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Analyst and Fund Manager with almost 20 years investment experience. Coverage includes a variety of industries, with a focus on technology. Particularly focused on value stocks, poorly understood or under-followed situations, and contrarian perspectives. Primarily invest in special situations... More
  • DRAD Shares Should Go Higher With Red Oak Sales Near Completion 2 comments
    Nov 11, 2013 8:27 AM | about stocks: DRAD

    Anytime we buy a stock we ask ourselves, "what do we know that the market isn't factoring in?" After all, a stock trade is a two way transaction. Just as the buyer believes the stock will rise, the seller, in theory, believes the security being sold has attained full value.

    While we discuss our investing philosophy comprehensively in future articles, the thought process of, "why are we getting such a good deal on this stock?" sets a great backdrop for a quick update to our Alpha-Rich article on Digirad (NASDAQ:DRAD).

    Specifically, post blow-out earnings, reported on November 1st, we were surprised shares didn't go dramatically higher. On November 5th, an explanation became clear. According to a 13-D filed by Red Oak Fund, in the 3 days post earnings, they sold an astounding 535,160 shares, or 24.53% of the volume.

    Red Oak had been involved in a proxy contest with Digirad earlier in the year, and with a healthy profit, it was time to move on. Fortunately, for those interested in establishing a position in Digirad, Red Oak's sales have created what we believe is a very short-term ceiling on shares, and a wonderful entry point.

    Below is our calculation for how many shares Red Oak still owns, assuming they comprised 20-30% of trading volume from November 6-8.

    (click to enlarge)

    By our calculations, Red Oak still holds between 113,000 and 246,000 shares. Assuming trading volume remains strong, Red Oak should be fully out of the position, as soon as today. We anticipate a steady move higher for shares of Digirad once they are done.

    Disclosure: I am long DRAD.

    Stocks: DRAD
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  • Renmycat!
    , contributor
    Comments (938) | Send Message
    by your calcs, where do you see Red Oak now; trading volume remained strong over the last month, so would we assume they are completely out?
    are you still a holder after the general drift lower over the last few weeks, or do you feel the market is high and can get back into DRAd at a better point? thanks in advance, greg
    10 Dec 2013, 02:57 PM Reply Like
  • Valuable Insights
    , contributor
    Comments (478) | Send Message
    Author’s reply » Believe that Red Oak is long gone. Have no idea who has been selling.


    We have added under $3.70 and can't explain the recent price action. Happy to hold on to a 5%+ yielder. Plan to own this for at least a couple quarters, unless stock runs significantly (towards full value) much sooner.
    11 Dec 2013, 05:23 PM Reply Like
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