The Mud Wars Continue

My patience is being tested on an extreme level. My purchase of RBCN this morning resulted in instant winship, as the stock spiraled up to $11.90, up $1.84 from my basis. Considering the amount of shares purchased, it was a handsome (extra Fly) win. However, as the day waned on, perverts sold the stock, and with it my gains dissipated in the inferno.

Being up a mere 15 cents on the stock, as I write this post, makes me want to commit arson.

I’ve been busy all day, partaking in extreme coffee consumption, chewing on espresso beans as if they were bubble gum.

At the moment, my gains are being enjoyed by the moves in JAZZ and BALT. Earlier gains in NSTG and RBCN have all but vanished, again pushing me towards committing arson.

My largest position, ALJ, is lower, further entrenching myself in the mud, amidst the grass and the sheep. I’m still up 0.8% for the day, down from +3.5%. However, given the current trajectory, it will be getting very hot around these parts soon.

First off, BALT acquired two new Capesize vessels today, upping their fleet to 13 (4 capes, 4 supramax, 5 handy size). I love the deal and feel BALT in keenly positioned to profit from a rising BDI, more than any other publicly traded company, due to their solid balance sheet and age of fleet, which stands at an industry low of just 3.6 years.

As you know from an earlier post, I acquired shares of RBCN today, based off the GTAT-AAPL arrangement.

Sapphire is a commodity and will trade higher, as supply gets taken off the market. The fact that Apple is paying GTAT $500+ million dollars for sapphire supplies means this is a big deal. I believe it will be used for screens, which will force competitors, like Samsung, to follow suit. Due to the exclusivity of the GTAT deal, the only other supplier of note left is RBCN. I view this in the same vein of how the industry  shifted to flash memory, away from DRAM. Early buyers of SNDK were richly rewarded.

The plain truth: sapphire is a superior material to gorilla glass. As an aside, companies like ZAGG will go away, once sapphire is adopted, since it’s scratch proof.

I bought my RBCN position at the opening tick and have an average cost of $10.06. I didn’t mind paying up because I feel the stock is heading to $20, if not higher. With 35% of the shares sold short, bears are in for a house of agonizing pain for the foreseeable future.

It’s also worth noting that the decline in WTI is outpacing Brent, also bullish for refiners like ALJ, DK and WNR.

I am +2.5% for the day so far.

I started a position in RBCN because it’s going higher. Details forthcoming.

Many month’s ago, I highlighted one of my thesis plays, regarding GTAT and its product “sapphire.” Naturally, I owned hundreds of thousands of shares in the $3 range, only to sell them out for a 25% profit, well before the real run.

Here are some of my early notes from The PPT.

Last night, during GTAT’s earnings announcement, they had this to say:

AAPL Agreement

• On October 31, 2013, GTAT and Apple (AAPL) entered into a Master Development and Supply Agreement and related Statement of Work, pursuant to which GTAT will supply sapphire material exclusively to Apple for consumer electronics. GTAT has granted Apple certain intellectual property rights in connection with its sapphire growth technologies. Although the agreement does not guarantee volumes, it does require GT to maintain a minimum level of capacity. GT will be subject to certain exclusivity terms during the duration of the agreement. GT expects this arrangement to be cash positive and accretive to earnings starting in 2014. Gross margins from this new materials business are expected to be substantially lower than GT’s historical equipment margins.
• GTAT also entered into a Prepayment Agreement with Apple pursuant to which GTAT will receive approximately $578 million in four separate installments, as payment in advance for the purchase of sapphire goods. GTAT is required to repay this amount ratably over a five year period ending in January 2020, either as a credit against Apple’s purchases of sapphire goods under the MDSA or as a direct cash payment. GTAT’s obligations under the Prepayment Agreement are secured by certain of its assets. While the MDSA specifies GTAT’s minimum and maximum supply commitments, there are no minimum purchase requirements under the terms of the MDSA.
• Finally, on October 31, 2013, GTAT entered into a lease agreement with an affiliate of Apple in order to lease a facility in Mesa, Arizona that GTAT will use for the purpose of manufacturing the sapphire goods under the MDSA.

Impact on 2H13 results

• To service the sapphire material agreement announced today, the company has dedicated the vast majority of its ASF capacity in the second half of 2013 to expanding its own materials capacity. This shift in business model has effectively precluded the company from shipping significant levels of ASF units to other customers during the second half of 2013 and will continue to do so for the balance of the year.
• Given the impact of its shift from ASF equipment sales to building ASF capacity for its own internal use as the company prepares to service the Apple agreement, GT is revising guidance for fiscal year 2013, which ends December 31, 2013, as follows: Revenue in the range of $290 million to $320 million Gross margin in the range of 30% to 32% Non-GAAP EPS in the range of a loss of $0.40 to a loss of $0.50; GTAT sees 2014 revenues in the range of $600-800 mln.

