TRID CFO Leaving - Last of the Old Guard

The CFO of TRID announced his impending departure. This is within a few months of the new CEO coming onboard.

Net it out - is this good or bad? What does this say about future prospects and buyout potentital?

I note that the CFO has 300K options that are not vested (unexerciseable) and worth $3M and a further 100K options that are worth $1M and exerciseable. Stick around 4 years and make $3M or join another company and hope for better upside.

Under a buyout, the acquiring company has the right to let the unvested shares automatically vest. That's a present they like to give executives. So I don't see this as a positive in favor of a looming buyout.

I do go back to an important point: the CFO has a job already lined up. So he probably began his job hunt once the new CEO was landed. That's a professional thing to do - ensure some handing off.

But I struggle to find positive news in this. Except for another opportunity to load up on shares.

TRID Downgraded - Get ready to buy more

Remember the TRID fundamentals:
$3.50 in cash now puts this company at $2.50 stock.
With a forward consensus of $1 EPS, that's a 2.5 P/E. Yep, you read that right.

Meanwhile, after GNSS got bought out, UBS put a valuation of $10 on the stock if the price were the same as GNSS. But they pointed out that TRID has better technology.


Normally, I'd be laughing at an analyst who downgrades at the bottom. But I think he makes a good point. He has done the research and - by God - Vizio is outselling the high-end makers in the US. Time to panic!

Actually, the analyst downgraded with the following points -
1. Sales could be $10M lower than estimated (a 3% drop)
2. Lack of TRID penetration into low-end market

Note that he still expects continued strong slaes from TRID.
Note also that the analyst is focusing only on the US market.

Nevertheless, the analyst makes a good point: low end LCD TVs are growing faster than high end and TRID is missing out on the low-end market. With such a price sensitive item, you would expect low-end TVs to be selling faster. That's fundamental basic economics.

But the point about TRID missing out on the low-end is valid. Only so many TVs can be sold and consumers want cheap TVs - so any low-end TV sold is 1 less high end TV. That's less business for TRID.

And that's the critical assumption: that TRID will sit back for 18 months or more and not do anything about the low-end market opportunity. He may be right. He may be wrong. But some things to keep in mind:
1. TRID stock price is based on EPS - as long as they reach EPS growth targets, they will rise.
2. TRID can go to the low-end anytime - but the opposite is not true. Lexus moved downstream pretty easily. If sales start to dry up, TRID can snatch market share pretty fast.
3. TRID has a 2.5 P/E
4. TRID has a clear floor of $6

One thing remains true - the LCD TV market is a strong market and TRID remains the dominant player. With a new CEO, hopefully they will have the ability to address the low-end market concerns.

Buying today

STOCK PRICE SHARES
CF 97 200
NOV 70.31 100
FWLT 154.73 100
ATW 86.07 150
VIP 37.15 200
WFR 82.71 100
MVL 27.15 300
AG 67.75 100

TOTAL COST 85435.5

NOV buys GRP

GRP is a great company that is consistently undervalued.
In buying GRP, we finally see signs of the consolidation that the drilling industry needs. Strap on for some deals to happen

Choppy Week Ahead

Typically there wouldbe a rebound on Monday following a down week. It's hard to say.
One thing is clear, this week will show sluggishness in retail.

Other highlights will be
Bear Sterns & Morgan Stanley - good opportunity still to short these turkeys
Oracle - I suspect weakness from reduced IT spending
Best Buy - Probable an exception, they should be doing ok

Portfolio and Plan

It's been a few weeks since I posted the weekly portfolio updates

Let me start with dividends

AMX - $1.87 per share @150 shares = $280.50

PCP - $0.03 per share @ 100 shares = $30

Stocks we left or were STOPped out of had the following gains/losses

AMX 25%

ATW 46%

CLB -9%

DRYS -33%

FWLT 12%

HOLX 21%

NOV -10%

NUAN 12%

TIE -6%

The STOPs actually did not help because
1. I did not have the opportunity to focus enough to buy back in at the lower levels (the real point of having STOPs on stocks that you like)
2. Most of these stocks are up a LOT since then

So we continue to beat the broader market, but we should be doing better. And we will.

We have $95K in cash and this is the way I want to play things.

• $10K cash
• $10K risky stocks
• $75K in new investments
• Look to move out of IO and possibly IMA

The target stocks are

Fertilizer companies –
This is a fractured market with lots of potential for buyouts. AGU just made a major purchase and, as the largest North American fertilizer retailer, have just 15% market share. For the most part, the stocks move with the same amount of growth – exception being MOS.

• Target buys: CF & POT. I favor CF because it has almost no debt
• Runner-ups: MOS (a little ahead of itself), POT, TRA, AGU

Farm Equipment:

ARTW (a little ahead of itself) & AG

ENERGY
Petrodollars are still flowing.

Drillers – Cash rich, still growing.
ATW, RIG, DO are growing and ESV and NE are stalling. You could also consider CAM (driller suppliers) , IO (seismic exploration) and OII (deep sea exploration) as operators in similar markets.

• Targets: ATW & DO – almost no debt for ATW, strong growth, great margins

Infrastructure - This is a target rich environment. We will return to FWLT & NOV.

I am also looking at SGR and MDR because they have been beaten up. SGR in particular is interesting - the CEO sold 2/3s of his shares the last week, along with other executives. That sudden selling is tied to inability to sell due to problems filing Earnings statements. Or so they say.

MDR is unnaturally lagging its peers - which means catch up soon. Their technicals look mighty strong. They pulled back because of a revenue miss and because they are exposed to coal energy plants and an analyst said that the US is slowing coal power plants. MDR then turned around and landed a large coal power plant deal.

GLOBAL CELL PHONE
We have MICC. I am thinking of adding VIP

OTHER
WFR - They will be seeing large margin growth. Even if the Solar demand starts to slow, they still have semiconductors.
PCLN - I avoided travel stocks because I saw only a downturn among US consumers. What I missed was the international exposure that PCLN has. But it feels pricey....