earnings report that beat analysts' expectations, and cash balances actually increased from 2.2 billion to 2.3 billion. This increase was primarily due to the reduction in accounts receivables, and the management team understands the importance of cash going into the crucial turnaround phase (BB 10.)

I understand that many of the skeptics are saying that BlackBerry won't stand a chance against the mighty Apple or Samsung. I fully agree that the lack of innovation from the last few years significantly hindered RIMM's abilities to innovate. The share price fell from 60 something in 2010 all the way down to $6.20 last week Monday. This dramatic price movement illustrated Mr. Markets distaste for Blackberry's, and I wouldn't disagree with the skeptics otherwise on these signals. However, I want to point out a few things that just might change your mind about RIMM.

With a 4.3 billion market cap, we have to take into consideration that buying a stock is buying a piece of the company. So when we actually purchased the stock, we have to remember to subtract the cash out of it. With nearly 2.3 billion in cash, the company is at 2 billion. Ask yourself this one simple question, would you be willing to pay 2 billion for a company that is still generating positive operating cash flow, have nearly 80 million subscribers in the world, own land and properties worth nearly 1.4 billion after depreciation and the BlackBerry Enterprise Solution system.

If your answer is no, then that's completely fine, because the company could still burn cash during the turnaround phase, but now ask yourself this question. At the current market cap, you are essentially paying 600 million for this company if we don't include any other assets on the book into this equation, so are the patents worth only 600 million? If stinky AOL can sell their patents for 1.1 billion, I don't see how the competitive landscape of the smartphone industry's patents won't fetch for more.

In the end, I am long RIMM, but I didn't buy the company for a turnaround story. I bought the company because it was so dirt cheap that it didn't make any sense anymore. While I do have to confess that I was fortunate enough to buy it below current assets - total liability, I am still convinced that RIMM's patent portfolio alone will fetch for more. Sometimes in investing, you don't have to find the next Apple, you just have to find a company so unwanted, so cheap that it makes absolute sense to buy it at that price. It's always about the margin of safety.

I hope you all enjoyed my short writing. Once again, I'm not praying or hoping for a turnaround (although if they do, that would be beyond fantastic.) I simply believe that the assets on its balance sheet is worth a lot more. Remember, cash, land and properties already pays for your investment. We aren't even counting in their patents, accounts receivables, inventory, and so much more. But I wish you all the best of luck in your ventures, and I hope you make lots of money!

Disclosure: I am long RIMM.