It might be interesting to look at Pixar stock.
In 96 and again in May of 97, the good news on Pixar seemed a long time to wait, until Pixar's next movies were released in fall of 98. The stock traded down to the low teens from its high in the 50s. Yet everyone knew these movies were coming. You could do an economic case for the movies, and work back and arrive at a price for the stock in the 20s. Very similar to doing a cashflow projection for Valence's production lines.
Then Titanic was released, and grossed over $1B, and the whole equation got tilted. Suddenly the upside on the two new animation films wasn't $300M, it was a much higher number. And since production costs were sunk, any revenues over that amount could flow to the bottom line. And now its only about 4-5 months to release date. So today, in a punk market, Pixar broke 40. I'm a rationalist, so I sold mine in the 20s for a nice gain, but my wife, the idealist, still has her shares bought at 15. She likes to buy a company that is a leader in what she will believes is an attractive market, and holds forever. She owns Oracle, Intel, Pixar, etc and all of them are about 3-8 times what she paid.
Well, I may lose my shirt, but Valence fits that mold for me. I have followed this company for a long time, and I've been buying the dips, and today I hold a ton of shares with an average basis less than 6. So I'm underwater. But I think this stock is about to turn. I can't believe what would motivate a holder to sell big time here. Anybody who has wanted to get out based on disappointments is long gone. And if the trading record shows 'distribution', then maybe that is caused by the sales of the insiders and ex-insiders to raise enough cash to exercise their options before they expired.
But also on the technical side, if you look at long term (5 year chart) on this stock, it has bounced off 4 again and again. Given the anemic volume today, my guess is the selling is over for now, and its bounced once more off the 4 range. In fact, isn't this recent low higher than the last low in Dec/Jan ?
Now I wait for the rise in volume over a period of days and weeks, that will signal the knowledgeable smart money increasing their stakes. I must admit I'm surprised it hasn't happened yet, but given the string of previous disappointments, I guess this company will have to prove itself.
Finally, everyone is waiting for the inevitable announcement of sales to a laptop manufacturer. In my eyes, the announcement by Micron that they expect to have Li-polymer batteries in their laptop this fall, is as close as you can get. Who else could be providing these batteries?
I think we are finally getting to the payoff time. One caveat that I have mentioned before on this thread last spring; this is a speculative stock, so don't put your entire investment monies into it.
Paul |
