August 2015 Portfolio Update #2

Given the recent volatility in the market, and the fact that I haven’t posted anything in almost 2 weeks, (been busy at the bar, no joke) I’ve decided to write a second August portfolio update. And what an interesting couple of weeks it’s been, especially the last few trading days. The DOW dropping over a thousand points, rebounding, subsequent drops… it’s been wild. So what’s changed with me and my portfolio?

Well, three of my positions have been relatively unaffected. First Solar, Inc. (NASDAQ: FSLR) has bounced around a little, but not enough to hit my lower, second buy point at $37.40. I’m considering raising it closer to $40, but with the current volatility, perhaps I should leave it alone. Maybe I’ll up it a buck, maybe not.

Constant Contact (NASDAQ: CTCT) and Mattel Inc. (NASDAQ: MAT) haven’t seemed to move around too much, which I see as a good sign for them, though I still would like to see lower prices so I can snap up some more shares. I’m a patient person. I read an awful lot about Mattel having to cut its dividend if things don’t turn around. Maybe fear over that will give me an opportunity to get some shares on the cheap.

Now for what’s a little more interesting. Chesapeake Energy (NYSE: CHK), interesting and painful. So my average price is $13.61 for 59 shares. Last update I told you of my buy order for $6.25. Well, I lowered that to $5.75 the day before yesterday, JUST before the $6.25 order would have been filled. It never got to my lower order, and is now about $6.80. I’d love to tell you that my decision to lower the limit order was based on something other than fear, but I’ll cop to it. I was afraid to own more of this company. CHK is the first company I bought, back in April, and I didn’t think there was much chance of it going bankrupt. Now a lot of people are ready to sign the company’s death warrant. If oil and natural gas prices don’t rebound for a long time, it’s a possibility.

While I have absolutely no plans for selling what CHK I have, I’m cautious about buying more. If the price continues to go down, I believe I’ll make one more purchase to lower my average cost, but I don’t see myself buying in four times, like I’d be willing to do in a more stable company.

Daktronics Inc. (NASDAQ: DAKT) is another interesting point in my portfolio. The company reported earnings of 9 cents a couple of days ago, missing the analyst estimate of 14 cents. That’s a pretty large miss, percent wise, and of course in this market the stock got hammered. In the conference call they talked about some of their customers being cautious in this economy, but their bookings are still strong. It seemed like some of their missed revenue came from working around their customer’s schedule, that sort of thing. I bought in at $10.10 in early June, and yesterday at $8.30, for an average price of $8.99. It’s at $8.50 as I write this. I’ll have come within 12 cents of ‘calling the bottom’ in this if it doesn’t go back down. (Surely 24 hours later it’s safe to pat myself on the back for that one. Right? Right?)

Anyway, I have one more buy slated for DAKT should it come down more. (Only three maximum buys here, because the company is so small.) Still deciding at what price to put the limit order. The 5 year low is at $6.32, so part of me wants to put it just under $7. But then again with the way things are moving in this market lately, maybe just hold off and see what happens. I really like the prospects for this company, so I’m glad to get the lower price I got yesterday.

What’s on the horizon? What am I looking at for the future? I have limit orders in for two companies that I don’t currently own. 8point3 Energy Partners (NASDAQ: CAFD) at $13.25, and PayPal Holdings, Inc. (NASDAQ: PYPL) at $28.25. I mentioned 8point3 in my write-up of First Solar. I might do a write-up of PayPal soon.

So while I’m down about $440, I think I can handle some more pain if it comes my way. In fact, I’m sure of it.

As always, feel free to look at my portfolio and see how I’m doing. And please READ MY DISCLAMER. Make your own decisions, do your own research, and never rely on any single source for information. I am not a financial professional; do not rely on me as such.
Thank you,
Michael, the Stock Picking Bartender

Can DreamWorks Animation Wake Up and Smell the Profit?

Cutesy title, but an honest question. DreamWorks Animation SKG, Inc. (NASDAQ: DWA) is the studio behind familiar animated titles such as Shrek, Kung Fu Panda, How to Train Your Dragon, Madagascar, and most recently, Home. Those are some household names right there, especially for those of us with kids. Ok, I don’t have kids, but I watch animated films for investment purposes.

