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Mark Gomes
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With over 20 years of professional experience, Mark Gomes has grown to become one of the world's most experienced technology stock analysts. He is also a Masters Track & Field world record holder and U.S. Gold medalist (http://www.fasterthanforty.com/hello-world/). Currently, Mr. Gomes is... More
My company:
PTT Research & Pipeline Data, LLC
My blog:
Poised To Triple
My book:
Faster Than Forty
  • Poised To Triple Update 6 comments
    Aug 17, 2013 8:59 PM | about stocks: ATTU, FB, HIMX, LGF, PXLW, QADA, STX, TPCS

    In this update, we'll fill you in on the recent performance of our portfolio. Almost all of our picks have been doing incredibly well. We'll also analyze the news on one of our picks that isn't doing as well as the rest.

    Starting with the good news, it has been a banner summer for Poised To Triple. After delivering 34% returns with our spring picks, the attention turned to our Core Portfolio. Fruitfully, that basket has jumped 18% since our last update, raising our total return to 97%.

     

     

    CORE PORTFOLIO

            

    Company

    Ticker

    Date

    Initial Price

    Peak Price

    Peak Return

     

    Current Price

    Current Return

    Current Classification

    Seagate

    STX

    11/11/2011

    17.94

    47.83

    167%

     

    39.20

    119%

    Gold Mine

    Lions Gate

    LGF

    3/20/2012

    12.14

    35.04

    189%

     

    33.68

    177%

    Gold Mine

    Attunity

    ATTU

    4/27/2012

    3.36

    8.29

    147%

     

    6.89

    105%

    Wait Time

    Facebook

    FB

    10/29/2012

    18.06

    39.32

    118%

     

    37.08

    105%

    Gold Mine

    Himax

    HIMX

    3/4/2013

    3.44

    8.19

    138%

     

    6.08

    77%

    Gold Mine

    QAD

    QADA

    3/24/2013

    11.73

    14.24

    21%

     

    11.85

    1%

    Value Stock

    Averages

        

    130%

      

    97%

     

    Our Speculative Portfolio has provided more excitement (each of our two selections peaked with 60%+ returns), but has since settled back (5%, with an average holding period of just under 2 months) for reasons we will discuss.

     

     

    SPECULATIVE PORTFOLIO

           

    Company

    Ticker

    Date

    Initial Price

    Peak Price

    Peak ROI

     

    Current Price

    Current Return

    Current Classification

    PixelWorks

    PXLW

    6/3/2013

    3.24

    5.30

    64%

     

    3.93

    21%

    Speculative

    TechPrecision

    TPCSE

    7/11/2013

    0.40

    0.65

    63%

     

    0.36

    -11%

    Speculative

              

    Averages

        

    63%

      

    5%

     

    As a reminder, we label a company "speculative" if it has yet to fully-establish itself (in our view). As always, we urge investors to read and heed our methodology section to gain an understanding of how to approach speculative picks. In short, the rule of thumb is to invest 10% of your portfolio into a basket of speculative picks (in other words, invest about 1/10th of what you would in an established company).

    Our Methodology section also discussed the importance of keeping an eye on a stock's risk and reward. If a stock rises fast (as most of ours have this summer!), they are usually bound to take a rest (pull back a bit). Accordingly, it is usually best to take some profits off the table and wait for the next opportunity to make some more money…in other words, buy low / sell high.

    Indeed, the entire stock market has pulled back in recent weeks. Those who have been taking profits are now sitting on lots of cash. Soon, that cash can be used to buy some of the stocks that are now going on sale.

    Legally, I cannot advise you on exactly what to do, but I practice what I preach. Reading my Methodology section only takes a few minutes, but will arm you with the knowledge I have used to make millions. Also, we will soon roll out new services that will give you more direct insight into when to buy and sell.

    Now, on to the bad news…

    ___________________________________

    On July 11, we added TechPrecision (TPCSE) to the Poised To Triple Speculative Portfolio. This is a specialized manufacturing company with many unique capabilities. This has attracted many customers and upcoming opportunities.

