Invensense (INVN) Update

I’ve been asked the following question (one way or another) numerous times:

“Why do you like Invensense so much?”

My answer: It’s an investment in the technology and I believe this is the company to take that technology to the next level. I always follow that response by emphasizing this: Do your own due diligence and NEVER make an investment based off of what I do.

I am not a short term trader but I do follow rules while making trades and one of the most important of these rules is: CUT LOSSES!

As several of my twitter followers have pointed out, I have violated that rule with INVN. That’s true, I didn’t cut the loss when is violated my mental stop. In fact, I dollar-cost averaged my original position. The follow-up purchases have taken my original position to a maximum position size. Now, I sit here writing this post stating that I DO NOT violate “position sizing” within my portfolio. That may be difficult to believe if I just violated another rule but as of today, I have not violated that one. My cost basis is higher than Friday’s closing price for INVN and it took a lot of strength not to buy another block of shares when it dropped below $10 (as low as $9.06 to be exact).

Think about it, a purchase below $10 is showing a gain anywhere from 10%-20% in two weeks. I knew it was a fantastic level to enter and my cost basis would have dropped but I am maxed out – I CANNOT increase my risk against my overall portfolio. That’s how you GO BROKE (especially if you turn out to be wrong – and I may be wrong with Invensense).

That’s the beauty of trading and investing. Your ideas prove to be right or wrong based on making money or losing money. As of today, I show a loss in INVN. So why do I still hold on?

Two reasons

  • The technology: INVN is a leading provider of MotionTracking™ devices for consumer electronics products such as smartphones, tablets, game controllers, smart TVs, and wearable sensors. I see a big future here and I’m betting that INVN is the leader or one of the leaders.
  • The fundamentals (specifically: sales and earnings growth)

I am a technically based trader on a longer term time-frame but for now, I am not trading the chart. Although one may argue that the recent price action suggests that support has been established – it’s still debatable based on the number of shares sold short. The IPO lock-up period has passed, the lawsuit is open knowledge, supplier product shortages have been discussed and the market has not performed well so INVN has paid consequences. I’d like to believe that all of that BAD news is priced in.

The pending lawsuit from their main competitor, STMicroelectronics, does keep me a bit worried on the fringes but I have no control there, other than to sell (that can screw up everything, regardless of fundamentals and technicals).

Let’s take a look at the numbers:

Earnings (YoY):
2008: -0.09
2009: 0.01
2010: 0.19
2011: 0.13
2012: 0.47
2013: 0.61 estimated +30%
2014: 0.85 estimated +39%

Earnings (QoQ):
June 30, 2011: 0.11 vs. -0.01
September 30, 2011: 0.15 vs. 0.04 | +275%
December 31, 2011: 0.13 vs. 0.06 | +117%
March 31, 2012: 0.07 vs. 0.03 | +133%

INCOME STATEMENT | FY2012 (April 1, 2012) vs. FY2011 (April 1, 2011)

Current Period Prior Period % Change
  4/1/2012 4/1/2011  
Sales (Income) $152,967,000 $96,547,000 58%
Cost of Sales $67,246,000 $43,386,000 55%
Gross Profit $85,721,000 $53,161,000 61%
Gross Profit Margin 56.04% 55.06% 2%
Net Operating Income $47,014,000 $21,478,000 119%
Net Operating Income Margin 30.73% 22.25% 38%
Income Available to Common $16,329,000 $1,631,000 901%

BALANCE SHEET | FY2012 (April 1, 2012) vs. FY2011 (April 1, 2011)

Current Period Prior Period % Change
  4/1/2012 4/1/2011  
Cash $157,772,000 $38,075,000 314%
Accounts Receivable $11,931,000 $10,678,000 12%
Inventory $12,240,000 $15,208,000 -20%
Total Current Assets $186,131,000 $65,297,000 185%
Total Assets $193,318,000 $70,746,000 173%
Accounts Payable $13,172,000 $10,786,000 22%
Total Current Liabilities $13,200,000 $11,012,000 20%
Total Liabilities (Total Debt) $16,441,000 $11,605,000 42%
Total Equity $176,877,000 $59,141,000 199%

INSTITUTIONAL ACTIVITY (as of May 28, 2012):

Institution Type
  13F (Money Market) Mutual Fund Other
Number of institutions 100 101 7
Number of new positions 47 61 5
Number of positions sold out 11 4 1
Shares held 15,879,598 8,357,405 118,315
Shares held previous period 11,958,005 1,790,387 62,656
Shares bought 9,209,721 6,724,972 84,315
Shares sold 5,288,128 157,954 28,656
Value of shares held $159,431,164 $83,908,346 $1,187,883
Value of shares bought $92,465,599 $67,518,719 $846,523
Value of shares sold $53,092,805 $1,585,858 $287,706

Two things stick out:
1. The increasing number of institutional investors (including large quantities of shares bought)
2. Increasing earnings, year-over-year and quarter-over-quarter.

