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Trade Of The Day: Gravity Corp ($GRVY)

Gravity ($GRVY) is a Korean-based maker of computer games. Requiem was its biggest hit and the company is planning on releasing a sequel to that very soon. Anticipation of this offering is sending up the share price--+13% just today! According to a tantalizing article on Seeking Alpha, the company is trading under its $3.42 book value, has very little debt, and is in a high-margin business. The author makes a compelling case for further upside, targeting $3 as a conservative value and $5.00 as a normal value (compared with its industry peers). The company is also saying that it's planning on partnering with Facebook which can't hurt the bottom line.

With the stock trading around $2.70, the above targets make for a tempting short-term play. The open beta release of its new game is expected next week (Feb. 22) making this a good time target for all of you swing traders. Note that this is a play based partly on valuation projections and momentum thus making it more of a trade rather than a long-term investment and this is the way I'll be treating it. Note that the company does not pay a dividend nor are there any options. An appropriate stop/loss would be around yesterday's close near $2.40.

Disclosure: I took a long position in the stock today.

Disclosure: I am long GRVY.

Stocks: GRVY