Saturday, November 06, 2010

Picture Worth 1000 Words

Not sure that I need to do much more than show this picture:

That almost says it all. It shows my % gain/loss on my invested amount in MFI week-by-week. You can see the sharp upwards move since the beginning of September. What you can not see is that while I am not at an all time high on a percentage basis (that was back in July 2007 when I got to 21%), I am at a all time high cash wise (recall I invested 55% of my stake in 2006 and 45% in 2007).


I did make a move on Friday. I sold all my UTA and bought NEP. UTA had had such a great run for me, I had bought them on September 15th at $3.34 and ended up selling at $6.51. That is a 95% gain in under two months and as it was in my IRA, there were no tax ramifications.

Recall that September 15th was the date of the slanderous article that suggested UTA was an utter fraud (UTA Spirals After Blogger's Fraud Allegations). The impact of these bloggers on a small cap stock can be stunning. While as an investor, it is impossible to defend against them in the short term, you can make money by showing some courage and buying when everyone else in running around like their hair is on fire. The difficult part is determining when there might be fire beyond the smoke.

Here are my current holdings:
Symbol Initial Current Pct Gain R3K Change
CCME $9.49 $19.61 106.6% 13.3%
CEL $26.22 $32.95 28.8% 14.5%
CEU $4.61 $5.37 16.5% 5.5%
CHKE $18.18 $19.90 12.7% 14.1%
CMFO $5.29 $6.66 25.8% 9.6%
CMTL $26.66 $31.50 19.1% 7.3%
EESC $2.27 $2.00 -12.1% 8.8%
FLL $3.15 $3.63 15.2% 10.9%
INTC $18.97 $21.24 11.9% 8.3%
KSW $3.66 $3.20 -10.4% 8.5%
MAIL $6.08 $6.12 4.7% 7.4%
NEP $7.10 $7.20 1.4% 1.2%
NEWN $6.53 $7.64 16.9% 5.0%
NVMI $5.94 $6.65 12.0% 3.8%
PETS $16.40 $16.86 2.8% 4.4%
PM $44.30 $60.44 39.2% 12.8%
RAI $53.55 $66.80 29.8% 8.0%
SNDK $38.28 $41.31 7.9% 4.0%
STRA $129.55 $135.57 4.7% 3.9%
TTT $9.42 $14.86 60.8% 25.2%
UNTD $5.90 $7.11 22.1% 14.4%
Grand Total 22.5% 8.8%

Mail Call

One item that really disappointed me was MAIL's earnings report this week (IncrediMail Reports Record High Revenues of $7.5 Million, $3.3 Million EBITDA and $2.2 Million Net Profit in Third Quarter of 2010). It is not that the earnings themself were poor, rather it was the MAIL has stated a change in strategy:

Commenting on the results, IncrediMail CEO Josef Mandelbaum said, “The strong financial results of the third quarter continue to demonstrate the power of our business model and provide the necessary foundation for future growth. We have recently embarked on a new strategic plan for the company that will require a renewed focus on the consumer, and investment in certain key strategic areas of the company balanced with finding efficiencies in other parts of the business.”

“Moving forward, we will build upon our existing base to build, acquire and enhance a portfolio of personal productivity products that help make our consumers' lives a little simpler. We believe this approach will help us to accomplish several goals: strengthen revenues through product sales and advertising, diversify our revenue streams and add new growth channels outside of search. In preparation for the accelerated growth we are expecting, we have begun restructuring the company by hiring additional experienced personnel and realigning the Company’s activities with our new goals. Our new strategy emphasizing our core competencies and initiatives to move the plan forward will begin to unfold in the coming months.”

“As part of our repositioning the Company towards growth, we will be discontinuing our dividend distribution in 2011. As a growth-oriented company, cash that we had paid out in the form of a dividend will in 2011 be used to increase shareholder value by growing our business by way of investment in organic and non-organic growth,” Mandelbaum added.

Perhaps it is a good plan. But I was perfectly satisfied (as were apparently many other MAIL investors) with a company worth $60m, having a $40m enterprise value and earning $8m per year paying a strong dividend. The stock has sold off more than 10% on the new strategy.

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