Take a look at their website, how many movies do you recognize?

DreamWorks Animation

Unfortunately for DreamWorks, many of their films aren’t really household names. Several recent movies have disappointed shareholders. Early this year DreamWorks cut its workforce, stating that it would focus on making two films a year instead of three. Quality over quantity sounds great, but if a movie bombs, then it could potentially hurt the company more so than in the past. Kung Fu Panda 3 comes out in January, and a lot of the company’s hopes seem pinned on this being a success. 1 and 2 were certainly hits, and this investor is looking forward to 3. (For investment purposes, of course)

So the movie segment seems a bit iffy, right, so what does this company have going for it? Diversification of income is a big part of the story here. One branch of this story is their TV segment. DreamWorks has partnered with Netflix (NASDAQ: NFLX) to create original content for the streaming giant. According to the DreamWorks website, that consists of 12 original series from 2013 to 2017. These shows are popular, hinting that the partnership could continue well past 2017. Netflix has been pretty aggressive lately in acquiring original content, and children are huge consumers of entertainment.

Another part of the TV segment is AwesomnessTV, a popular teen network on YouTube. Dreamworks acquired AwesomnessTV in 2013. ATV is currently creating content for Verizon Communications’ (NYSE: VZ) Go90 mobile video service. The TV segment appears very strong at DreamWorks. Revenue for this segment more than doubled, year over year, to 55 million in Q2.

Consumer products (toys), however, were not so hot. In the Q2 conference call last week, there was a lot of talk about how disappointing this segment was. The company said that it would probably not meet previous year end guidance for this segment. A lot of the blame seemed to be placed on merchandise based on ‘non-feature’ content. So, maybe toys based on the Netflix originals aren’t so hot? Also FX pressures didn’t help the picture either.

Live entertainment is another area of diversification the company is pursuing. Royal Caribbean Cruises, Ltd (NYSE: RCL) offer The DreamWorks Experience on select ships, offering live shows, character meet and greet, etc… There are even theme park attractions such as DreamWorld Australia, and rides at Universal Studios Singapore.

The company seems to have a lot of fires burning, but pretty much everything comes down to creating popular movies that will attract moviegoers, sell DVD’s and digital downloads, move toys off of shelves, and bring people in to see live entertainment based on said movies. So while this diversification is great, pretty much everything hinges on pounding out popular movies, year, after year, after year. These ancillary businesses should be poised to make big bucks for the company if the hits keep coming, but if not…

So what’s a cartoon loving investor to do? The stock has been hit HARD the past year and a half, coming off a high of $36.01 to where it’s currently trading, around $19.50. The company lost 45 cents a share in Q2, hammering the stock down to current levels, near its 52-week low of $18.16. The ‘good’ news is that the company expects 2015 to be a breakeven year, or perhaps slightly better, if we ignore the costs of the recent restructuring. So, what to do?

Personally, I’m going to hold off on DreamWorks at these levels, but I’m keeping an eye on the company. I believe that a few hit movies and a couple of good quarters would send this stock skyrocketing, but I feel like the risk is a bit too much to buy in around $20. The 5 year low (all time low, actually) is around $16. I’d feel better getting in closer to $16 than $20. A few bad weeks in the market just might get me there.

As always, feel free to look at my portfolio and see how I’m doing. And please READ MY DISCLAIMER. Make your own decisions, do your own research, and never rely on any single source for information. I am not a financial professional; do not rely on me as such.

Thank you,
Michael, the Stock Picking Bartender

August 2015 Update, Just Getting Started

It’s been almost a month since I started this blog, and I’m happy with the views I’m getting and the interaction from my fellow investors. I figure it’s about time I went over how I’m feeling about my investing results. Of course everyone can see my portfolio, usually updated daily, but I’ll go over each position so you can get inside my head a bit. I’ve already written a much more detailed analysis of each company mentioned below, feel free to look them up.

I’ll start with the big red elephant in the room: Chesapeake Energy (NYSE: CHK). I’m writing this just after listening to their Q2 conference call, on Wednesday, August 5th. The call didn’t really give me much new information to work with. The company is lowering costs, increasing efficiency, etc… They’re trying to improve their balance sheet, and might sell some assets to do so, but reiterated that they won’t have to dilute shareholders to keep afloat. There was some positive talk about a new pipeline coming online in November that will allow gas from their Utica interests to be sold for better prices in the gulf coast, for export. A few weeks ago the company cut the dividend as well. I see that as a positive. I didn’t buy the stock for the dividend it provided.

