SILC

[ygtrdr]

Yeah, I agree. Let's keep 3SoF above the crap that goes on at Yahoo and other boards.

[yukiii]

I don't wish for your stocks to go down, I just don't agreed with your exit plans and buying at highs.
I rather pick my own time to buy and sell.  David you have had a habit of loosing profits because of this.
I don't like to loose anything if i can't help it.
1. Why buy Jakk at its high bad timing,  TZOO overvalued when you picked it.
2. Why not lock in your profits on SILC.
3. You say you will hold stocks long term and when i say time to sell you say you are holding for your targets. Them you sell wcg, jaso, tsl. 
4. why buy NGA after it up 50% its a momo stock it will go down when everyone leaves.
What will happen when the market goes down, your portfolio will go back down again.
the market keeps going up but your portfolio isn't moving because of your principals.

When I say stock will go down, I don't say i don't like your picks. They are usually good, just don't
agreed on the timing. We need to better job on this. I am here because of the potential of this site.
But it keeps changing strategy, and we need to work on a better one. There is a flaw in your valuations also in giving to much growth forward that won't materialize. (Overly optimistic)

You guys make fun I bought SILC at $4 and sold it at $15 and put my money in WPCS $10 to $14.
SILC goes from $15 to $26 and now back to $21. I will buy back SILC one day and continue on. Why hold on when it overvalued?  Just find another undervalued play  or sell half. There where many good picks here last year, which I sold within  weeks some 2x or 3x but most when back down it you hold them to long. David you do not account for a bad quarter to lock in gains, which is a big thing
with small caps. They don't keep going up.............

[DragonAMG]

Just find another undervalued play  or sell half.  They don't keep going up.............

I do that exact same thing  after a huge run up and when I still really believe in the company... satisifying both sides... the side of me that says "lock in the profits" and the other side that says "this thing can still go up but I'm not sure".  Do I always make as much as I potentially could? No. But, I sleep much better and I'm limiting my potential loss in the event it retraces (and they always do). 

[rickjust]

hi,
i agree with yukii on this . locking in profits is the most important. zurich axiom 2
Major Axiom 2: On Greed
Always take your profit too soon.

this works for me . i sleep better . knowing i took profits too soon even if it can go higher without me .

[dmdray69]

Wow, some interesting points.  I've been here for about 2 years and things have changed a lot around here as far as strategy.  However, I have always felt as though David has his and our best interests in mind.  He follows his gut and experience as the market and its multiple personalities present themselves.  He has character, which is why I have remained a member.

When I first got here it was about day trading, swing trading and market timing.  I still see glimmers of it.  Like the other day with SILC earnings call.  David correctly called that it would drop after earnings but using his new long term strategy he held anyway to not lose his position.  2 years ago he would have sold in the morning and watched it drop with satisfaction and then watched it to reenter.  Even today, a week later, he could have gotten back in for less money but there is no way of knowing that.  With NVTL, David also held through earnings even though it seemed it might be overextended.  But NVTL kept going up and so in this case David was a genius.  It's all 20/20 hindsight but I appreciate the concept of a consistent stategy.

Here's where I have a problem and can kind of see what Buddjas1 and Yukiii are talking about.
Beginning of March David passionately went short the market and gave a huge defense for it.  He sold me and I went short along with him with IBN and FMCN.  Then 2 weeks later in one day slammed on the brakes and said he was a long again.  Thank God I was watching day to day to catch this or I would have been caught.  I actually covered my shorts with a very small profit.

I place a lot of trust in your initial analysis so often times I am caught off-guard by your quick 180's.  The biggest problem I think you have David is that sometimes you leap too fast and before you have all the information you need to really make a truly confident decision.  These erratic 180's also occur with many of your long purchases as well.  Let me give examples.

CPNE, according to your initial analysis is a 15-30 bagger with great long term potential.  Within a week we all find out it's a sucker stock with too high a churn rate and the stock tanks.  In fact, it really sells just a bunch of crap.  I'm sure a little more digging could have revealed this.  If I had been on vacation after I bought into your initial analysis that I trusted I would be down 50%.  Actually I was up and then ended up losing all profits and taking a 15% loss.

