I hope everyone is having a good weekend. I haven't been super active on SA's free site this year, as I have been focused on Second Wind Capital. That said, I am still trying to share some ideas on the free site.
As I remain cautious about the broader market, and have been concerned since the last week of November 2020, I have adopted a hybrid strategy. I am long 3 to 7 investment ideas (sized 6% to 10%) and then I trade the rest of my capital. Currently, I have five core investment ideas and everything is more trading oriented. Trades are based on an actual catalyst, earnings event, or special event and I pay attention to technicals (for direction).
Enclosed below I share a good recap and the highlights of the trading week. And I recognize this was like catching lightning in a bottle and it won't happen again. At least it was fun to pitch a no hitter once in my career : )
Monday (March 22nd)
Buy Mechanical Technology, Inc. (OTCQB:MKTY) at $11.30 to $11.50 (bid/ ask spread).
Lo and behold, MKTY (OTCQB:MKTY) closed on Monday at $14.70 and briefly spiked to $18.90 on Tuesday morning.
Tuesday (March 23rd)
At 9:51 am, I mentioned Dolphin Entertainment (DLPN), on live chat, then trading at $12. This was a pixie dust/ magic bean type idea on the NFT fever. That said, I didn't feel comfortable recommending it in an 'at all alert' as the optics would be bad, as it was then already up 100% on the day.
Wednesday (March 24th)
I mentioned WISeKEY (WKEY) on Wednesday morning as my 'Pixie Dust/ Magic Bean' idea. I did send an 'at all' alert.
Also, on Wednesday, one of our readers mentioned Funko (FNKO), which I recommend, a week or two prior, at $15.50.
FNKO opens at $18.58 and spikes to $24.72 in a few hours.
Thursday (March 25th)
I got stopped out of two positions for 10% losses. The Russell 2K enters an intra-day correction and then bounces aggressively off the 2,100 level. The market starts to look a lot firmer and momentum builds during the afternoon.
On 'live chat', I mentioned that I was buying a modest 500 shares of DLPN, at $15.58, for a dead-cat bounce trade only. As far as I know, upwards of 5 to 10 readers joined me. The stock bounces hard (we got lucky) and we all sold it in the $18s.
Friday was all about ViacomCBS Inc. (VIAC).
If you were on 'Live Chat' on Friday afternoon, about 2pm, I got a little loose (I wasn't drinking but took some risk). I am hemmed and must adhere to a very strict risk management system. I can't have drawdowns and I need to be right 7 out of 10 times. In this system, when you are wrong, you have to kick out the idea for a 10% loss as you can't let a 10% loss spiral into a down 30% to 50% loss. Doubling down or tripling down on weakness is off limits and not how this system works.
Anyway, I was about to shutdown my computer for the week, and call it a good week, despite the big sell-off from Monday - Wednesday, notably in the Russell 2K. Then I just happened to notice that VIAC was scrolling across CNBC, down $20 points, at $45 per share. I sprung into action and checked for news.
The only thing that I saw was that Goldman was shopping a block of 30 million shares. I know Viacom had just priced its $2.7 billion secondary offering (the equity at $85, consisting of 20 million shares, and a convertible preferred that was a mandatory convertible in 2024).
Incidentally, the prior week, I had a spirited discussion with a reader that VIAC was an easy short at $89. He dared me to short it since I felt so strongly about it. I can't buy calls or buy puts in my main account (I can only sell covered calls and recently got access to sell covered puts). So in a small other account, I bought one VIAC $80 May 2021 Put on March 17th.
Lo and behold, VIAC ripped from the high $80s back to $100 in my face, so I took my medicine and loss on the put. I figured what would stop it from going to $120.
I have passionately been at this game for 20 years. I worked on the buy side for 5 years (on a bond trading desk/ fixed income research role, albeit as a junior member of the team) and have friends who had great careers on the buy side.
I would like to think I know a fat pitch when I see one.
At 2:12pm, I alerted the group via an 'at all' alert that I was buying up to a 5% sized stake in VIAC around $44.
I sensed that a big hedge fund was blowing up.
I started to get really, really excited. My spidey sense was tingling. I was playing the sequence of events in my mind. The stock was $96 on Tuesday and Mr. Market was offering it to us in the low $40s and there was no fundamental news and this isn't a Biotech stock that's only drug just failed its Phase II-b trials.
Again, VIAC priced a $1.7 billion secondary at $85, on Wednesday, and now Second Wind Capital members were loading our baskets from $41 to $44.
At my max sizing, intra-day, I was long 900 shares at 44.33 and sold 2 puts. I was at my 15% max sizing. I realized I was just over my limit and bought back the 2 puts and keep it at roughly 15% sizing (900 shares at $43.33).
If you go and look at the 'live chat' stream, I was fired up. It almost felt like being transported to one the world's most elite hedge fund trading desks and we got our fat pitch and the group was taking a shot. In my mind, my imagination said this stock rebounds to $48. It turns out it got over $49. Anyway, I ended up selling 400 shares between $47.90 and $49 and I sold 2 VIAC $45 3/26/21 calls for $2. Obviously, those 200 shares got called away this morning.
A lot of SWC members who happened to be logged in on Friday afternoon joined the party. The atmosphere was electric. We all collectively made some money. One member made $5k in VIAC call options in an hour.
If you are more trading oriented and looking for idea generation, you might want to try Second Wind Capital.
Happy Trading/ Speculating.
Analyst's Disclosure: I am/we are long VIAC.
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