Tag Archives: nasdaqconn

The V20 Portfolio – Relative Calm

Summary The V20 Portfolio declined by 0.51%, less than S&P 500’s gain of 0.04%. The share repurchase program will continue to support Conn’s. I wouldn’t worry too much about MagicJack. Despite lower activation, the company continued to produce good cash flow. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! The S&P 500 was essentially flat this week, rising only 0.04%, beating the V20 Portfolio’s performance of -0.51%. While the V20 Portfolio didn’t beat the index, considering its historical volatility, the “decline” was inconsequential. Portfolio Update Our biggest position, Conn’s (NASDAQ: CONN ), continued to rally, rising 5% from $25.72 to $27.02. This echoes my sentiment in my previous update, that the company’s share repurchasing activity will continue to buoy the share price. As the company inches closer to its Q3 earnings in December, it would appear that investors are quite optimistic (or at least more optimistic than before). Month to date, shares have risen by 42% from its low in October. Last week I also mentioned that we should pay attention to the consumer sentiment index, which could impact investor expectations, especially for the retail sector. Recently we’ve seen several retail stocks fall (e.g. Walmart, Best Buy). The final consumer sentiment index for November was 91.3, which was higher than October’s reading of 90.0. This hasn’t stopped investors from dumping retail stocks however. Fortunately for us, Conn’s buyback program will offset this near-term downward pressure. MagicJack (NASDAQ: CALL ), previously our largest position, continues to account for a substantial portion of the entire portfolio (~20%). It was quite surprising when I heard of news of a short attack on the stock. MagicJack can possibly take the title for the worst short candidate in the world with its high cash balance and high cash flow generation. These are the reasons why I still want the V20 Portfolio to get some exposure to the stock in the first place. I haven’t bothered to write a piece rebuking the short pitch, since it doesn’t reveal anything that we don’t all know already. The facts are right, but everyone is entitled to their own interpretation. Ever since day one, I believed that MagicJack’s value is derived from a core group of customers that will renew year after year. Now that shares have appreciated from a few months ago, more value has to come from growth. But this doesn’t change the fact that the company still has a good business (albeit declining) that is generating cash flow year after year. Furthermore, growth opportunities come at almost no cost to MagicJack. There aren’t expensive projects that would require a truckload of cash or any upfront commitments that would put a drag on the company’s current operation if things don’t go their way. In other words, the company can’t really lose with these expansions Looking Ahead Conn’s will report Q3 earnings next month. From a sales perspective, we know that Q3 numbers will experience a boost from new stores. The company releases monthly sales data, so the revenue increase should be expected. The determining factor will be the company’s bad debt expense, which forecasts future delinquency rates. The company has made significant improvements in its credit policy, so I believe that the number could improve. After all, the company is now lending to more credit-worthy customers. Dex Media (NASDAQ: DXM ) is still undergoing restructuring negotiations. The forbearance period was supposed to expire on Monday, but it was extended since the negotiation is still ongoing. It would seem that the forbearance period is really just a legal nuisance, and could be dragged on while negotiations take place. Nevertheless, I do believe that Dex Media is very close to its end-game, and shareholders will soon know the results of the restructuring. The amended forbearance period expires on December 14th, so keep your eyes peeled for any new developments. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

The V20 Portfolio Week #7: Outperformance

Summary The V20 Portfolio appreciated by 5% against S&P 500’s increase of 1%. Don’t celebrate my “win” on MagicJack. Spirit Airlines was pitched by a hedge fund manager. Conn’s boosted overall performance, likely as the result of buybacks. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! It was another great week for the markets, and an even greater one for the V20 Portfolio. The S&P 500 was up 3%, lagging behind the V20 Portfolio’s performance of 5%. Month to date, the index is up by less than 1% while the V20 Portfolio has appreciated by 5.3%. Portfolio Update MagicJack (NASDAQ: CALL ) continued to underperform this week, falling 6%. There were no news, so it would appear the investors have become bearish again. I was rather fortunate in that I reduced MagicJack’s stake by 50% last week after earnings. Since then, the stock has dropped by almost 20%. Did I foresee this sharp decline? The answer is no. My original rationale for the position reduction was that because the investment thesis has shifted to more of a growth story, the company no longer deserved the exposure that it had. If I had the foresight to realize that the market will again be pessimistic about MagicJack, I would’ve sold the entire stake and rebought at current prices (or whatever prices that I deem to be the “bottom”). The point is that there is no need to celebrate this “win” on MagicJack as you should not let price dictate the validity of your original decision. Had MagicJack shares appreciated significantly after I sold my stake, the mentality would’ve been the same. This reminds of Icahn’s sentiment on his Netflix exit: You’re never going to get the top. Once in a while you get the timing right, but that’s like Vegas. As MagicJack slides further, the odds tip more and more in my favor. Similar to Conn’s, at a certain point, I will add to the position once again. In other news, one of our major positions was brought into the limelight by Whitney Tilson , who coincidentally owns MagicJack as well. Spirit Airlines (NASDAQ: SAVE ) was one of the top performers this week, with its shares rising 7%. If Spirit Airlines was not the top performer, then what was? It is none other than Conn’s (NASDAQ: CONN ). The stock remains controversial for investors, just look at the comment section in my past articles ! With the buyback program in place, there will be more upward pressure in the near-term. This week, the position rose by 12%. I cannot determine how much of this increase can be attributed to higher demand caused by the buyback program (as opposed to market participants), but I do believe that this upward trend will likely continue until the buyback program is halted. Looking Ahead From a risk perspective, I continue to look for a cheap energy company to offset my commodity exposure stemming from Spirit Airlines. As for Dex Media (NASDAQ: DXM ), the forbearance agreement will expire on Monday, so I do expect news regarding the restructuring proceedings soon. Since the position is so small (