SYX was given all the glory to be at least over 60 bucks but you had a short term target of 30 you passed on.  I sold at 27.17 and made 60% so I'm not complaining too badly but when you posted your iniital analysis it was a long term hold because sales were going crazy.  It now sits at 16.68, 27 cents below where I bought it.  We later found out they were selling a lot but marking down even more, killing margins.  Your analysis didn't consider this possibility and ignored the tremendously high complaint rate the company enjoys. 

GOAM is another you jumped into before you knew the whole picture.  We made money on it but those of us that jumped in know it was really lucky we got out when we did because after digging deeper you saw it had very limited potential and subsequently dropped below our purchase price. 

On April 15th, JASO was a great long term hold that with an "optimal selling price" of 73.12 and 3 year price projection of 114.  This made me and I'm sure many others very excited.  Cool, I buy in at 25 and change.  On April 16th you called it a sure thing.  One week later you do "some more digging" and find a document that was available before your initial analysis that has the correct amount of outstanding shares.  Uh oh I'm getting nervous.... but at least your new optimal selling price is still pretty good a 42 bucks.  A week later you realize your 120% rev growth projection is way too high since it was linked (maybe) to the incorrect # of outstanding shares and POOF! the optimal selling price is now 14 bucks!!!!  Two weeks ago I was going to buy this company at 25 bucks and sell it in 3 years for 114.  Now it's gone in 2 weeks and I made a hundred bucks.  Talk about a whirlwind of emotions. 

BLFY is another that you gave up on that you planned on holding for the long term but sold after a small loss and a couple of months of single penny moves.  I have to admit it was like watching grass grow.   

Now I am sounding negative but everything I wrote is factual and only meant to point out my opinion of how things can be improved.  Like Yukiii wrote, I think you are often too optimistic, not digging deep enough in your initial analysis to find some of the things that later show your initial analysis or maybe more importantly, your initial enthusiasm to be misplaced.  There must be a better litmus test to back up your picks so that there is a chance of adhering to your long term philosophy.  The philosophy is sound, it's your picks that have not always been.  It seems that there must be a longer watch period so the stocks can prove themselves.  If they are truly long term winners they can be watched a little longer without missing out on much.  Maybe create a watch list.  Just looking, no touching!!  Some of these startup companies with weak or okay balance sheets and seemingly great potential have been killing us with dilution.  Weed these out or watch them.  Just don't buy them yet.  Meanwhile, concentrate on some proven winners like GIGM and NVTL (my only holdings right now) until you can add more solid picks to them.
Then on the ON FIRE portfolio you can satisfy your swing trading crowd with more of a technical analysis of companies with good fundamentals.    You are talented in capturing short term moves within the chart of a long term hold..... and let's face it......it's fun.   Maybe allocate a smaller portion of you total assets to this portfolio.  You can lock in profits after a healthy gain and accept small short term losses because you know you aren't banking on this portfolio for your long term appreciation (this is what you more rock solid main portfolio would be doing long term).  Swing trading does seem to be in high demand here and I think it can keep you sharp.

I didn't realize how much I was going to type until I got started but the bottom line is that David is good but he could be even better and this site could be better.  I think he would be the first to say this himself and that is why I feel comfortable writing this.  It is David's honest effort and character that will keep me a member for the long term.  Ray

[buddjas1]

You all post some interesting points; so "applaud" to rickjust, yukii, etc.

Let me start by saying that I do not know everything.  The stock market is an infinite learning curve. 

My experience tells me that David's new "long term" holding theory is the best theory for wealth accumulation.  That said, David's recent picks are not the best stock for that model.  SILC, NVTL, etc., have been stock that have already seen a 100%+ run in the past six months or so.  They all require what David would call "future catalysts," i.e., twelve straight quarters of good EPS.  That's not sustainable.  They are bound for a "correction" and even stellar earnings cannot support the trend.  That's why SILC retreated and NVTL will accumulate (even the analysts "upgrades" are minimal).

