February Portfolio Update!

First off, a slight change to the blog. My PORTFOLIO section now includes trading costs. The cost of buying the stock, and the future cost of selling the position is included in the gain/loss. So if the share price is exactly the same as where I bought it, it will reflect a loss from the buy transaction AND the future sale transaction. I’m trying to make it as hard on myself as possible. I want any gains that show up to be REAL gains that I would actually have if I sold the position at the current price. The chart showing my performance vs. ‘Mr. Market’ has been updated to reflect the inclusion of trading costs. Now, on to the positions.

So let’s talk about Chesapeake Energy (NYSE: CHK). They reported earnings yesterday, February 24th. They lost 16 cents a share, slightly better than the 18 cent loss wall street was expecting. The ‘good’ news is that they’ve sold a lot more assets than anyone thought they would, $700 million so far this year. They will be able to pay the $500 million in bonds coming due very soon, and they’re buying back some of their debt at discounted prices. That said, they only have about $300 million in cash at the moment. But with the current asset sales, and the $500 million to $1 billion they expect to sell later this year, they are, apparently, not in danger of going under anytime soon. (YAY!) Investors (and probably short coverers) saw this quarter as positive, sending the stock up almost 23% at the end of the day, to $2.69. Keep in mind that my average cost here is $8.38, so I’m in no mood to party over it just yet. I’m certainly not selling here.

My other disappointment is much more minor. Daktronics (NASDAQ: DAKT) reported earnings a couple of days ago. In my January portfolio update I said that I didn’t have much confidence left in DAKT, which was trading around $7.50 at the time. I thought that the analyst estimates for the coming quarter were low, and maybe I could get out of the position on some strength after the numbers were released. The analysts were expecting a profit of 2 cents a share, but the company reported a LOSS of 4 cents a share.

Before the quarter, DAKT had traded up to a little over $8.50, and I knew I should get out. But in this game, ‘knowing’ something and not acting on it doesn’t matter, not unless you learn something from the experience. DAKT is currently trading at just over $7. I have a limit order to get out at $7.75, if it can claw its way up. Should that happen and I don’t change my order, I’ll lose about 15% on the position. The 5.6% dividend is the only thing keeping this thing from tanking. The dividend is nice, but I don’t see this company growing profits, and I’m tired of hearing about the poor quarterly timing of revenues. 4 quarters make a year; you’d think that any timing issues would even out and produce some good news somewhere? Apparently not with this company.

I’d like to use Daktronics to illustrate a broader dilemma I have. I consider myself a very risk tolerant person. I buy stocks in pieces as they are going down, creating ‘value’, in the expectation that they will one day move back up. Of course this creates loss and pain initially. Having this as my primary strategy, it would be disastrous to be the kind of person to be ‘scared’ out of a position simply because it’s going down. Lower prices should signal ‘yay, I can get more’, not ‘holy crap, sell sell sell!’ Having said that, some stocks just turn out to be losers, and there’s no benefit to keeping them on the books forever.

I think a major key to my future success is going to be balancing the need to get rid of losers vs. the need to keep companies of value and give them a chance to run. I don’t feel as though I’m panicking out of DAKT at any price; I feel more like I’ve simply lost faith in the company and want to sell it into some strength. Perhaps another lesson learned here is to be more cautious with companies that almost no one talks about. Small companies are fine, and I have several on my radar, but other than the quarterly calls, there is almost nothing out there about this company. Far less than anything else I follow. It takes me almost no time to keep up with the articles and social media discussion about this stock every week, because there’s hardly ever anything to read.

I’m happy with 8point3 Energy Partners LP (NASDAQ: CAFD) I’m up 20% on the position. (23% with dividends)

PayPal Holdings, Inc. (NASDAQ: PYPL) is doing well, up 11%. I wouldn’t mind at all if it fell so I could get more on the cheap.

Ambarella Inc. (NASDAQ: AMBA) is also doing well, up 16%. I got 2 buy points in, so it’s a big position for me. They report in a week. I hope I’ve seen the bottom in this stock, but I’d be willing to buy more at lower prices.

Energy Transfer Equity (NYSE: ETE) has been good to me so far. Up 20% (22% with dividends). They’re holding a call today to discuss yesterday’s earnings release. (I’m writing this several hours before the market opens) It looks as though they had a slight miss on earnings, unless you give them the benefit of the doubt on impairment costs, and missed on revenues. I’m expecting a big move, one way or another. This doesn’t strike me as a ‘small move’ event. ETE is down pre-market, which is reflected in my numbers, but this one moves all over the place. Investors want to hear about the dividend, and the deal to acquire Williams Companies (NYSE: WMB). We’ll see. Current yield is about 17%, but because I bought it a bit lower, my yield on cost is 20%. If the dividend gets cut in half, it’ll still be great. I’ll buy the ensuing panic if it gets bad enough.

As mentioned before, I sold out of Mattel Inc. (NASDAQ: MAT) at $33.50, for a 43% gain. I’m waiting for it to hit the mid 20’s to get back in. FYI I don’t see the ThingMaker 3D printer being a success for Mattel. There’s been some buzz about it, but, meh…

My last post was at the end of January, when Fitbit, Inc (NYSE: FIT) was at $16. I said I’d be very interested at $10 to $12. Yesterday it dipped just below $12, and yes I’m getting itchy to buy some.

As you may have noticed, I spent a lot more time on what was going wrong, than what was going right. But things are going well. I’m down $108.47, whereas if I’d simply invested in ‘the market’, I’d be down about $370. (Check out my PORTFOLIO to see how I calculate that) So I’m feeling pretty good about things, but certainly not cocky.

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

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