The V20 Portfolio Week #4: New Position, And A Bumpy Road Ahead

Summary The V20 Portfolio underperformed the index. Weight has not shifted from MagicJack to Conn’s, although it could happen after Q3 earnings. Spirit Airlines was added to the portfolio. Oil companies could be on the radar in the future. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! Unfortunately it was another week of underperformance for the V20 Portfolio. Over the past week, the V20 Portfolio declined by 2.1% versus S&P 500’s minute gain of 0.17%. The biggest contributor to the decline was none other than Conn’s (NASDAQ: CONN ), the repeat offender. Its shares dropped from $23 on Monday to $19 at Friday’s close. Considering that the stock represented 28% of the V20 portfolio, a 17% decline definitely put a dent in our returns. Still No Shift In Portfolio Two weeks ago I mentioned that our position in MagicJack (NASDAQ: CALL ) was getting a bit bloated. You may be wondering, why did I not shift some of the weight to Conn’s. There are two reasons. The first one is that I don’t think the stock declined enough to warrant additional purchases. From the last purchase price of $23, the stock “only” declined by 21%. I say “only” because Conn’s has been so volatile that these movements don’t surprise me at all. As the company won’t have much news (other than sales releases) between now and Q3 earnings (December), the stock may continue to fluctuate wildly, meaning that there could be more headwinds for the stock over the short term. Secondly, MagicJack remains undervalued. Although it is not as attractive as before due to the substantial increase in share price (~40%) over the last little while, its Q3 earnings may serve as a strong catalyst for the market to push its shares to fair value. Considering that Q3 results are only a bit over a week away (November 9 th ), holding MagicJack still makes sense. That being said, if MagicJack appreciates substantially (20%+) without any change in fundamentals, then the weight should shift towards Conn’s as planned in the near future. New Position The new position is Spirit Airlines (NASDAQ: SAVE ) and you can read my analysis here . This investment is a rather unconventional one as value investors typically don’t like airlines. As Richard Branson puts it: “If you want to be a millionaire, start with a billion dollars and launch a new airline.” However, I think that the stock’s post-Q3 decline was completely unwarranted and the company still has a lot of growth potential as evident by its fleet expansion. One of the concerns was that the company’s revenue growth declined (driven by pricing pressure). It seems that investors underestimated competitive forces in the market and didn’t realize that if revenue growth stayed constant, the company would’ve earned 70% more than 2014, a quite unrealistic number in a competitive market. For that reason, I believe that what had transpired was very normal, hence the post-earnings crash provided an excellent opportunity for the V20 Portfolio to get some exposure to the airline industry. The Weeks Ahead Perion Network (NASDAQ: PERI ) will be releasing Q3 results on November 3rd. While not as significant as MagicJack, the stock still makes up a healthy chunk of the portfolio (> 10%), so I do expect some volatility on Tuesday. As mentioned earlier, MagicJack, which accounts for over 30% of the portfolio, is set to release Q3 results in less than two weeks. No matter the outcome, it will have a large impact on the overall portfolio. Unfortunately, high volatility is one of V20’s characteristics, an idea which I’ve emphasized since the beginning of this series . Because the V20 Portfolio now includes a fairly cyclical position (Spirit Airlines) that is prone to external shocks (i.e. oil), I will be looking at commodity investments that can offset movements in oil. I’ve debated about whether I should include oil stocks in the V20 Portfolio, as I’ve never considered them to be core holdings. However, now that Spirit Airlines exist in the portfolio, I believe some commodity exposure can be justified, as it can be treated as a hedge against the airline industry.