David's "long term" holding theory will best support stocks that are already undervalued based on current earnings.  That way, the stock must catch-up to its value, especially over the long term.  That is exactly what Buffett does.  My examples here are:
PTNR ($9.50 to $16.73) (http://www.3stocksonfire.org/trading/index.php?topic=6918.msg96771#new);
ACH ($25.00 to $29.36)(http://www.3stocksonfire.org/trading/index.php?topic=9132.0)
AZZ ($40.00 to $58.25) (http://www.3stocksonfire.org/trading/index.php?topic=7597.msg78332#msg78332)
CPA ($34.26 to $63.27) (http://www.3stocksonfire.org/trading/index.php?topic=6919.msg72555#msg72555)
VPHM ($6.60 to $24) (I bought soon after earnings posted of $0.36 for the quarter, knowing that growth would continue).

They have all posted significant gains because the stock's price had to "catch-up" to its value, thus making the stock a great long-term pick.

There are other stocks that currently fit that model.  We just need to find them.  IEAM is one.  I believe ELP is another.  Price will eventually, i.e., long term, catch-up with value.

Those are my thoughts.  David has the correct idea, but the stocks have not fit the model well.  That is why I seem to sell when David continues to hold.  However, we can find stocks that will.

[stocky]

Though David strategy need not be defended but it would be good idea to explain something: Its not a day trading, momo or swing trading. If you are looking for this stuff then you may be disappointed.

About IN and OUT take the case of GIGM or VPHM, where you will put the exit, after 1 bag, 2 bags or even more. On the other hand ppl were bragging when they made either a bag or couple on ACOR [sadly this one was not picked by 3SoF, I think David was not around that time], well the long term holders does have something to smile.

Theoretically short term beats head above all kind of trading provided you are a visitor from future with list of all IN and OUTs. Otherwise you will for sure miss the bus.

The timing can be made better but whenever David is going to recommend the 3SoF has now quite a big following so dont think that a less liquid stock will not move.

On the other hand it would be good idea to present some stock ideas. I think David should look at APPL and MIVS. The first one has proven record and second one is speculative. Just my two cents, I dont have any position in these stocks.

[eggman11]

David,

What is the new target price for SILC after the new shares are factored in?

Thanks

[David Randolph]

David,

What is the new target price for SILC after the new shares are factored in?

Thanks

Good point eggman11, before I start digging into the RAD Group (which controls SILC), I need to compute my valuation model taking into consideration the new shares and the $17.9 M the company received from the recent private placement. I'll do that over today's update, I need to run to pick up my kid for karate now.

See ya

[wxmang]

This Fool.com article was just released and I am pleased to see that "SILC" was at the Top of the Fool.com Networking & Communication Devices CAPS rating list.
Check it out:

http://www.fool.com/investing/general/2007/05/07/before-the-call-cisco-sings.aspx

One more thing....
I tried to purchase some more SILC shares when it was down almost 5% this morning and man I was not happy about this...
My Broker: TradeKing, is saying this when I tried to place the order:
"This is a Foreign security that will incur an additional processing fee of $75."

What kind of BS is this?
This is new by the way..
It used to be just $4.95.
I am kind of bummed, because I have only a 5.7% portfolio position in SILC


Wxmang

[David Randolph]

David,

What is the new target price for SILC after the new shares are factored in?

Thanks

Ok, what we have from the recently announced private placement are 875,000 new shares issued and outstanding and the possibility of having another 218,750 new shares coming from warrants converted if the share price exceeds $28.25. I'm going to use the fully diluted share count as my initial share count number, which is:

5,653,000 + 875,000 + 218,750 = 6,746,750

Since the company just received $17.9 M, it will have working capital of $31.44 M and a current ratio of 6.9, which represents a very strong balance sheet. Therefore I'll lower my dilution factor going forward, from 1.0834 to 1.02.

Oops, I also noticed that the Networking & Communication Devices industry average earnings multiple declined from 33.55 to 26.94 now (this will surely have a big impact, I need to find out Yahoo's calculation method, not sure I can trust it as being accurate).

After these changes, the results of the valuation model look like this:



SILC is still one of the three most attractive stocks of the Main Portfolio, with an expected share price CAGR of 64.96% and an optimal selling price of $60.44.

