INAP (Internap Network Services)

I came across this name while looking through arbitrage deals for Piedmont. The company is buying VSTH in a stock deal. The acquisition should help the company cross sell new services to existing clients at a point where the company is ramping up sales and becoming a profitable entity. The overall margins should benefit significantly from revenue growth as the infrustructure has been costly to put in place but there is little marginal costs associated with new clients.

I got involved in the stock as it traded out of a base that began in April. The breakout was in strong volume and really was a trade through a consolidation started after the stock broke out a couple of weeks earlier on lighter volume. Since then I have traded around my position a bit and added size to it at opportune times. I currently have a realized loss of nearly $30,000 which is due to selling calls against the position and then buyng in the stock at higher levels to keep the exposure on. My unrealized gain is north of $65,000 and this has happened in just a few months so I feel the buy has been one of my better trades and I expect the momentum to carry it further. I have a 4% position and 1/3 of that is hedged with calls that have recently flipped from being out of the money to now being in the money. Expiration is next week so it will be interesting to see whether the calls are assigned and then i will have to decide whether to ramp back up my exposure or leave it at a lower level.

Jan 19, 2007

Yesterday was a very difficult day for small caps in general. The Russell 2,000 dropped 1.25% and the IBD 100 dropped 2.4%. My account took quite a hit and a large part of it was due to INAP's drop. I looked all over and couldn't find any significant reason why the stock would be dropping except maybe people unwinding their merger positions. At any rate, the calls were not assigned and while i didn't get stopped out at the full 10% loss, I decided to use today's rebound to lighten up on my position until the picture is clearer. I sold 5,000 shares leaving me with 10,000 shares now un-hedged. The rebound today was in strong volume which is encouraging but I'm still a bit concerned.

Jan 26, 2007

Since the sharp selloff the stock has stabalized but not rebounded as i would have hoped. Normally I would give the stock more time to shape up, but there have been some warning signs in the overall market so on Wednesday I sold the last portion of my stock at 17.85 (before the stock made a late day run @#%@#$) In total the trade was only a slight success as i made a few thousand on a full position.

KBR (KBR Inc)

KBR is an engineering and construction services company... Nothing too exciting but they seem to have adiversified client base dealing with both government infrastructure as well as energy customers.

The stock came public at $17 and traded above $21 the first day. It consolidated for its first 3 weeks of trading and then made an incredible run up to 27.63. Since then it has pulled back grudgingly and the last week has shown signs of life again.

I don't know enough about this company to take an investment position and I'm not sure that I'm all that excited about the industry. However, the buyers are clearly out for this stock and It looks like a good risk/reward situation as the possibility of another strong run is looming.

Jan 26, 2007

After my purchase, the stock sold off sharply but then made a decent attempt at a rally. I was briefly positive on the position but the last 2 days have seen more selling both in the stock and yesterday in the overall market. I am trying to lower exposure so this name seemed a natural one to cut. I took a moderate loss but it is significantly less than the 10% manditory stop.

SBUX (Starbucks Corp)

I am probably going to take some flack for this one since i am almost religious about my caffene intake each morning but I think the time is right to short Starbucks. I actually tried to short the name last year as the stock initially broke down from its high, but the bull market in the latter half of the year stopped me out. The pattern has worked its way further including an attempt to re-take the previuos high which failed both in October and November. Now the volume is picking up as the stock trades through and below the 200 and 50 day average. I expect that this time we will get a full bout of selling as the market is showing more and more ominous signs.

Fundamentally, the stock is expensive. This is not a good reason by itself to short a stock, but the deteriorating technical picture as well as the high price may work well together. The stock has been a favorite among institutional and retail investors alike. This is definitely positive for my position because if everybody who has any interest already owns the stock, there is really no one left to buy more shares. Hopefully this will act as an absense of demand and allow the price to come in substantially. Finally, the company has expanded to the place they may have saturated their market. Now that there are 3 stores for me to choose from within miles of my house somewhat outside the city, even I can see that there will be challenges in finding new locations that don't canibalize the sales of previous locations.

Now please don't get me wrong. I love Starbucks. I will continue drinking it each morning (and afternoon... and sometimes evenings). My favorite is the Yukon blend, and my son David loves their hot chocolate and sour cream donuts. Part of me hopes that i am wrong and will get stopped out next week, but I think the prudent thing for me to do for our investors is to try to gains some returns short on this name.

GUID (Guidance Software Inc)

I am taking another stab at this name as it has rebounded above the IPO price of $12 and seems to be bringing in some volume with the positive trading. I believe the weak holders have been purged for the most part and now as investors begin accumulating positions, the name should show more stability. The group (software / enterprise) is in a positive trend and that should help drive interest in the name.