    However, as we stated in our initial piece, "the company got ahead of itself" and required "a few months of breathing room (from its creditors) to ramp its projects up". We believed (and still do) that if the company escapes the risks to its status as a going concern (a.k.a. bankruptcy), the profitability of its new projects should enable the company to stand on its own, start growing, and start paying down its debt.

    The company had a book value of over $10 million, so we reasoned that TPCS's bank simply needed to understand the near-term nature of its situation.

    Unfortunately, some new filings with the SEC show that things have not worked out for them so far. The first filing (an NT 10-Q) revealed that its bank "has not agreed to waive the non-compliance". As a result, the bank has the right to ask for full repayment of the debt upon 60 days of written notice. To this point, the bank not chosen to do so, but its refusal to waive the non-compliance increases the odds of a negative outcome (and obviously decreased the odds of a positive one). We'll discuss our revised odds at the end of this article.

    The second filing was a 10-K. This is also known as an annual report. We highly advise an investor to read the 10-Ks for any and every company they are invested in. They're a great source of insight into the business.

    By dissecting and analyzing the contents of TPCSE's 10-K, we believe the company will report disappointing Q4 results on Monday. Specifically, the Wall Street estimate calls for $11.6 million in revenue. The actual number will be closer to $10 million, with a net loss of $1.1 million. Making matters worse, the NT-10-Q stated that Q1 will result in a further loss of $0.8 million.

    We believe there is a silver lining here. First, the company generated $1.1 million in cash flow from operations in Q4 and $1.8 million for the year. This was only partial offset by capital expenditures of $268K and $395K, respectively. On the surface, the balance sheet doesn't resemble that of a near-bankrupt company. Even with the non-compliant long-term loan reclassified as a current liability, its current ratio remains well above 1. Further, the company disclosed that its backlog was $19.2 million as of the end of July, up from $16.4 million at the end of March.

    From a business standpoint, we have witnessed signs in the marketplace that the solar market is on the mend. More importantly, TPCSE's largest customer, Mevion received $55 million in funding to accelerate the deployment of its red hot S-250 proton beam cancer therapy device. TPCSE is the manufacturer of the S-250 and therefore an important part of Mevion's growth plans. This was evident in the 10-K, from which we calculated that Mevion represented $2.7 million in Q4 revenue for TPCSE. This was a nice jump from the $4.95 million it represented during the first 9 months of the year.

    To us, this may be the most critical part of TPCSE's business. Earlier this year, Mevion awarded a 5-year, $115 million contract to Techprecision to be the exclusive manufacturer of the S-250. To the best of our knowledge, as long as Techprecision remains a going concern (not bankrupt), it holds a very lucrative and long-term deal with one of the world's hottest private medical-equipment vendors.

    But that may not be enough. Accordingly, if we were running Mevion, we would strongly consider bailing TPCSE out (while simultaneously seeking another manufacturing partner, in the event that TPCSE fails to continue as a going concern). Fiscal Q1 (June) reportedly resulted in a net loss of $0.8 million, dropping its book value below $10 million for the first time in recent memory. Also, its revolving credit line was non-renewed, forcing the company to repay the outstanding balance. Investors should also consider that $0.5 million of its cash is locked up in China, where it may not be able to be repatriated to assist in the company's current dilemma.

    THE BOTTOM LINE: Netting out the good news and the bad, we strongly believe that TPCSE's situation has worsened since our last update. The bank's refusal to waive the company's non-compliance puts it at a higher risk of going under. To alleviate the current situation, the company likely needs to raise money very soon.

    The most likely way for this to happen may be to sell shares of stock, which would dilute its existing shareholders. Thus, even if TPCSE successfully avoids bankruptcy, the stock's potential will have been greatly impaired.

    To update our odds of success and failure, we now believe that the odds of bankruptcy have increased from 10% to 20%. The odds of a dilutive event (raising cash via a stock offering) is 20%The odds of becoming a ten-bagger have decreased from 10% to 1% (but has a more tangible chance of becoming a five-bagger). The remaining % represents a number of scenarios in which the company remedies its loan non-compliance and remains in business.

