Thoughts on Rubicon

The company is halfway retarded. I should’ve put this money into The Devil’s CLIR or PAMT play. Nonetheless, here I am sitting in a position that is +5%, less than a day away from dinging me for a cool 15%.

What went wrong?

Their biggest customer didn’t order anything for two quarters in a row. It’s pretty hard to claim they’re your biggest customer when they urinate on you like that.

Pricing for silicon on sapphire is abysmal. They need to see prices rise 25% in order to break even.

The good news is three fold.

1. I sold 30% of my position before the bell, told here and inside of The PPT. Oddly enough, before I put in orders, a trading desk called my office and asked for my stock. Apparently there was an aggressive buyer out there, for 50,000 shares, who wanted in just prior to the execution.

2. The company has $31 million in cash and no debt. They don’t expect to burn any cash next qt.

3. Silicon on Sapphire is in its nascency stages. It’s pretty hard to justify selling this stock as the LED market takes off and sapphire is being used in smartphones. That’s supposed to heat up, in earnest, during the second half.

My plan is to buy back the shares I sold today at lower prices, between $5.75-$6.00. This is a second half play and the stock could easily double if prices continue to rise, as the sapphire market expands into the smartphone space.

We keep running and running without pause. All of my friends believe the market is nearing a top. I felt May would be a very bad time for the market. However, price action has minimized my conviction for a downward reversal.

The conundrum is knowing tops happen when no one expects them.

CLIR is up today thanks to a company conference call last night that obviously attracted new buyers. Keep an eye on that stock, for it is the favourite of The Devil.

Speaking of which, he is very eager to get started on iBC. But he will not be penning missives or explaining his ideas in detail. He is paranoid about his identity and wants me to post his ideas for him, in bullet point fashion. So don’t expect to be introduced to the person called “The Devil” any time soon. For now, his top ideas will have to suffice.

After the bell are earnings from RBCN. They’ve disappointed every quarter for as long as I can remember. Expectations are very pessimistic, which might work in favor of the share price action post report. For the record, I am not enthusiastic about earnings tonight. I am in the stock for the turn in the sapphire industry, fueled by 2nd half wins at certain smartphone makers.

UPDATE: I trimmed my RBCN position by 30% and bought ARG for the $100 roll.

Companies that are in solid uptrends filing for secondary offerings, below market, are buys. We saw it two weeks ago with RLGY at $42 and GNRC today @ $37.

About a month ago, The Devil’s stock, CIMT, filed for a secondary in the low $5’s. Now look at it.

You don’t want to get in ahead of the secondary announcement of course. But if you get in after the dip, the way this market has been roaring, odds are you stand to make some easy coin.

Both gold and silver are getting smoked today, down about 1.5%. You can ponder all you like as to the reason behind the drop. Look no further than the power of fiat currency, backed by the full faith and credit of the US military apparatus.

While you misfits “invest” in bitcoins, the market trends higher daily, taking out gold bugs and curb stomping them until their jaws break off their faces.

I strongly advise you to avoid buying the dips in precious metals. The central banks have complete control of the markets now and have brought “stability” to the commodity markets too. They want it all, higher asset prices without the side effects of inflation. You’d think when a central bank creates new currency out of thin air, it would give life to inflation, most readily seen through commodities. Well, that might happen one day down the road. But for now, commodities are contained and alternative forms of currency are–essentially– in the fag box.

The hardest part of investing, in my opinion, is knowing when to let go of a loser. It’s easy to sell a winner. After all, there are gains to realize and victories to lock in. But locking in a loser is admitting loss, a pox of shame upon your household. Such shame may live forever, in infamy, as a tale passed on through the generations of how you lost the family fortune.

Or it might be some piker trade where you lost 3 grand. Either way, losses are hard to close out.

Often times, trades become investments when the trade goes bad. After the trade goes bad, we look for reasons to hold onto the stock. Sometimes we convince ourselves that merely trading the name in the first place would’ve been a ridiculous proposition. After doing all of that hard work and research, we unveil true value in places that no one ever thought of looking.

This is called desperation. More often than not, when we grab for straws, based upon a losing trade, we start over-fitting. In other words, we look for excuses to hold the stock, even buy more, in order to preserve our delicate egos.

After all, we are all genius, a gift to the earth and the stars. How could we be wrong when we are so smart?

If you think about it, this sort of rationale transcends every aspect of living, from marriage, friendships to dead end jobs. People always tell me “the best thing I ever did was divorce so and so.” Or “thank God I quit that job.” But we all fear making that commitment because it means we’ve failed.

Isn’t it better to realize a small loss than a gigantic one? This is common wisdom, not exactly trade secrets. But we keep reading about famous fund managers committing fraud, blowing up billion dollar funds, risking their freedom by trading on insider knowledge. Why? The answer is quite obvious. No one wants to fail, ever.