Jan 26, 2007

The market had a good day Wednesday and yet GUID did not participate. I'm becoming wary of some of the internal technical measures that i follow so i decided to reduce exposure and turned out this name in order to raise some cash. I ended up losing about 12 cents per share plus commissions so while it was a loss it wasn't a significant drain.

HLYS (Heelys Inc)

HLYS came public at $21 but has yet to trade below 30. It hit its ultimate high the first day of trading at 38.75 or almost double the IPO price. The company's main product (shoes with wheels in the soles) is in high demand. I could not find shoes in David's size when looking for them for Christmas. Sales have been phenominal and the company is ramping up EPS now as they have reached critical mass.




After letting the initial trading wear off, I bot on the 21st taking a 5,000 share position. The stock took another 2 days to consolidate, but on the 27th it ran up again and so I added another 2,500 shares. I expect to see the stock continue to run quickly as they report good sales for the Christmas season and more fund managers decide they need to have this represented in their portfolios. I currently have a profitable 3% position.



Jan 12, 2007

Heelys has made a very nice run the last 2 days giving me a 15% return on my total purchase. I have no reason to believe the stock will stop moving forward, but because of the quick run and the fairly large position I started with, I am a bit uncomfortable holding all 7,500 shares. Therefore, I took 2,500 shares off the table realizing about $10,000 in profits. I will continue to monitor, and I have faith the rest of the position will provide further gains.

Jan 25, 2007

For those of you keeping score at home who saw HLYS today and may want to congratulate me on such a great trade... STOP THE PRESSES... I sold it - yes that's right - i missed it. Yesterday I was uncomfortable with the way the overall market was trading and while i was accumulating some decent gains in my account, i wanted to reduce exposure and so i trimmed back some positions. HLYS was one of them... HLYS was up over 6% today... I HATE HLYS!!!

Ok, all kidding aside, I'm disappointed but knowing only what i knew yesterday I would still make the same decision. The market is down sharply today. Many of my decisions yesterday saved me from pain today. HLYS is a volatile name right now and i need less volatility. While i wish i had the gains that i forfeited by selling, I'm not going to beat myself up too much for this one as not all trades are going to be correct, but on the balance if i use proper discipline, I will end up doing well.

LRCX (Lam Research Corp)

LRCX operates in the semiconductor equipment group which has seen a lot of demand lately. It's difficult to understand all the technology that goes into their systems, but it is clear that the company has been winning business and growing earnings quickly. The group is also trading very well which should act as a tail wind for the stock.

I got involved after the stock traced out a well formed base with handle formation. The break above this formation was on high volume indicating institutional sponsorship. I think i got an excellent price on my initial purchase, but when i went back for more stock a few days later I bought at a very extended level which put me at risk. As the stock pulled back naturally, I had a larger position at a higher basis so I am now a bit under water even thought the stock has not traded in a very negative fashion.

I am watching volume carefully here as the stock has traded below the 50 day average but seems to be finding support right below this level. I expect higher prices over the next few weeks and I would like to see volume come back into the stock at this time. I am still watching 10% as a stop point and if it trades up but does not have corresponding volume I will have to think hard about turning it out.

Jan 23, 2007

Two days before options expiration would have taken half of my exposure, the company reported earnings and while the headline number was good, the guidance given by the company failed to impress the market. Some concerns include a deterioration in gross margins and the fact that the company announced it will no longer give order guidance. There were shipment delays which also cause concern from the demand side.

The stock sold off on the news even though it was trading at a fairly coservative multiple before the announcement. Currently it is holding just above the 200 day average and at this time the 200 day coincides with my stop level. I am holding on tentatively right now waiting to see if institutions will step in over the next few weeks and support the stock. If not, i will be forced to take a loss on the trade as there are plenty of other ideas that may be more promising.

Jan 25, 2007

The stock attempted a rebound yesterday but gave that ground back today. The market is flashing some alarming signals so I decided to cut back on exposure and this name is one that i am least comfortable with so i threw in the towell and liquidated today. This ends up being right at a 10% loss which is disappointing but i would rather be disciplined about selling than hopeful and stay around to take a bigger hit.

VTAL (Vital Images Inc)

VTAL priced a 2ndary offering on Nov 17 at $31.00. The stock traded poorly below this level for about a week as the additional supply weighed on the market. However the volume soon dried up and then the stock began to run up on somewhat increasing volume. On Dec 4th I bought 5,000 shares at $33.03 as the stock broke out of its consolidation in above average volume. I expected that the overhang was now complete and the stock woudl continue its run started in the 2nd half of this year.

The stock took a bit of time and made me nervous that it would not follow through. There were no significant negative signs but the positive movement lacked energy. The calls were attractive so I sold January 35 calls (about $1.00 out of the money) for $1.50. This move eventually proved helpful as the stock has run past 36 and then back down to my purchase level. However I missed most of the volatility because of the call premium and I have a gain in the position even though the stock now rests exactly at my purchase level.

