Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Art of Investing -- Ignore unavailable to you. Want to Upgrade?

To: Trader J who wrote (8100)	3/2/2024 12:24:30 PM
From: Sun Tzu	Read Replies (1) \| Respond to of 10533

Congratulations on you big wins with SMCI. And thank you for sharing your analysis. I like your focus on the flow, short positions, and the float. This is how trading should be. I don't like that you digressed into investing and 5 year projections. IMO, this is the kind of stock that one trades, not one to invest in. A short term focus on the trade dynamics is the key for profitable positioning in SMCI. With regards to longer term holding periods and investment thesis, there are a few things that I'd like to highlight, hopefully they will be of value to you and others: The management is a big risk. I've watched interviews with the CEO and looked at the track record of the company's senior management. They have a history of getting into trouble with SEC and come across to me as too oily for my comfort. I expect them to milk the stock moves for all they can and to sell into the rallies and issue shares and bonds as much as they can. This is not necessarily a big problem for longer term investors IF there is a competent management in place that puts the cash into productive use. But I have no such faith in them. In fact, there are rumors that SMCI (and AMMJ) may be actively trying to curtail US sanctions on China (and in AMMJ's case perhaps money laundering). One does not have to agree with the above rumors in order appreciate the risk. The rumors could be completely false and yet push the SEC to investigate them and cause a drop in the stock price. From the fundamental side, NVDA is very unlikely to maintain its pace of revenue growth beyond this year (perhaps sooner). Even assuming that NVDA will continue to be successful and meet their revenue goals, and I have no reason to dispute this, the slowing pace growth will destroy the cottage industry around reselling and renting out NVDA products as supply catches up with demand. This is a fundamental risk for SMCI. Finally, you may note that the current agreed upon IB block sale price and conversion rate for their bonds is way below the spot price. That tells something about how much risk the pros are assigning to the long term prospects of SMCI and that the management has agreed with that point of view. If I were to consider a long term investment in SMCI, it would be in the form of convertible bonds. So in conclusion, one can trade SMCI based on the flow dynamics (short covering, index inclusion, TA, etc), but personally I would not make it an investment with a 5yr horizon. And if I were to trade it, I would do it as you have done, via options, and ideally via option spreads. This way you will be able to quantify your risks, even if one the air pockets I mentioned above appears out of nowhere. Good luck!