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The upside is not reflected in King Digital

I added a new position in King Digital Entertainment (KING) this week.

I discovered the company while perusing through 13-F filings.   I search for hedge funds that have performed well in the last few years and look for tickers of either large or growing positions in those funds.  I found King via a fund called Steadfast Advisors.

King Digital is out of my usual area of competence.  The company is a video game developer and I have never invested in a video game developer before.  I’m not much of a gamer.  Nevertheless the company is extremely well-priced for scenarios outside of a collapse of the business, and I am an avid opportunist of market inefficiencies.

King is also a busted IPO.  The stock priced at $22 in March and is now $16.  The timing of the IPO was bad, both in terms of the market and the business.  It was a bad time for the market because tech has taken a pounding.  It was a bad time for the business because the biggest grossing game (by far) in the history of the company, Candy Crush, was beginning to go into decline. Read more

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Week 150: Stepping Back a little

Portfolio Performance

week-150-yoyperformanceweek-150-Performance

See the end of the post for the current make up of my portfolio and the last four weeks of trades.

Recent Developments

For the last number of months I have been increasingly uncomfortable about being fully invested.  Throughout the amazing rally that we’ve had since the beginning of 2012 I have been haunted by the idea that the rally is a liquidity induced euphoria .  In particular, I am given humility by this chart. Read more

Week 149: Earnings Update on a few companies

This isn’t a complete portfolio update. I won’t be posting my performance or trades; I will leave that for another week.  I just want to give a short update on some of the earnings reports that have come out or are still to come out while the thoughts are still fresh in my mind.  Here is a quick snapshot of the top positions in my portfolio as of Friday’s close.

05-10-14 topholdings

MagicJack

MagicJack earnings come out Monday after the market close.  I’m nervous about them, because the stocks action has been poor, it is a large position for me and because I’m not convinced the numbers will be great.

The company lowered advertising spend significantly in the quarter in anticipation of the release of the new version of the device and the app.  That will help costs, but it will also probably hurt revenue. On the fourth quarter call the company said that they expected the first half of the year to be “soft”. Read more