Wednesday, June 27, 2007

Gigamedia and Microvision

Today was a great day, all the way around. I took the day off to run some errands, and to hopefully sweep up some cheap MVIS.

Not only did I get some more MVIS, but I picked up some GIGM on sale, added 250 shares of SWHC @ $16.99, and then watched as the markets put the shorts on notice that the Fat Lady called in sick.

First, let's look at GIGM. I have been trading in and out of this stock for many months. GIGM has quarterly earnings growth of 167%, year over year. Its forward 2008 PE is 15.45. Short interest is currently 12% of the float. This gem is on sale at these prices.

As evident from the chart, today's blow-off-bottom presented a perfect buying opportunity, so I started my initial position, 500 @ $13.10. All signals are go at this level. However, it is trading under the 50 day average, so I would expect some resistance as it approaches the average. Even selling at the 50 day will give over 1 point of profit. A stop underneath today's low is typically how I play this type of set-up.

Now for MVIS. I made two purchases today, one block at $4.52 and one at $4.74. These shares are not included in my account I keep with Stockalicious as they were purchased in an accounts I keep for my parents. Certainly, this could be a dead cat bounce. There are likely more warrant holders who want to liquidate at higher prices. Because of the pressure from the warrants and the shorts, it would not be unlikely for MVIS to retest the $4.40s. I have seen it happen many times. However, I would not have purchased shares in the .70s if I thought the probability of more downside was likely.

I am absolutely dying to read the spin the MVIS haters/shorts put forth from here on. Let's recap what has transpired.

  • The dilution has been priced in. No more anonymous hedge fund writers predicting a swift down move when the warrants are converted.
  • MVIS has no debt.
  • MVIS has enough cash to fund operations for over a year.
  • Short interest keeps building, and is now around 10%, and is likely to have increased tremendously over the last few days.

So again, I'm sure the shorts will get creative, but the reality is that either MVIS comes through with a major contract, or they do not. I predict that with Tokman's track record, and the company firing on all cylinders, that the shorts are likely to begin covering, in anticipation of the contract. I feel that a contract announcement is more probable than a competitor getting to market first, or MVIS dropping the ball entirely.

Finally, the FOMC could wreak havoc on the markets tomorrow. I will likely not trade anything, except for maybe adding more GIGM. I will have stops in place for both GIGM and SWHC. I do not feel certain that longs are safe, but today's action was extremely bullish.

8 comments:

kmorph said...

Shedder,

I just wanted to say thank you for your consistently logical, rational observations. Keep it up.

Woodshedder said...

Kmorph- thanks for reading, and thinking, about what I have to say.

Brent said...

Wood, I appreciate your insights as well. Here is an interesting chart to scope --ACTU. I just found it on my TC2000 screen for stocks hitting new highs under $10. I started and closed a position in the company awile back and did some pretty thorough DD. Good company, take over candidate, and chart says buy now. This one had a little more daily volume so I thought of you.

Woodshedder said...

Brent, thanks.

That ACTU chart looks spectacular. If it weren't for fed day tomorrow, I might buy on open.

Brent said...

I know, I could get "mushroomed" tomorrow with holdings in ORCL, SNDK, F, and MVIS.. Preying the fed is easing stance from housing and durable goods #s. I am 50+ cash now just in case.

Look at the 5 year chart on OMNI. Summer Energy play. Is a driller with no Gulf exposure.

Woodshedder said...

I talked to a friend who works for Wachovia securities. He doesn't know much, is not much of a trader, but he tells me what others in the business are talking about, and he said they are talking about a fed rate cut, for what that's worth.

If the markets get mushroomed tomorrow from a hawkish fed, I am of the opinion it will be the straw that will break the camel.

OMNI is at a great buy point.

Brent said...

That would be sweet, if not, you are right as the Coastal RE market would be disintegrated. Will be interesting to watch. Time for bed. Thx.

Dinosaur Trader said...

Nice day so far for MVIS, I'd love to see a close above $5.

-DT