Reminiscences of a Stockblogger

Jun 6

Betting on another Distressed LTL Carrier: Vitran

A lot of my ideas are built upon the work of other people. I spend a great deal of time scouring blogs, watchlists, tweets, message boards and the like, looking for an opportunity that someone else has discovered and that I think deserves a closer look.

Every once in a while I am lucky enough to come across an excellent write-up that encompasses the idea so clearly that I do not have to do all the work myself. I found this sort of write-up with Alliance Healthcare a few months ago, though unfortunately since it was published on SeekingAlphaPro it is only available to premium subscribers now (of whom I am not one).

I found an equally good write-up on my latest company of interest, Vitran Corp. The write-up (accessible here), was written by someone who goes by the pseudonym AIGSwap, and does an excellent job of encapsulating the essence of the idea. I recommend reading it before proceeding. All that I plan to do here is provide my own color and update a few important operational changes that have occurred since its writing. Read more

Jun 2

2 Comments

Atna Resources and the Importance of Following my Rules

Things have turned out poorly for Atna Resources (ATN.to). A combination of (not atypical) mine development delays, a precarious cash position and a falling gold price have coincided with each other to crush the stock. That crushing reached a culmination on Thursday when the share price tumbled 43% to 25 cents.

Its crazy to think that I was adding to Atna as little as 3 months ago.

Fortunately I did see some of this coming. My losses have been mitigated from what they could have been. As I tweeted in mid-March.

in my April 1st update I described the reason I was getting out of gold: Read more

May 27

10 Comments

Week 99: Patience

Portfolio Performance

Portfolio Composition

To see the last four weeks of trades, click here.

Update

Last month was an excellent month for my portfolio. I wrote about some of the significant moves that occurred over the first few weeks of May in this post, and I won’t repeat that discussion here. Apart from what was discussed there, I made only a few changes to my portfolio. I added Ambac (AMBC), which I wrote about here. I removed a number of the natural gas stocks, and I added a couple of new positions in the Health Care sector. I also subtracted and then added back some gold stock names, with the net sum of the moves being close to zero. Read more

May 24

An Update on Comverse

I don’t provide regular updates on the stocks I own unless there is either meaningful news that I have an opinion on, or if I have added or sold a significant amount of the stock. I simply don’t have time to be writing updates all the time. I’ve tried to bridge that gap with twitter, and it does an ok job, but a lot of time you just can’t say as much as you want to because of the character limit.

Nevertheless there is a lot more going on behind the scenes then what eventually culminates in a post. During the first quarter I reviewed pretty much every earnings release and conference call of every company I own, and that isn’t to mention the number of releases and calls I reviewed of companies I considered owning, but for whatever reason decided not to.

One of the companies that I spent quite a bit of time on but haven’t said anything about is Comverse. I’ve owned about a 3% position in Comverse since mid-January when I posted my basic thesis here. Since that time the only thing that has happened is that the company has announced fourth quarter results.

I’ve reviewed the quarter, listened to the conference call a few times and read through much of the 10-K. Everything appears to be on track with respect to the improvements that the company has forecast to occur in 2013 and 2014. The company reiterated its guidance of $30 million of SG&A reductions by the end of 2013 and $45 million by the end of 2014. They reiterated mid-teen operating margin guidance for 2014. And the company said they expect revenues in 2013 to be slightly ahead of 2012 with a pick-up forecast in the second half of the year. The skew to second half bookings is because of the release of the new Comverse One BSS platform. They expect bookings of Comverse One to be higher margin business as customers transition to Comverse One platform which should be lower maintenance and less installation.

Just to remind us of what this guidance is going to look at when and if it comes to pass, here is a copy of the earnings I posted in my original post:

The carrot remaining enticing. EBITDA between $4 to $6 along with cash of $14 per share implies a share price of between $42 and $58 if the company gets a 7x EBITDA multiple.

But as you can see, all of heavy lifting is going to take place in the second half of 2013 and beyond. Until we start seeing some of those results, there is not too much information to give us insights to whether the company will reach its goals or not.

Still, it is encouraging that management has thus far exceeded its goals, and they gave some positive, albeit guarded, comments about the second quarter. In particular, there appears to be a pick-up in spending in some parts of the world and they said they are seeing a firming up of bookings as a result. And while I didn’t listen to any of the competitor conference calls, it was mentioned on the Comverse CC that this had been said by a competitor as well.

One unabashed positive for the quarter was that the cash level ended up higher than anticipated. Comverse ended the year with about $14 per share in cash. The absolute level of $305 million was up from an expectation of $285 million.

It also appears that they are making progress on their expenses. If you look at the company’s segment performance for the fourth quarter versus the first and make the same one-time segment expense adjustments that the company makes for its Comverse Performance metric, it appears that expenses from Comverse Other, which primarily consists of the corporate and SG&A expenses, dropped to $42 million in the fourth quarter versus $53 million in Q3. If you annualize that number (something that is perhaps not a wise thing to do so take this with a grain of salt), you see an expense reduction of $44 million.

But I’d be the first to admit that I’m not sure if this comparison can be made so directly. For the moment lets leave our conclusion to this being a potential positive trend that should be re-evaluated when the second quarter results are posted.

Comverse continues to look to me like a second half story with good potential. The fourth quarter results were strong enough for me to add slightly to my position, but there was not enough certainty to compel me to add substantially. I’m hoping that the first quarter results have a few more hints of an upswing, but hopefully not enough to cause the stock to take-off before I can add. I’d like to see Comverse be a big second half winner.