This mentality has climbed to the top of the capstone. The controlling elite now accept failing as part of the business cycle and allow poor stewards to continue to run good companies into the ground.

I own one stock that is underwater: FRO. Had it went up to $3 after my initial purchases, I would’ve sold it. But since it’s down 17%, I am a long term investor, very prim and proper–interested in the ongoings of the shipping business. I care for shipping in the same way I care for a banana less gorilla jungle. Sometimes I feel like smacking myself in the head with my tea mug for being so stubborn. All of my money losing ventures are the result of pride.

I’ve been blogging on the internets since 2002, one way or another. In the world of finance, I’ve been blogging since 2006. I’ve written more blogs than you could imagine. The pinnacle of iBC was back in the frantic days of 2008-2009. This isn’t exactly a growth industry, as there isn’t anything very innovative about reading the missives from a group of traders. Twitter is to blogs what the internet is to newspapers.

All of my time and energy have gone into making iBankCoin successful. But my opinion of success might differ greatly from yours. Some are happy with a little recognition and influence. Others only want to make money. My opinion of success is fairly straight forward: is the endeavor creating value? If so, is the time spent to create this value worthwhile?

Mrs.Fly often queries “how long will you blog?”

Ideally, I’d like to pass on the torch at some point, crowning the next “Fly” in the same manner as the catholic church selects a new pope, black smoke and all. Perhaps in 500 years, your great, great, great, great grandchildren will be reading the insane missives of King Fly the XIII. Or, maybe I’m just over-fitting again.

http://www.youtube.com/watch?v=eCre5lvlEcY

Poof! Why isn’t this damn wand working?

-Merlin

Banc of America just settled with MBI for a song, sending MBI up 40%. As such, BAC is ripping too. Hell, the whole entire god damned banking sector can’t find enough buyers. Warren Buffet said he’s been buying WFC every month this year. The regionals are all up big and anything related to housing is up 50%+.

Even Fannie and Freddie are back from the dead, sporting 5 symbol stock symbols up 100’s of percentile a lot in recent months.

All of the government rules and regulations to curb risk taking hasn’t got in the way of some good old fashioned stock market speculation. The speculation is: the banks are bullet proof. Their balance sheets are strong and housing is driving fees again.

They may not be sporting 3x p/s ratios any longer–but the industry is clearly in bull mode.

I don’t own any banks, regrettably. Like others, I was brainwashed to believe “the banks are too hard, might as well look elsewhere.” Sometimes the blackest of rocks yields the brightest diamond.

The good news, as a whole, is that the economy should benefit from this banking renaissance. Auto and homes loans should be abundant and American consumerism will rake the path to prosperity, one Michael Kors bag at a time.

All things considered, what’s good for BAC is good for us all.

I added to my MU position.

RBCN earnings are tomorrow. Last quarter the company missed bad, citing purposeful withdrawal from customers due to cheap sapphire pricing. Wall Street thought they lost customers, sending the stock diving. We shall see tomorrow. It is not for the faint of heart, trust in that.

My AMBA is ripping higher. It just fits the criteria of every high tech winner these days: small float, high growth, teenage stock price: BOOM.

I am up another 1% or so today, but need MU and RBCN to keep going higher to fuel my gains–which stand at around 17%.

For now, to make things clear and concise for me, I am focused solely on technology stocks, mainly due to valuation. The way I see it, stocks have run very high, very fast. If I am to be caught with my pants around my ankles again, I’d rather it happen in an industry that doesn’t get annihilated when deflation talk hits the tape. Technology, in a way, is resilient to macro events and can trade on a company by company basis.

Aside from the stocks I own, I also like WFR, AMKR, GTAT and PAMT.

How about that WETF?

Bottom line: we’re all waiting for the market to pullback. While we wait, why not make a little money?

APO posted gangbuster results today, solidifying private equity as a force to be reckoned with on Wall Street, as far as smashing EPS estimates is concerned. Pair that with the buyout of BMC this morning, and there is reason to pay attention and look for names that might be next on the takeover list.

Here is my criteria.

Market Cap under $50 bill

Minimum daily volume of 500k

Debt/equity under 2

Forward PE under 15

PEG ratio under 2

Price to free cash flow under 15

Price to sales under 5

Exclude all China related stocks

Sector: only technology

When looking for private equity buyout candidates, growth isn’t a major factor, believe it or not. Sometimes growth is paired with volatility, which is avoided by PE. What they’re looking for is free cash flow, clean balance sheets or able to lever up, inexpensive valuation in a cheap sector. In this case, tech is the cheapest sector out there.

According to an S&P report published this morning, information technology is trading at a significant discount to historical valuations, more so than any other sector.

I don’t have a favorite name just yet. But some of those chip companies look good and the industry is ripe for consolidation.