The basic story here is the same: can the company survive this low commodity price environment? I still think they can. When prices improve, Chesapeake should be very well positioned to take advantage of it. I have 2 buy points in this company, at $15.17 and $12.30. I have a limit order in at $6.25. With the price currently at $7.03 and falling like a rock, all indications are that my order will be filled and I’ll soon have an average price of about $9.50. I was well aware that this was something I’d be holding awhile to see returns on. With hindsight of course I wish I’d waited before jumping in, but I’m comfortable with my position.

I’m happy with my position in Daktronics Inc. (NASDAQ: DAKT). It’s up about 14% on my small initial buy. I had no near term catalyst for this to rocket up (not that it has), and planned to simply accumulate some shares of a great company in a growth industry. Nothing has changed; if it goes significantly lower than where I bought it, I’ll pick up some more. My limit order is for $8.30, but that’s probably wishful thinking.

First Solar, Inc. (NASDAQ: FSLR) reported earnings this week, and things seem great at this company. They earned 93 cents a share, while the analysts were expecting 36 cents. This position is up about 14% as well. Great bookings out to the end of 2016, improving technology, improving cash position, just about everything I wanted to hear. And it seems that their position in 8point3 Energy Partners (NASDAQ: CAFD) is going to be very beneficial to them. I REALLY like this company. I bought in at $45.50, and it’s now at $51.92. If it runs up to around $60 on the back of this great quarter I might consider selling, then hope for a pullback to get in again. I wish I’d bought more, but it didn’t come down to my second buy point. Hopes and wishes, perhaps not the most effective concepts in investing, but I’m sitting pretty on this one!

I bought Constant Contact (NASDAQ: CTCT) and Mattel Inc. (NASDAQ: MAT) very recently, and they haven’t done much. Ok, Constant Contact is up 10%, and that’s great, but it’s probably going to be pretty volatile, so that doesn’t really mean much. Mattel is essentially unchanged. I have orders in to buy both at lower prices and would be happy to get them.

I’d like to take a moment to talk about some of the responses I’ve gotten to this blog. I’ve connected with a few like-minded investors, many through StockTwits.com (http://stocktwits.com/StockPickingBartender), some through a few other places, and I love discussing all this with them. I personally know very few people who I can talk about investing with. “You have a blog about the stock market? Ya, ok, I’ll look it up. Hey did you see that pitch/catch/hit/goal/whatever?” Always feel free to comment or message me, I love it.

A few people have asked me: why bother? Why bother writing up a detailed analysis of a company if you’re only investing $375 in it? Or even if you follow your plan and buy in 4 times, you’ll have less than $2000 bucks in the company. What’s the point?

I understand the question, really. Say I invest a thousand bucks in a company and it doubles, or maybe it goes bankrupt. Either way, I only gain or lose $1000. Chump change right? Well, not exactly, but certainly not life changing. When I’m 80 I won’t look back on it and think that thousand dollars had any real impact on anything. So WHY bother?

Because while I’m starting small, I don’t feel as though the amount invested should have any impact on the process. I’ll still need to do the work involved in buying, owning, and selling a position, no matter the size. I feel fine making these small investments while keeping the majority of my trading account in cash. I happen to LOVE cash, and I’ll keep adding more to my account. Eventually I’ll be at the point where my initial buy will be $2000 instead of $375. It might take awhile, but I think I’ll be happy to have had the experience of smaller investments to build upon.

And as far as writing a detailed analysis for anyone to read… I love to write, and it helps me think about what I’m doing. Not only am I showing others what I do and how I do it (good or bad), but it’s like opening the process up to myself. It’s a Zen, flower power, ‘pass the dutchie ‘pon the left hand side’ kind of thing. Thanks for reading, and good luck out there.

As always, feel free to look at my portfolio and see how I’m doing. And please READ MY DISCLAIMER. Make your own decisions, do your own research, and never rely on any single source for information. I am not a financial professional; do not rely on me as such.

Thank you,

Michael, the Stock Picking Bartender