    ___________________________________

    Overall, we would love to experience this year's combination of wins and losses. Most all of our calls have been winners…and our losers have consisted of unofficial picks (like Blackberry) and TPCSE. Consistent with our Methodology, TPCSE (a Speculative pick) should only represent 1% of an investor's portfolio. Thus, even if it goes bust, it will only knock 1% off of this year's sizable returns. I will personally be glued to Monday's 2:00 call to determine if our odds require further revision.

    Looking ahead to the rest of the year, there are reasons to feel cautious about the stock market. To mitigate these concerns, I have increased the amount of cash I hold. I also purchased shares of TWM, which goes UP when the stock market goes DOWN (and vice versa). At present, I own $1 worth of TWM for every $10 of stock I own. I have also placed similarly-sized bets against Oracle (ORCL) and Angie's List (ANGI).

    If the market continues to fall, I'm very confident that I will make money on TWM and my bets against ORCL and ANGI. That knowledge makes me feel very comfortable with holding each of the stocks in our Poised To Triple portfolios.

    Since many of you have asked, my "favorite" at current levels is ATTU, but I continue to like them all (with the possible exception of TPCSE -- more on that after they report Q4 results).

    Stay tuned for more!

    Stocks: ATTU, FB, HIMX, LGF, PXLW, QADA, STX, TPCS
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Comments (6)
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  • djejr1
    , contributor
    Comments (16) | Send Message
     
    What are your short positions in ANGI? I lost some money recently on November 13 $20 puts.
    18 Aug 2013, 07:21 AM Reply Like
  • Mark Gomes
    , contributor
    Comments (1674) | Send Message
     
    Author’s reply » I simply shorted shares of $ANGI. I prefer writing (shorting) options over buying them. $DATA calls were a recent exception.

     

    Stay tuned. We're working on tutorials and more for PoisedToTriple.com !
    18 Aug 2013, 10:34 AM Reply Like
  • tampat
    , contributor
    Comments (993) | Send Message
     
    "At present, I own $1 worth of TWM for every $10 of stock I own. "

     

    Mark,

     

    At what point do you decide to get out of TWM and can you outline the criteria you use to make that decision?

     

    Thanks for the articles.
    18 Aug 2013, 02:03 PM Reply Like
  • Mark Gomes
    , contributor
    Comments (1674) | Send Message
     
    Author’s reply » Tampat,

     

    To be honest, it's hard for me to say. My expertise is focused on picking individual stocks that possess superior risk/reward ratios. With the exception of major inflection points (the Internet bubble and the real-estate bubble), market timing is not a strength for me at all.

     

    In this particular case, I saw most of my stocks reach the top-end of their Risk/Reward charts (see the Methodology section of PoisedToTriple.com for more on this), which told me to take some profits on those stocks. It also gave me a gut feeling the entire market might be due for a breather.

     

    All I can tell you is this -- if you're nervous that the market might decline in the near-term, shorting stocks (or an ETF like SPY) or buying reverse ETFs like TWM is a decent way to protect gains on your long positions (the stocks you own). As a portfolio, my picks have an outstanding track record of success, so even if you always had protection, you would reap solid gains.

     

    Beyond that, we're in the process of evaluating market-timing experts who have a track record for success in this regard. If we find a worth candidate, we'll add this as a PoisedToTriple service.

     

    Hope that helps (a little).

     

    Kindest Regards,

     

    Mark G.
    18 Aug 2013, 02:27 PM Reply Like
  • Mark Gomes
    , contributor
    Comments (1674) | Send Message
     
    Author’s reply » We've also published a comprehensive review of all of our portfolios, along with up-to-date performance stats! http://seekingalpha.co...
    18 Aug 2013, 06:05 PM Reply Like
  • Mark Gomes
    , contributor
    Comments (1674) | Send Message
     
    Author’s reply » This document was edited on Aug 22 to show HIMX's correct classification as a "Gold Mine". Our classification system is described in depth here: http://seekingalpha.co...
    22 Aug 2013, 03:10 PM Reply Like
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