This Fool.com article was just released and I am pleased to see that "SILC" was at the Top of the Fool.com Networking & Communication Devices CAPS rating list.
Check it out:

http://www.fool.com/investing/general/2007/05/07/before-the-call-cisco-sings.aspx

Hehe, it's nice to see SILC mixed with those mammoths, even more so since it has more stars than all of them and then they say "does not meet the $100M market cap minimum.". Well, they're wrong about this, because SILC currently has a $128 M market cap.

One more thing....
I tried to purchase some more SILC shares when it was down almost 5% this morning and man I was not happy about this...
My Broker: TradeKing, is saying this when I tried to place the order:
"This is a Foreign security that will incur an additional processing fee of $75."

What kind of BS is this?
This is new by the way..
It used to be just $4.95.
I am kind of bummed, because I have only a 5.7% portfolio position in SILC 

If your broker charges an extra commission for trading shares of foreign companies (when they're traded on US exchanges) I have to say you should change your broker, maybe to interactivebrokers.com.

Technically I would say SILC will probably meet the 50 days SMA at the 50% fibonacci retracement level and that will probably be near the low point of the current correction phase. But I wouldn't dare, as I haven't done it in the past, to take profits now to buy just a bit lower. I want to hold SILC for all that it has to give me, which seems like a lot.

I'll continue holding SILC.

[David Randolph]

As one can read over this form 6-K filed with SEC yesterday after the close, many institutions were involved in the recent private placement:





These people bought 840,000 shares at $20.5, and since the deal was closed, SILC traded just 596,400 shares, so I guess most of them are still holding. They're winning just 0.58% on their investment. The questions now are:

1) Are these institutional investors going to sell or hedge their position now for a slim profit?
2) Or they know fundamentals are attractive and they'll be able to sell/hedge their position at much higher prices in the not so distant future?

I don't know, but my guess is they're not going to sell here and yes, they know the company's fundamentals are very attractive at this point.

My valuation model says SILC will be worth $94.35 three years from now, and that means an average annual return on your investment of 66%. Very attractive by all means.

I'll continue holding SILC.

[David Randolph]

Technically SILC seems to be waiting for the 50 days SMA support to start a new bull run. Perhaps it will meet the 50 days SMA (currently at $18.4) at the 50% Fibonacci retracement level, which stands at $19.5. I don't know about the short term, but from a long term perspective, the extrapolation of SILC's fundamental trends tells me stock has a much superior value.

In fact value rose substantially today because the Networking & Communication Devices average earnings multiple (the number I use for my EPS multiple estimate) rose from about 26 to roughly 36 (I guess it has to do with CSCO's earnings out overnight).

SILC has regained the second place in the top holdings of the Main Portfolio, in terms of their attractiveness at this point in time. I'll continue holding SILC.

[realcoolhead]

How so? CSCO dropped 6.5% so the average P/E should decrease instead of increase? Even if other companies in the group rise, the jump from 26 to 36 is too big not to be a data error.

In fact value rose substantially today because the Networking & Communication Devices average earnings multiple (the number I use for my EPS multiple estimate) rose from about 26 to roughly 36 (I guess it has to do with CSCO's earnings out overnight).

[David Randolph]

How so? CSCO dropped 6.5% so the average P/E should decrease instead of increase? Even if other companies in the group rise, the jump from 26 to 36 is too big not to be a data error.

Not necessarily so, if EPS declined more than 6.5% CSCO's P/E would have increased, so the industry average would rise too. But you're right, this doesn't seem to be the case since CSCO's EPS was the highest ever and the change is too large. However, there's some confusion when making comparisons to the year ago period because CSCO changed its fiscal year (my fundamental data service has two quarters as Q1 2006, giving me $0.42 EPS for that period, so $0.31 now would mean a 26.2% drop in EPS).

Anyway, this confusion will prompt me to inquire Yahoo Finance on their method to calculate the industry average P/E (I wonder if it is a simple or weighted method). I'll do that tomorrow morning and will post the answer on this message board.

Thanks