5/16/14 Weekly Picks

5/16/14

Quick note on one of last week's short picks (WWE). Turns out their network can't make up the lost Pay-Per-View revenue and the stock is down more than any stock traded today (-45%). That's what we call a Stone Cold Stunner...

Only one pick this week. This was uncovered due to long time reader Charlie Arnold's interest in the mobile payment sector.

Long MITK ($3.4)

• MITK develops mobile imaging services, primarily for financial and insurance companies.
• If anyone has deposited a check in the last few years on a banking app, they have most likely used MITK's product. MITK owns the patents on mobile check deposits and other solutions.
• Only 5% of check deposits are currently made using mobile apps, this will likely increase rapidly as more banks implement this technology and more users learn how to use it - is is the future.
• Over 2,000 banks already use their technology and all of the top ten largest banks.
• They are also in negotiations with insurance companies to file claims using your app and billing companies to take a picture of your bill and pay it automatically.
• MITK has a very small market cap and is very risky. The stock has gone from almost $8 down to $3.4 due to litigation with another company and poor profitability so far. Management is currently modifying their billing model to increase revenue and profit. Hopefully these growing pains allow for a nice entry point at a discount.
• While I usually hate unprofitable companies, there are some silver linings to MITK. 30% of their operating expenses are in Research & Development. This shows they are working hard at improving their technology and investing back into the company rather than milking it.
• At current prices, the downside is limited and the upside is exponential. They could license out their technology to any developers looking to use their image technology and it's only a matter of time before mobile deposit goes mainstream with consumers - it isn't going away.
• MITK is volatile and could swing down due to continued losses or litigation, but the upside potential seems much greater. Continued adoption among mobile users, future announcements with large corporate partners, or even being acquired by a bigger player would all result in a nice pop.

5/9/14 Weekly Picks

5/9/14

Long TRMB ($35)

• TRMB uses remote sensing technologies for various industries, mainly construction and agriculture.
• In their agriculture segment, their products increase yield by using GPS and rain sensors to tell farmers exactly where they need to water, fertilize, harvest etc. most efficiently.
• This industry is booming and will only get bigger with growing populations and limited farmland - farms have to start using technology to become more efficient and profitable.
• Company is growing quickly and very profitably.
• They missed earnings last week so it finally gives a chance to get in after a pullback.
• Farm tech is getting to be huge and they are the leader.
• Long term play

Short WWE ($17.25)

• WWE is exactly what you think, World Wresting Entertainment. Yes, they are still around and yes, people still waste money watching this.
• Stock has gone from $10 to $30 in the past year due to their online subscriptions where fans can watch current and past media on the internet.
• Instead of growing their revenue substantially, it will likely just switch fans from TV to internet and cannibalize their current base, not increase it.
• Revenue growth is flat over the past few years and they are barely profitable (600 P/E ratio).
• We missed the boat a bit here, it has already fallen from $30, but has room to fall further.
• Vince McMahon is the company, it would crash without him. Let's then consider he is 68 and has obviously been on steroids for an extended period of time. I would bet against his liver.

Short LOCK ($13)

• LOCK is lifelock, the commercials where the guy guarantees you won't have your identity stolen with their products, although the founder has had his personally stolen 13 times.
• The company has frequently been under investigation for fraud, but has weathered the storm. They are now under investigation again, and the results haven't been released yet.
• Their products don't add value, they scare consumers into buying and now other competitors (like CapitalOne) are offering similar products for free.
• We missed the boat on this one as well (down 20% YTD) but could fall further after the FTC is done with them.

5/2/14 Weekly Picks

5/2/14

Long CTRP ($45 4/29/14)

• Priceline.com of China
• Strong top and bottom line growth
• Emerging and rapidly growing Chinese middle class (target customer)
• Down 9% last month so good entry point
• Long term play

Short CSH ($45)

• Payday lender
• DOJ is investigating and likely to implement new regulations on industry
• Stock is up recently due to spinoff and good short entry point

Long INVN ($19)

• Chips for wearable devices primarily
• AAPL will likely use their chips in iWatch
• If AAPL contract is won, stock should appreciate signicantly
• Stock is expensive, near 52 week high, but fell today on poor earnings

Long SDRL ($34.5)

• Offshore driller
• 11% dividend
• 52 week low due to capacity over reaction in industry
• Mgmt assured dividend will not be decreased until 2016
• Did I mention 11% dividend?

Short CTRN ($17.2)

• Urban clothing retailer
• 52 week high for no apparent reason
• 500 P/E ratio
• Long term viability is questionable with unattractive industry and poorly run company

FSLR Long Straddle ahead of earnings on Tuesday