Time will tell and my account balance will let me know if I am right or wrong. As for now, I am long $INVN – betting on the technology, industry growth, earnings growth and sales growth. In addition, I would like those institutional investors to continue buying!

Future Stars: Stocks to Watch in 2011 – Update

It’s only one week since my post Future Stars: The IPO Holiday Gift List for 2011 so we can’t get ahead of ourselves but the list of 18 IPO’s from last week saw some wild swings, both up and down. Overall, the majority of the stocks moved up or down only a few percent, on average.

Recap:
11 of the 18 stocks are up an average of 7%
6 of the 18 stocks are down an average of 6%
1 of the 18 stocks is virtually unchanged

MCP was the biggest gainer with a 22% surge while MOTR dropped the most at 15%.

Future Stars: Top Performers (1-week update):

  • MCP – 38.26, Molycorp was up 22% over the past week on the largest volume in nearly two months. I said this: “The current consolidation is ideal to shake out weak holders and allow new supports to jump on board.” Now, let’s see if MCP can blast to new highs (it’s an important test).
  • QLIK – 26.14, Qlik Technologies was up nearly 12% on above average volume. As mentioned last week: “A move to new highs would be positive for grabbing shares.” A move to $28 or above would be very positive.

Future Stars: Bottom Performers (1-week update):

  • MOTR – 20.00, Motricity dropped 15% last week on the largest weekly volume since it’s debut. I noted last week: “is consolidating back to its 50-d moving average”. The stock dropped hard Wednesday but reversed from it’s low and closed the week higher. It’s still a longer term opportunity. The key here is to reestablish trading above the 50-d m.a.
  • ONE – 20.71, Higher One Holdings dropped 11.20% on above average volume but it stopped at the 50-d m.a. As mentioned last week: “Solid support is down near the $16 area with moving average support at the 50-d (just above $18).” Now is the time to buy shares if it holds support above $16-$18.
  • KH – 18.20, China Kanghui dropped more than 11% on heavy volume as many Chinese stocks continue to get hit hard. The stock is currently trading at its support level so its key to hold above the $17.50 area.

Future Stars: The IPO Holiday Gift List for 2011

The past year has been very kind to IPO’s, the young growth stocks that will typically lead the market for years to come. With the NASDAQ up more than 90% since the March 2009 low, many have predicted time after time that it is far too extended to move higher. I have been one of those people, one that has been consistently watching for the possible Dow Theory Reversal (1-2-3 Setup). It hasn’t happened to date and the latest attempt to stall at resistance has actually propelled the tech laden index to move to new highs. The trend in higher until the charts tell us otherwise and always remember what Livermore said:

“Just because a stock is selling at a high price does not mean it won’t go higher” – this applies to markets as well.

Whatever the market will do in 2011, I decided it was prudent to point out a number of strong growth stocks, young companies that have debuted within the past year (many within the past six months). This is NOT a buy list but it is definitely a watch-list for anyone that searches to buy young, innovative companies that are growing both earnings and sales. Several, if not many, of the stocks listed below will lead the market from time to time over the next few years, A couple of them may even become household names, similar to the GOOG, BIDU and AAPL’s of the past.

As it stands right now, Sunday (night), December 12, 2010, the major market indexes are all trending higher in the short, intermediate and long term phases. Until that changes, grab shares at ideal low risk entry points. Enjoy the possible future leaders.

Future Stars: Young Growth Stocks to Watch in 2011 and beyond:
*All charts are listed below*

  • HSFT – 27.46, only five months young, HiSoft Technology has currently pulled back to the 50-d moving average line, providing some support for a new entry or an opportunity to add shares.
  • MOTR – 23.55, after a three-fold run from it’s IPO price, Motricity is consolidating back to its 50-d moving average for an opportunity to add shares or enter for the first time
  • RP – 28.83, RealPage is forming a short term base that resembles a subtle cup with support above the 50-d moving average. A breakout to new highs will continue the up-trend.
  • QLIK – 23.40, Qlik Technologies is has been trading mostly sideways over the past three months after nearly tripling from it’s IPO launch. A move to new highs would be positive for grabbing shares.
  • MCP – 31.28, Molycorp is trying to maintain support at the 50-d m.a. after running from $14 to a high above $40 per share. The current consolidation is ideal to shake out weak holders and allow new supporters to jump on board.
  • TSLA – 31.52, Tesla Motors has been all the rage in the automotive world over the past several months, partly due to it’s stock run from $17 to more than $36 in a few short months. A bit extended here but further consolidation to the 50-d m.a. will offer new opportunities to grab shares.
  • KH – 20.48, some of my longer standing readers know I have had a long love affair with Chinese IPO stocks dating back to 2007 (BIDU, EDU, MR). China Kanghui looks like another solid young growth stock – always grab shares at or near a support level like a major moving average. Note this: other young Chinese stocks are starting to show sings of a breakdown so be careful.
  • VRA – 36.41, Vera Bradley makes my list because I know and understand this company, one of her bags was a recent gift to my wife. If VRA can be anything like Coach (COH), I’d love to jump on the ride now, nice and early. We can all dream for a ride like COH, extending back much of the past decade.
  • [Read more...]