I will watch closely until expiration and if the stock shows much weakness i will not hesitate to turn it out and let the calls expire at a profit.

Jan 25, 2007

I sold the rest of my position yesterday just below $33.00. While i took a loss on the stock portion of the trade, the option premium more than made up for it giving the net trade a gain. I am a bit hesitant to sell as the stock is not performing especially poorly, but it is rangebound and I am looking for areas to lighten up my exposure. I feel it is better to be missing an opportunity than to be missing capital lost to the markets.

AER (Aercap Holdings)

AER came public mid November at 23.00 It started the day out hot but closed just a bit above the offering price. It spent 2 months trading around the IPO price but appears to have now broken out of its range and volume has come in higher on the advance. The company is profitable and should recognize some revenue stability due to the dynamics in the Airline industry (its main source of business).

I bot the stock on the 5th as the stock pushed to a new recovery high on strong volume. I think $23 is a key level and I will be less likely to hold it if it crosses below that level as it proves my initial thoughts wrong. However it could run a good bit and still be priced attractively for a company with improving fundamentals. If it earns $2.02 next year as forecasted it will be at a very low multiple. I anticipate the stock beginning to recognize that figure unless we have bad news at earnings time.

Jan 8, 2007

I added an additional 2,500 shares at $24.30 as the stock broke above the $24 level that had been minor resistance. I wanted to have a larger position if it follows through from this level.

Jan 10, 2007:

The stock has made an impressive run in the last few days and now has a bit more risk of giving some of that positive action back. For this reason I went ahead and took the extra 2,500 shares off at $25.62 but I want to hold the original pice as long as the trend remains intact.

Jan 23, 2007

The stock has traded down a bit which is normal especially when the overall market is becoming more distributive. However, I wanted to use caution and raise some cash and the shorter-term trading positions ended up being where I took some profits. I sold the 5,000 i had left at $25.39

BARE (Bare Escentuals Inc.)

BARE has started a trading pattern that shows some good opportunity. The stock is trading well above it's IPO offering and has held up very well for the last 3 months. Each significant dip has been met by strong buying power with volume showing signs of institutional support.

Fundamentally the company looks like it is gaining footing as sales and EPS have picked up over the last few quarters. The trade back above the 50 day this week caught my attention and I put on a small position on the 8th at $33.30. So far the trade has acted well and it is not a name I want to hold long-term until there is a little more solid information and trading history.

Jan 16, 2007

As i looked at my positions this morning, I noticed that BARE was running up against what appeared to be some stiff resistance around $35.00. While this was no reason to be paranoid, I did have a nice profit that I received fairly quickly in the name and the market was not particularly exciting this morning so I decided to take 1/2 profits off the table. I sold 2,500 shares at 34.91 only to watch the stock trade up and close above $36.50. I'm glad I left part of the position on the table but a bit frustrated that I missed the move with the other half. Damage control is important but it definitely keeps you from missing moves at times. So for now I have a realized gain of about $3,900 and unrealized gains of $8,200.

Jan 23, 2007

The stock traded through 35 without any problem and made me question myself for taking some of those profis early. However, after just a few days, the stock has gotten weaker and that coupled with a market that has been showing some signs of distribution has me a bit more conservative. I decided to liquidate some of my shorter-term trades and downsize on some i am less comfortable with. I took the rest of my profits in this name and closed a good but not great trade.

SNDA (Shanda Interactive Entertainment)

SNDA is not a typical investment for me. The stock is coming out of a long downtrend and while it has had a positive move the last 6 months, the chart looking back several years shows a good bit of pain.

The company is a chinese internet content firm. Currently sales and earnings are decreasing on a year-over-year basis but the expectations are for this to turn back up. The company has a new model that is attracting usuers better and generating better margins per user. This is driving an increase in the stock multiple as the company should be able to leverage this successful model to the main public. There are several new games planned to launch in 2007 that will drive further growth.

I currently have 10,000 shares with cost of 19.50. I have done some hedging since to reduce the volatility but as of today the 10,000 shares is all I am holding. I will watch both the fundamentals and the technical pattern carefully and I don't anticipate holding if either area shows weakness.

Jan 23, 2007

The overall market has given some discouraging signals the last few days with volume rising as the indexes sell off. More importantly, leaders as defined by the IBD highly rated stocks have seen more than their fair share of selling. We are not at a place where i feel comfortable swinging to having a bearish portfolio, but it warrants more caution.

With this in mind, I decided to sell my SNDA position. Over the weekend, I had lost 5,000 or 1/3 of my position due to options being assigned. I have a healthy gain in the position but the turnaround story is not the type of trade that I am especially skilled at so I felt it was the most disciplined decision to take this position off since i have less of an edge and i am uncomfortable with the overall market trends.