During the trading day last Friday, I tweeted the following:
In a year that has been marked by taking pride in what I've liquidated rather than anything held, I made the decision early on not to allow SGGH to get away from me on the downside. Steadily began scaling out of the name in the 8 range starting in November and finished selling last week. Not at all comfortable with the way the name has been trading as they attempt to raise the capital needed to pursue their acquisition.
Some of that discomfort comes from the fact that I'm having a difficult year in terms of performance, which automatically creates less of a tolerance for buffoonery in new names. Another part of that discomfort comes from the fact that the company needs their stock for currency in order to facilitate the acquisition. The further it drops, the more expensive the acquisition becomes for management in terms of overall costs. Lastly, the company SGGH is attempting to acquire is tied to commodities, which are in an absolute royal rumble at the moment. Anything related to the sector could see some outsized volatility. Didn't want to sit through that when other opportunities exist to profit.
I will be watching the name into 2015 to see if there is an opportunity for reentry once everything is ironed out.
In January, I should have a new research report on a financial name that I have been accumulating since November. What looks to be a really outstanding opportunity in what was formerly a significant sized company. I'm working on putting together the research as I continue to slowly accumulate shares. It is difficult name to accumulate due to the lack of liquidity.
As for the general market, the opportunity remains to the upside. The power with which declines are being bought is not euphoria or signs of a bubble as popular perception seems to dictate. Rather it is a testament by the market of the underlying bid that continues to exist in equities. What should be kept in mind is that since the beginning of this bull, this market has exhibited a pretty consistent tendency towards rotation. Early on it was from financials to tech. Then it was from small-caps to large cap names. Now it looks like the next great rotation is from "new school" tech, which are companies that I would be define as being around since 1995-present, to "old school" tech, which are well established technology companies that blazed the trail for the technology we are all so familiar with today. Think Intel, Microsoft and Oracle.
I do believe that the outperformance of the aforementioned "old school" technology names is by no means a coincidence. These names should continue outperforming throughout 2015 in what continues to be a market tightly controlled by institutions, without much retail presence to disintegrate the outstanding mannerisms that have kept this bull intact. I will go over further details of what I see as the next great rotation in the year end summary due out in early January.
Goodnight.