My Twitter Positions are Up Big

I have been using Twitter and StockTwits for approximately two months and have highlighted 18 different stocks. Of the 18 stocks, 15 are currently showing a gain and 3 are showing a loss for an average gain of 20% per position. I only analyze stocks that I am about to buy/sell or would possibly buy/sell. I don’t talk about any old stock for the sake of posting tweets and wasting people’s time.

The average gain of the stocks showing a profit is 26%.
The average loss of the stocks showing a loss is 11% (-5%, -8% and -21%).

The top performing position is DXO, currently up 65% with a peak gain above 70%. Following DXO is EJ at 56%, STAR at 50%, RVBD at 40%, FRPT at 32%, ARST at 26% and V & VMW tied at 25%.

Visa (V) has appeared the most with a total of eight mentions (I may be biased since it’s my largest personal holding). DXO has also been an active play of mine since 2008 so it has been the second most popular ticker in my tweets, appearing five times over the past two months (DXO first appeared on this blog last November as a speculative oil play).

I would like to emphasize that the stock down 21% (APEI) would have been cut for a smaller loss using simple money management tools but for purposes of this update, we’ll assume everything is still being held.

Below is the list of stocks highlighted on my Twitter account, listed in date order (starting on March 31, 2009):

  • HTS: +7%, $26.15 from $24.35 on 3/31/09
  • V: +25%, $69.28 from $55.60 on 3/31/09
  • VMW: +25%, 32.59 from $26.12 on 4/1/09
  • RVBD: +40%, $21.52 from $15.37 on 4/2/09
  • STAR: +50%, $22.45 from $15.00 on 4/5/09
  • CXO: +14%, $31.90 from $27.96 on 4/5/09
  • DXO: +65%, $4.48 from $2.72 on 4/20/09 (1st posted on 4/6/09 at $3.07)
  • EJ: +56%, $16.78 from $10.79 on 4/9/08
  • ARST: +26%, $18.19 from $14.46 on 4/9/09
  • FRPT: +32%, $9.36 from $7.09 on 4/13/09
  • WMZ: +12%, $19.85 from $17.70 on 4/14/09
  • CTCT: +10%, $20.14 from $18.36 on 4/20/09
  • TNDM: +15%, $30.78 from $26.81 on 4/20/09
  • CFL: +11%, $30.60 from $27.50 on 4/26/09
  • PAR: +3%, $11.27 from $10.94 on 6/2/09
  • APEI: -21%, $34.56 from $44.00 on 4/2/09
  • MDAS: -5%, $15.90 from $16.79 on 4/23/09
  • MELI: -8%, $23.62 from $25.60 on 5/12/09

If you haven’t joined already, take the few seconds to follow me on Twitter as the bulk of my analysis appears there weekly, if not nightly.

P.S. – the bragging title of this post probably signals a short term top in the market! As I wrote yesterday:

“The main purpose of the stock market is to make fools of as many men as possible.” – Bernard Baruch

060609_dxo_daily

060609_v_daily

060609_ej_daily

[Read more...]

Visa Cup with Handle

Visa (V), $65.75: As I mentioned on Twitter last week, the stock is building a cup with handle pattern. A down-sloping handle is currently forming with a pivot point breakout at $68.55. I will be looking to add shares on a breakout. FYI: I currently own shares from 2008.

052509_v_wkly

See the post Visa, from December 17, 2008 for further details:

Why do I like VISA’s potential?

  • $1o Billion would represent the second largest IPO ever!
  • Revenues are expected to grow steadily as consumers continue to use their cards
  • VISA processed 44 billion transactions totaling $3.2 trillion in 2006 (Mastercard processed 23.4 billion transactions totaling $1.9 trillion)
  • VISA has made $771 million on $3.7 billion in revenue during the first nine months of 2007
  • VISA makes their money from the fees it charges to card users and merchants using its network

BEST OF ALL:

  • Because it acts as an intermediary, Visa doesn’t sustain losses when consumers don’t repay the debts run up on credit cards bearing its brand. Those liabilities instead fall to the banks that issue the cards and set the terms of repayment
  • Most of Visa’s major stockholders are banks. They include: J.P. Morgan Chase & Co., which owns 23.3 percent of the company’s Class B Stock; Bank of America Corp., 11.5 percent; National City Corp., 8 percent; Citigroup Inc., 5.5 percent; U.S. Bancorp, 5.1 percent; and Wells Fargo & Co., 5.1 percent.

Let’s see what happens. The gov’t here in the US scares me these days when it comes to credit cards so pay attention to what they are doing. I wish they would just butt-out and go back to doing what they are meant to do.