Nice News for Radian
Originally published at 9:39 A.M. EDT on Wednesday, June 17, 2015
Radian remains on my Best Ideas List. I added the stock at $12.69 back in November 2013.
I'm Out of BTT
Originally published at 4:19 P.M. EDT on June 15, 2015
In a generally flat bond market, the fund was up more than 2% Monday on more than three times the daily average volume because of the mention. This is a silly and outsized response, and I expect the fund to trend lower in the days ahead when investors get their heads back on.
Accordingly, I have sold out of my BTT holding into the strength today, and I plan to reinvest in one of the other 13 funds I own. I have removed it from my Best Ideas list, as well.
Trade of the Week: Long Twitter
Originally published at 3:30 P.M. EDT on June 15, 2015
I do this while recognizing how unpopular the trade will be in light of recent news, which has led to the stock price falling like a knife through butter. (Most traders, especially of a technician-oriented kind, prefer the other sort of price momentum before going long.) But my Trade of the Week is intended to be an opportunistic exercise that takes advantage, at times, of price dislocations.
The more I think about it, the more I believe that investor disappointment might be an overreaction to the laid-back interview on CNBC by incoming and outgoing CEOs Jack Dorsey and Dick Costolo. Perhaps it was the distraction of Dorsey's beard or the impression by many that Twitter's management team is inhabited by a bunch of "stoners" (to quote some vocal critics in the past).
I have watched this interview five times and I have spoken today with many Silicon Valley investors who have led me to believe that strategic changes will occur quickly, despite Dorsey's impression. Importantly, as I have surmised, those changes (unlike one analyst who was skeptical of effective change in the past 12 months, according to my sources) can be implemented much more quickly than generally assumed.
Equally important, it is my view that the management change at the top may occur more quickly than generally realized. The board and its other stakeholders (including the original private-equity investors) have too much of a vested interest to be benign in the strategic changes and management search process. My guess is that the company wants an insider who knows the company well (doesn't have a learning curve) and can move rapidly.
My candidate is Adam Bain, who will replace Jack Dorsey some time in the next 45 days. With that change will likely come a new team of very capable management additions, armed with an ability to quickly define the product, unify management and make the appropriate structural changes that simplifies the product and its message.
Moreover, Snapchat recently raised $17 billion worth of capital, compared with Twitter's capitalization today of about $23 billion -- this despite that Snapchat's monthly average users being about a third that of Twitter's. Very few social media entities have the ubiquitous presence and critical mass of Twitter.
Finally, with a market capitalization of about $23 billion, the low share price incorporates a lot of deal "optionality." Consequently, my view is that at current prices the upside/downside ratio (reward vs. risk) is quite attractive over both the short and intermediate terms.
- Housekeeping item.
I still find the company's fundamentals unattractive ("if you want to short innovation, buy IBM") and respectfully disagree with several technicians on the site who find the shares attractive. (I would be interested if the bullish technicians are still holding on in light of the recent share price weakness or have their opinions changed?)
My decision is based on there now being numerous better short candiates with superior upside/downside ratios.