On October 30, 2013, GTAT terminated its credit agreement with Bank of America and the other lenders from time to time party thereto. As of October 30, 2013, there was approximately $96 million outstanding under the term loan component of the Credit Agreement, which amount was paid in full on October 30, 2013 by the Company using its available cash.
And here are some analyst notes:

• Pac Crest notes GTAT misses and lowers as it changes its model and inks a deal with Apple. GT tossed old 2013 guidance out the window after it inked a deal to provide sapphire directly to Apple rather than sell sapphire tools. GT will now be supplying tools to itself as it builds a sapphire plant in Arizona. GTAT misses and lowers as it changes its model and inks a deal with Apple. Firm notes the Apple deal is likely for watches, not phones.Recurring Apple rev should support R&D funding, but lowers GTAT’s EPS outlook.
• Canaccord notes, while Apple has locked up GTAT in the near term, firm believes this deal could result in a more competitive sapphire furnace due to the increased R&D. Firm believes this has been the major challenge for GT sapphire LED customers. Initial reactions in the after-market are positive as approximate 2014-2016 guidance plus a large $578M prepayment from AAPL are leading firm to believe that this agreement is rather significant and possibly transformative. Its initial view is that it could result in $500M+ in annual revenues over a 5+ year time frame. Tgt to $13 from $10. 
• As mentioned, GTAT was upgraded to Buy from Neutral at BofA/Merrill and upgraded to Overweight from Neutral at Piper Jaffray.

Anyone who is doubting this as being anything less than ‘transformative’ is unable to read the tea leaves and should cease offering advice to others, on the basis that one can only be stupid for a finite period of time. This is the moment when smartphone makers walk away from gorilla glass in exchange for sapphire. This is the turning point that we will remember for years to come.

There are just two ways to play this, one of which is to be long GTAT. The other, for sake of discretion, will be revealed soon. However, I am sure most of you already know what stock I speak of.

The nerve of you fat catamites, coming to this place of stock market wizardry to offer me advice! That’s like going to the Pentagon and offering your strategies of war, learned from the countless hours of studious concentration derived from droning about the couch playing the arcade games.

Just because I am stuck in the mud, frolicking amongst the sheep, doesn’t mean that I am destitute to the point of accepting advice from the plebians in the readers class. I’d rather die a horrendous death of barbarous torture and amputation before submitting to the mercy of your intellect.

That’s not to say a great lot of you aren’t great traders and overall decent folks. As a matter of fact, I find your company to be entirely transfixing, in a good way. I draw an abundance of laughter and amusement from the internets and will continue to do so for the next 1,000 years, as it is the fate of iBankCoin to live forever, immortal and immune from the pangs of death.

But, do not believe for a second that “The Fly” is in the market for advice, especially of the financial variety. Respect these simple boundaries and you and I can be friends for as long as you live. Disobey them and we will speedily become arch enemies, just like the stories in your comic books when the anti-hero rips a beating heart out of his enemies chest cavity and eats it, while laughing at the CNBC for telling great jokes.

Good night.

I need social media exposure into the Twitter IPO. For the sake of the pristine reputations on Wall Street and Goldman Sachs, this deal must be a success. YELP ran away from me and I refuse to buy it above $65, so TRLA is my second favorite pick. My third pick is TRIP, then ANGI.

I want to own GMCR and will do so soon.

All in all, I sold HK at the lows on Friday and reallocated those dollars into TRLA, a stock that has been dead money for months. Nevertheless, I’ve never lost money trading TRLA and feel comfortable owning something that I have confidence and conviction in.

The SAC settlement is disgraceful, by all parties. $1.8 billion dollars to get away with crimes? How the hell can the government justify that outrageous fine without someone going to jail? Don’t get me wrong: I do not believe any financial crime, short of theft, deserves prison time. But $1.8 billion is freaking ridiculous.

I caught my respite today, up 1.5% in a milquetoast tape. God willing, this is only the beginning of receiving what is rightfully mines, by natural law.

I started a position in TRLA here.

A tepid opening, following a robust showing in pre-market futures. Twitter raised their offering price to the mid-20’s. If the greedy underwriters aren’t careful, they will Facebook this deal and ruin the ipo.

I’m looking for deals; but must admit that I am stuck in the mud of mediocrity. I’ve shed 10% from the highs, now sporting gains of about 50%. There isn’t anything wrong with a +50% gain, per se. However, it is my right, under God, to make more.

Miners and coal stocks continue to show strength, highlighted by WLT, CLF and X. I have no interest in purchasing the shares of companies who specialize in 19th century technologies. “The Fly” is about about hi-tech, chasing down the trends and profiting from it, sans the occasional boat trade.

Nevertheless, the facts on the ground remain: I am in need of respite and have been bleeding out for too long. I am tentative of the market and do not trust the relaxed mood of the market, all the while momentum stocks drown in their own vomit.

There is rotation and then there is distribution. This feels like the latter.

BDI bouncing again.

Forget about that, there are earnings ahead and short sellers are jumping ship.

Top picks: BALT, EGLE.

It is the railway of all information. Those of you who are hating on TWTR because of valuation are just haters. You will never make money in the market–because you’re not built that way.

When I bought FB at $32, many of you mocked me, as it careened down to $18. Now that it’s above $50, you are firmly in the ‘fag box‘, tightly fitted, not leaving any time soon.

I can look at charts and confuse myself as to where I want to place my chips. Or, I can rally around what I know.

This is what I know.

YELP is a winner.

GOGO is a winner.

TRLA is a winner.

BALT is a winner.

ALJ is a winner.

My new buys will be in the tech space. I will own WDAY because the people running it (old PSFT gents) know how to beat street estimates, every single quarter.

I want to own ANGI, YY,  TRIP, Z and maybe a little OWW. I want to buy retailers into black friday. Names like AEO and ANF are dice rolls. But KORS and JWN seem like dunkshots.

And lastly, I want to own TWTR at any price. Do you know why? Because when you are buying a winner, you can do so at any price and know that eventually you’ll make money.