Seeking Alpha

jsIRA's  Instablog

jsIRA
Send Message
Lejun James Shao is the founder of www.myIRAs.net (http://www.myIRAs.net/), WhitePine Investment Inc of USA, and CEO of WhitePine Software Inc, Beijing, China. He was the top finisher in MSN's 1st US One Million Dollar Investment Contest, "Strategy Open Tournament," with a +45.88%... More
My company:
www.myIRAs.net
My blog:
jsTRA's Blog
  • 10 Stocks That Could Be Doubled In Value During January Rally - VRNG 8 comments
    Dec 16, 2012 12:38 PM | about stocks: VRNG

    2012 is about over. With less than three weeks left in 2012, the US stock market will almost certainly have another year of extraordinary run. Year to date, Nasdaq has risen an impressive 14.62% and S&P 500 has gained 12.80%.

    However a number of stocks are not so fortunate. Many suffered huge loses so far this year and are now getting hit even harder with tax-loss selling.

    Many of those beaten down stocks are likely to rebound substantially in January. And this is particularly true among small cap stocks. We call this phenomenon "January Effect" or "January Rally" and it occurs over most of the years.

    Now is a good time to identify the right stocks which may be poised for a big January rally.

    How to Play the January Rally?

    We need to have a good strategy to play the January rally in order to maximize the possible returns. A good strategy should tell us

    • How to select the right stocks;
    • When to buy; and
    • When to sell.

    As the title indicated, we want to identify stocks which may give us 100%+ returns during the upcoming January rally, but at the same time we want to keep the risks low.

    The stock we are looking for should meet the following criteria:

    • Has to be a small cap - current market cap < 1.5 billion.
    • Price has down at least 50% from year high.
    • Price < $10.
    • Has plenty of cash with no or very little debt.
    • Has story behind its possible rally in January.
    • Has good liquidity. Average daily volume > 500k. In most cases > 1 million.
    • Price gain may be sustainable.
    • High growth or potential high growth in 2013 and beyond.
    • History - last year's January performance. History may repeat.
    • Analysts' average one year price target is at least 100% higher than its current price.

    When to Buy

    We will buy the picks during the next three weeks and want to buy them at their strong support levels.

    When to Sell

    • We may sell it if a stock gained over 100% during January
    • We will put a trailing stop at 10% below its high once a stock gained over 30%.
    • If neither happens, sell it at the end of January.

    Now is our first pick

    Pick No. 1 - VRNG

    We select this stock as our number one pick because this stock is currently one of the most debated stocks among many investors and it also meets most of our selection criteria.

    • Market Cap: $247.1 million (pass).
    • Share Count: 80 million.
    • Cash: $50 million (pass).
    • Debt: $0 (pass).
    • Year high/low: $5.76/$0.68.
    • Current stock price: $3.06 (down -46.87% from its year high, fail, but not far away)
    • Average daily volume: 7.97 million (pass).
    • Its strong support level: $2.8 - $3.1 (pass). See chart below
    • Has a story behind its possible rally in January - yes. See below for explanation

    Stock closed at $3.06 as of this writing. This stock has been in $2.81 - $4.25 trading range most of times since April and now is at the bottom of its trading range.

    Stock has been quite weak. It lost about 27% in last 10 trading sessions due to the market's increasing confusions on the jury's verdict for the case.

    In jury's verdict, Vringo was awarded a total of $30.5 million for the past damage and a 3.5% running royalty.

    The $30.5 million past damage includes $15.8 million from Google and $14.7 million from other four defendants (AOL, GCI, IAC and Target).

    If $15.8 million is used as a reference for future damage calculation, the company may get roughly $15.8 million per year or $63.2 million total for the next four years from Google. The total award VRNG will get may be at around $94 million.

    Vringo is currently valued at a 1.7 x multiple of its expected cash level - $50 million cash plus $94 million possible damage payment.

    What could be the story on the company next month?

    First the main event - Judgment day may be in early January. We will hear Judge's final judgment. The stock price will be greatly affected by how much Judge will award to Vringo.

    If Judge corrects the "math error" made by jury's calculation on the past damage and bring the total past damage to $158 million from Google instead of $15.8 million, Vringo's stock price will immediately run up roughly by $1.25.

    If Judge keeps the past damage amount unchanged but awards a higher future damage payment, stock will go higher as well. For each additional $100 million award, we will add $0.80 to its current stock price.

    That is, if the total future award is $300 million more than market expectation, Vringo's stock price should go up around $2.4. With $400 million more, we should see a double on Vringo's stock price.

    Stock will be traded within its current trading range before Judge makes his final judgment.

    Our view: We believe that Judge will use 3.5% x 20.9% formula to calculate Vringo's future damage payment.

