KNOT (Knot Inc)

www.theknot.com is a website dedicated to helping plan weddings, engagements, and all the extras that go along with getting married. The company makes over half of their revenue through selling ad space on their site, and the rest through selling wedding supplies and publishing associated magazines.

The company is only recently profitable but it has good experience in growing its name brand. Earnings have picked up exponentially this year as much of what has been built over time is now finally paying off. The company has also opened a new site (www.thenest.com) to offer help to newlyweds as they set up life together.

I got involved in the stock after it offered a 2ndary pricing in August and the stock subsequentially ran up out of the base created when the stock was weak around the secondary. I have traded in and out of some of the shares while keeping a good portion of my initial purchase to hopefully hold for significant long-term gains. I bought an additional position today (1/8/07) as the stok moved off the 50 day in strong volume. This brings my position up to 14,000 shares or just under 5% of my portfolio.

Currently earnings for Q4 are expected at 0.10 versus 0.06 last year. This wll translate to $0.42 for the year which means that the stock is at a pretty steep multiple. Growth must remain strong in order for the stock to continue, but this should be feasible. Sales are expected at 23.83mm versus last year at 12.8mm.

Jan 16, 2007

One of the KNOT executive's caught the market's attention today as he excercised options to add to his holdings. The stock rose 1.57 or 5.3% in the heaviest volume we have seen since August. It paid off to have a large position but as i thought about it, I realized that this was probably a good time to take some profits. I believe the stock will keep running, but there was ample liquidity to sell into today. If the stock was declining, it would be difficult to unload my shares without pushing the market lower so instead i am using this buying pressure to unload just 4,000 shares at a nice profit. I may take the opportunity to add those shares back at a time when the risk is lower but for now I am content to hold my remaining 10,000 shares which still represents about a 4% position. I currently have $34,000 in realized gains and $70,000 in unrealized gains.

Jan 26, 2007

The market is flashing some warning signs and while KNOT is holding up close to its previous highs, it has gotten a bit choppy and may be ready for a bit of a pullback. The options have a decent amount of premium in them so I decided to hedge half of my position with March 30's selling them for $2.40. This still leaves me with 5,000 shares un-hedged to run if we trade up from here, but gives me a little income or some downside protection if the stock doesn't continue to make new highs.

Feb 14, 2007

Yesterday the company came out with their Q4 earnings report and conference call. The stock didn't trade so well on the announcement even though EPS was up 167% from last year and revenue up 70%. The forward guidance still seemed pretty robust but obviously it fell short of what was hoped for. During the day I bot in the calls at a very low price and then late in the day I bought an additional 5,000 shares because I still had a profit and thought the chances of a rebound were pretty high. The stock closed right about the level it broke out from in November propelling it to a nice run so hopefully there is support here.

Today as i watched it trade, there didn't seem to be too much buying interest and so I turned out the 5,000 shares at a $0.50 profit which was ok and i still hold my original investment. I guess it is fair to say this stock is "on probation" and will be cut soon if it doesn't show some life from these depressed levels. I like the company, and think they have a unique and exciting business model but if the stock isn't trading right I have to have the discipline to cut it.

Feb 16, 2007

Yesterday the stock got some strength but only took a dent out of the sharp selloff from Tuesday. I decided that the potential reward in holding for further gains was overshadowed by the danger now that the stock has broken down in such strong volume. This may be a name that works out a base and comes back stronger later but until I see it consolidate and develop a better pattern I am more comfortable watching from the sidelines.

I booked about $64,000 in profit from the trade so I guess I should be satisfied and willing to let this one go for a while.