Author Archives: Scalper1

A Way To Own The Next Tech Unicorns

By Tim Maverick What investor wouldn’t want to own a tech unicorn? That is, a technology company, still private, that has a billion dollar-plus valuation based on its fundraising. Initial investors cash in on unicorns in a big way when these companies are either bought out or go public in an IPO. But that’s the realm of Wall Street and venture capital types… right? Wrong! There’s an obscure type of investment, tucked away in a recess of Wall Street, that allows everyday investors to get in on tech unicorns. Closed-End Interval Fund These closed-end interval funds have been in existence since the Investment Company Act of 1940. There are 58 such funds currently active. In effect, a closed-end interval fund is a strange mutual fund. It offers the same transparency and regulatory benefits of a normal mutual fund, and it’s continuously offered and priced every day. But, as the name suggests, closed-end interval funds are highly illiquid. Such a fund can only be sold at specified intervals . In many cases, such a fund can be sold only quarterly, and the fund will only buy back a portion of your shares. Thus, any money invested into such a fund isn’t money you’ll need anytime soon. It has to be very long-term, serious investment money. SharesPost 100 Fund But where do the tech unicorns come in? Well, one closed-end interval fund focuses on private firms that the fund manager believes are just a few years away from going public. In other words, late-stage tech companies. The fund is the SharesPost 100 Fund (MUTF: PRIVX ), and the investment minimum is only $2,500. Just to be clear to readers, I do not own the fund, and I have no affiliation with the fund. SharesPost 100 is currently invested in 31 companies. You can look at the current portfolio here . The fund’s eventual goal is to ramp to holding 70 to 90 names as more people invest. Ultimately, it aims to include more names from the SharesPost 100 list . According to Bloomberg, the fund has $68 million under management. Fund manager Sven Weber told Reuters he’d like to have $200 million under management within two years. Since its inception last year, the fund is up about 25%. But it hasn’t been very active recently, since the market for such companies has cooled in the past few months. It’s important to note that the fund will offer to buy back 5% of the outstanding shares from shareholders each quarter. If more than 5% of the shareholders want to bail out, they’d receive a pro-rated amount of the quantity they wanted to actually sell. The fund can suspend redemption privileges, as well. SharesPost also charges a sales load of 5.75% on amounts under $50,000, though the load drops as you invest more money. There’s also an advisory fee of 1.9%. So there you have it – a way to invest in tech unicorns, albeit one with a few warts. Personally, I could handle the fees and the risk of owning these shares, but the illiquidity is a big hang-up. What do you think? Leave us your thoughts in the comments section. And if you do decide to invest in the fund, please read the prospectus for a full look at the risks involved. Original post

Market Lab Report – Review of Pocket Pivots for the Week of 12/14-12/18/15

Trading Journal Notes from Gil and Dr. K regarding this past week’s pocket pivot alerts: China Biologic Products (CBPO) GM – Thinly traded Chinese stocks always make me nervous. This one had a pocket pivot on what is basically a flag breakout, and I am not a fan of buying into breakouts, especially one this extended. The stock has been able to edge higher, but a big outside reversal to the downside on Friday came on heavy options expiration volume. This might be better to look at if the pullback carries into the 10-day line as volume dries up. DrK – Volumes are always exaggerated on quadruple witching day, thus a stock should not be penalized for heavy volumes on such a day. A constructive pullback to the 10-day moving average in context with the general market could be bought. Average daily dollar volume is about $25 million so it is on the thinner side but not so thin it cant be considered. That said, the more liquid the Chinese stock, the better, especially in this market environment.  Stamps.com (STMP) GM – Another flag breakout following a buyable gap-up in early November. Again, I am not a fan of buying breakouts like this, and the pullback into the 10-day line following the breakout makes my point. This might be buyable here along the 10-day line, which offers a much lower-risk entry point, but whether it is able to hold will depend heavily on what the general market does this next week. DrK – Buying the stock as close to its 10dma lowers the risk. A stop could be placed just under the lows of Friday which would also place it just under its 10dma. Were the stop hit, the stock would then have dropped back into its prior base where it could be sold.  Ligand Pharmaceuticals (LGND) GM – this is a pocket pivot base breakout from a sloppy base so, again, I’m not looking to buy this on such strength. The stock was shoved back into its 10-day line on Friday, but showed some spunk by rebounding and closing in the upper half of its intraday price range. It seems to me that if you were looking to buy this you had to hold your nose and buy it right at the 10-day line on Friday. If one were going to try and buy this in the face of the weak general market action over the prior two trading days, one would certainly want to use the 10-day line as a guide for a reasonably tight downside stop. DrK – LGND shows resilience by closing midbar in the face of a heavy down day in the major averages. Had one bought LGND on Friday as it neared its 10dma, you are sitting in a good position as a sell stop placed just under the lows of Friday works well as it uses the 10dma as a selling guide. That said, it is not easy to buy a stock when markets are aggressively selling off as they did on Friday. In such an event, one strategy is to keep a one percent stop under the moving average being used as a selling guideline to keep risk to a minimum while preventing whipsaws. If you are looking to buy LGND, you could either wait for it to trade closer to its 10dma, or alternatively, should markets recover and should LGND show strength not giving an option to buy closer to its 10dma, it could be bought knowing your risk is based on a sell stop placed just under Friday’s lows.  Weibo (WB) GM – The best place to buy this one was on the extreme VDU or “voodoo” pullback into the 20-day moving average six days ago on the chart. The subtle pocket pivot three days ago on the chart also was a reasonable entry given that the stock wasn’t very extended from the 10-day line at the time. Friday’s reversal to the downside shows why it might have been a good idea to sell into the strength on Thursday since the move from the voodoo pulback six days ago to the Thursday highs was about 10%. In this market, that is a gift that is usually best accepted and banked! DrK – Breakouts that look obvious usually have not worked in this market environment, so Thursday’s strong action could have been used to take at least partial profits. If you did not buy WB when we reported on this stock on November 25, or bought on constructive weakness when it had a low volume “voodoo” pullback for a few days leading up to December 11, you could still buy it provided it is not too far from its 10dma.        Â