    The second event which may become the company's next main event: The progress on its patent infringement lawsuit filed against ZTE Corp in UK and Germany. If the lawsuit has significant development in favor of Vringo during January, stock will also be boosted.

    Risk: Stock may try to touch $2.81, the low of its 8 month trading range in coming days. The maximum pain will be $2.50. That is, we may see 20% down risk.

    Reward: The stock price could be doubled if Judge's final judgment is in favor of Vringo. That is, 100% up potential.

    That is, 20% down risk against 100% possible reward.

    Our buy price: We will use $3.06, its today's close price, as our buy price.

    ---------------------------------------------------------------------------------

    Additional Notes:

    After this writing, we sent our second and third picks to our current members last week. The remaining seven picks will be sent during the next two weeks.

    All the picks are carefully selected with low down risks and potential high returns.

    Our service currently contains "Core Portfolio", "$5K Portfolio" and "Short Term Play".

    Short Term Play is our new service. It has gained over +182.13% (non-compounded) or +537.55% (compounded) since its inception April 2012.

    "January Rally Portfolio" is our one-month Portfolio. We are currently building our positions now and the performance will be given by the end of January 2013.

    Can you afford $49.95?

    By Subscribing into our service (only $49.95 per month), we truly believe that you can make much more money than the Monthly service charge.

    Disclosure: I am long VRNG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: VRNG
Back To jsIRA's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (8)
Track new comments
  • stewarthunt
    , contributor
    Comments (60) | Send Message
     
    James - I like your conservative valuation calculations, but do you believe the street might also increase the mulitple along with more favorable rulings? Both in this goog case as well as the pending ZTE litigation?
    I use the history of VHC as analogous stock to add merit to the increase in VRNG multiple as judgements and cash roll in a favorable direction.
    11 Dec 2012, 02:15 PM Reply Like
  • jsIRA
    , contributor
    Comments (2437) | Send Message
     
    Author’s reply » VRNG is one of the stocks I believe will double its value before the end of next month.

     

    I am long on VRNG now.

     

    If Judge's final judgment is in favor of Vringo, its multiple will be up for sure.
    11 Dec 2012, 02:37 PM Reply Like
  • Johnismyname
    , contributor
    Comments (4) | Send Message
     
    This strategy seems to be contradictory to a comment you made in response to a December 7th article by EXPtrader where you wrote "need patience and prepare to hold three years." Can you explain? (I am a possible future subscriber.)
    12 Dec 2012, 03:50 AM Reply Like
  • jsIRA
    , contributor
    Comments (2437) | Send Message
     
    Author’s reply » We just created a new Portfolio called "January Rally Portfolio". The Portfolio only last 1 1/2 month. VRNG is the first one in the Portfolio.

     

    We also have "Core Portfolio" buy-and-hold type of stocks are in there VRNG is also one of them there. We will hold it long term
    12 Dec 2012, 09:03 AM Reply Like
  • havelostalot
    , contributor
    Comments (65) | Send Message
     
    James, what do you think about renn? It rallied quite a lot last January. It is now just above $3 which is its record low. Will you include it in the January Rally Portfolio?
    12 Dec 2012, 09:54 AM Reply Like
  • jsIRA
    , contributor
    Comments (2437) | Send Message
     
    Author’s reply » You are too late into party. We bought it at $3.06.

     

    Many here bet all the money into this one stock. That is a very bad habit. While VRNG is dead at the bottom, many have doubled in last two weeks.

     

    Best bet now: solar stocks, resource stocks, etc. That is why I give ten stocks for January. Some of them already move up a lot.

     

    Remember, there are still more than two weeks left in 2012. Many stocks may have good runs during Christmas rally, that is they will run up huge in the next two weeks.
    12 Dec 2012, 03:30 PM Reply Like
  • BGI_Los
    , contributor
    Comments (2) | Send Message
     
    Just sold DDD and made a decent profit when it hit 50.
    Ok...so where is Douglas W. House err white castle, who ever, the guy that does that cool thing where he makes the stock drop 5 points in one swift swoop. Would like to buy in again, but will wait on white House post.

     

    I mean no harm here folks, just creating some laughter for the holidays.

     

    I really do wish to buy in again, however.
    23 Dec 2012, 03:42 AM Reply Like
  • goodoboy
    , contributor
    Comments (117) | Send Message
     
    Thank you James for your efforts, I am just now reading.
    28 Dec 2012, 10:59 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

  • ICPT biggest winner. My Aug 16 $275 call option up 4,000% in one day.
    Aug 11, 2014
  • KNDI - 20.00 Strong Q2 and the future of TSLA in China.
    Aug 11, 2014
  • Looking for another stock with 100-baggers in biotech sector. JAZZ up 300-folder in 4 years. Now we are looking for another JAZZ.
    May 9, 2014
More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.