November 2015 Portfolio Update

Time for a portfolio update! I’m pretty excited about this one. Why? Because I’m in the black, what’s why! My portfolio is finally making a profit! As I write this, well before the market opens on Thursday, November 05, 2015, I’m up $140. A small number, granted, and it may fade away if some of my favorite companies continue their downtrend. (So I can buy more) At one point I was down almost $600 smackers, so I can be happy in the moment.

First let’s talk about Constant Contact (NASDAQ: CTCT). On Monday the 2nd of November, 3 days ago, Endurance International Group Holdings, Inc. (NASDAQ: EIGI), announced that it had reached an agreement to buy Constant Contact for $32.00 a share. CTCT closed the Friday before at $26.10. So $32 bucks, how do I feel about that? There were rumblings from various law firms claiming that that wasn’t enough, and rumors that perhaps another company was going to bid more, but I don’t buy any of it. I’m out… same day as the announcement, for $31.80, thank you very much. I bought it for $23.21 in late July, and I’m more than happy with a 37% gain.

What I’m not so happy about is that my position is CTCT was so small; I’d only gotten one buy in, and hadn’t had the chance to average down into a fuller position. (a theme we may see repeated in this post.) But at least it’s not a problem to cry over. So of course I looked into Endurance International. Why wouldn’t I? I REALLY liked Constant Contact, was enjoying seeing their commercials from time to time, and had high hopes for the company. Maybe this Endurance International is something to look into. EIGI’s chart looks great, from my perspective. Of course the chart is the first thing I look at to get a handle on a company. The second thing I generally look at is the balance sheet. I looked at EIGI’s and simply closed the browser. No thanks. Moving on…

Now to the only poorly performing name in my portfolio: Chesapeake Energy (NYSE: CHK). They reported earnings yesterday, took a $5.4 billion write down on the value of their fields, and lost 5 cents a share, but that was better than expected loss, so that’s something. The company seems to be on track to cut capital spending and lower production, both good things in this commodity environment. The company is spending less money, and doing more with it. That said, I’m in this thing at $13.61, the average of 2 buy points. It’s now at $7.46, for a 45% loss. Ouch. Given its recent trading activity, the stock price MAY have stabilized. I have a buy order in at $5.75, because I still think things will get better long term, and I’d like to lower my average price. Doing so would take on considerably more risk, of course.

Daktronics Inc. (NASDAQ: DAKT) is slowly gaining back ground since it got hit on earnings in late August. I bought it at $10.10 a couple of months before said earnings, and at $8.30 after, for an average of 8.99. It’s worked its way back to $10.04, almost to where I bought it in the first place, so I’m up almost 12% on a fair sized position. I’m crossing my fingers for when they report again later this month. Other than my conviction that this is a well run company in a good industry, there’s not a lot of information out there between quarters due to its small size. We’ll see.

First Solar, Inc. (NASDAQ: FSLR), is another one where I wish I had more. I bought in early July for $45.50, and after the GREAT quarter they reported last week, it’s now at $58.66 for a gain of almost 29%. I have a dilemma with this position. I really like the company, I think it has a great future in a great industry, and Wall St seems to really be behind it after the great quarter. If I had a larger position, I think I’d be perfectly willing to stand pat and ride any short term weakness out, and take a longer term view. But with my measly little position, what should I do? It goes against my discipline to ‘average up’ into a current position, so I flat out refuse to do that. Here’s what I’m thinking: hope it rides the current exuberance to about $61, where I think it will hit some resistance/profit taking, then buy it back lower, but more aggressively. Say at around $56 and then $51, and then possibly 46? What could possibly go wrong? Well, a lot, of course. It could continue to shoot up without me, or my plan could go perfectly, until I aggressively buy a bunch in the 50’s and it keeps going down. Anyway, that’s the current plan, sell around $61 and see what happens. Why didn’t anyone tell me this was going to be hard?

Speaking of First Solar, I am exceptionally pleased with my position in 8point3 Energy Partners LP (NASDAQ: CAFD). I’m up about 9.5% on a fairly large (for me) position. I got two buy points in for an average of $12.80. It’s trading at $14.01 now, and it seems that people are starting to see the value here. This is a stable company with stable earnings that they are simply going to hand over to you. My yield on cost here should be about 6.5%, and it will surely grow when First Solar and SunPower Corporation (NASDAQ: SPWR) drop additional projects down to them. Now I’m not a dividend investor, but that’s hard to ignore, and it may be hard to give up when it comes time to sell after the price appreciation I’m expecting.

I’m up almost 9% on Mattel Inc. (NASDAQ: MAT), so there’s not much going on there. I’m willing to buy more on weakness, still believing in the turnaround story. The holidays are coming up, and Mattel has something to prove.

I bought PayPal Holdings, Inc. (NASDAQ: PYPL) in late September, for $32.25, and it’s now at $37.60, for a gain of about 16.5%. So here’s another dilemma. I only got one buy in, so my position is, again, small. I’d like it to go down into the mid 20’s, so I can average into a larger position. But then again, it’s kinda hard to WANT to see a 16.5% gain turn into a loss, even if my conviction is that it’s only temporary, and in the long run things will be even better with a larger position at an even better price. But I certainly don’t want to sell PayPal now, because I don’t have a strong a conviction that it WILL go anywhere near those levels. The only thing for me to do here is wait and see, and be happy/sad either way it moves. That sounds odd, but there it is.

Last week’s post was all about Ambarella Inc. (NASDAQ: AMBA). I said I would buy into weakness around the GoPro, Inc. (NASDAQ: GPRO) earnings call. Well, I got that weakness, down to $49.00, but I was trying to buy it closer to $47.00, so I didn’t get in. It’s now shot up to $57.02. Remember this is a stock with a 52 week high of nearly $130.00. So of course I’m hoping this one tanks again, because it’s against my discipline to chase a stock that’s ripping higher. That’s just not what I do. And if it DOES come down, and breaks that $49.00 support, I have a feeling it just might fall well below $47.00 anyway. This is a wait and see situation.

So this has been a week or two of wishing that my positions were larger. But the overall market has been doing very well too, so I’ll bet I’m not the only one. I’m still happy with my conservative approach and the cash in my account. I’m still testing these waters, and right now they feel warm and cozy.

As always, feel free to look at my portfolio and see how I’m doing. Usually I own or plan to own stock in many of the companies I write about. 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