The Three Horsemen (SNDA, TASR, OSTK)
I wanted to take a moment to post a few thoughts on a few of the worst investments in my portfolio.
First, a moment for brief celebration. All three of these stocks, which for quite some time have been the poorest performers in my portfolio, are now ONLY down on the order of 50% from my average purchase price.
OK, so that's not that impressive -- but one of them, Taser, was down by close to 80% at one point -- so there is indeed at least a little cause for celebrating.
Taser (TASR -- click to register for free RT streaming quote), Overstock (OSTK), and Shanda Interactive Entertainment (SNDA) are all former stock market darlings.
Taser was going to revolutionize law enforcement with their "less lethal" stun guns.
Overstock was going to bring the best of closeout merchandising to the web and drive high volume sales and great customer loyalty that would make Amazon blush.
and Shanda was ... well ... big in China. And there are a lot of people there. And they play these online games, for a few cents an hour, and Shanda sells them the game time. Did I mention that they're in China. And they're on the Internet. Do you know how many people live in China? Wow, it's a lot.
Now that was just the prevailing sentiment on all of these stocks at or near the time when I first bought them, and I fell victim to the exuberance as much as anyone else.
But you know, these businesses are all pretty solid if you strip away the short-term messes they find themselves in. I regret that I've lost money on all of them, but they seem to have a lot of potential long-term upside at today's prices ... which is why I haven't sold them yet.
I have sold companies whose stocks have declined, but I have sold them becaue the business lost it's way or because I lost faith in the business' ability to grow or earn money. That was the case with Great Wolf (WOLF), and with Design Within Reach (DWRI) -- click on the tickers on the top left for those takes of woe.
Taser has recovered pretty remarkably -- I still am a little uncomfortable with the level of hucksterism we see from the Smith brothers who run the company, but I think now that the furor over wrongful zapping has died down and the press releases about every positive instance of Taser use flow freely from the company's flacks, things look a bit more positive. I have always believed that they sell a useful and important product that ought to be carried by every policeman, but now it looks like we're finally concentrating on the upside of the product instead of the downside and the market has really enjoyed that. Earnings are still lagging behind thanks to their well-publicized troubles, but I expect them to return in time ... hopefully no one will notice and we'll get to enjoy TASR chugging back to respectability for several years to come.
Overstock I am really having a hard time understanding. I am very pleased that Patrick Byrne brought in his dad to be chairman, and I still do think that the business model they're running has a lot of promise -- and their sales growth reflects some of that promise. This is the one of the three that I'm closest to considering selling, however -- and one more thing that makes me question management's ability to handle this business may send me over the edge. I think they're a little bit chastened by their huge mistakes from the last six months, and I hope Byrne will leave the short sellers alone and let his lawyers argue his points -- he must realize by now that his bully pulpit has ceased to have any impact on public opinion and now merely calls attention to what the press seem universally to acknowledge is his megalomania or, at worst, his lack of focus on the business. Hopefully daddy Jack can help him right this ship and get growth going -- they've now got the technology infrastructure in place, and the sober leadership on the board, and I like Patrick Byrne as long as he's using his energy to build the Big O, not detract from it. I'm still very much on the fence.
And several people have recently posted questions for me about Shanda here on the blog and at ADVFN. I'll give you the short answer: I don't know what's going on, but I think the next year will be better, not worse, than this past fall.
What it really comes down to now is how well Shanda's EZ system of home and portable devices performs and whether they can really establish a distribution pathway for all entertainment to the consumer, and whether their next wave of MMPORPGs gets to market in good time and to a good reception. I think the market is pricing in negative news for all of that, and I would not be surprised to see pretty weak earnings for this past quarter given their massive changes to their business with free game play and the new focus on the EZ system. That said, I think bad earnings are priced in, and although they don't really provide guidance I expect the news we hear about sales of EZ and advancement of the new games, as well as about the effectiveness of the new free play model for their older games, will be the determining factor for the short term stock price. It could be a wild one, but barring more bad news I'm holding on to Shanda for potential appreciation over the next several years as their market continue to grow by leaps and bounds.
So there you have it -- one company on a serious rebound in Taser, one that the Street and I both have an itchy trigger finger on in Overstock -- a business that should work but that has been beset by management mistakes and bad press, and one in Shanda that seems completely shrouded in mystery in the short term but still with great potential if they can successfully navigate their new business plan.
This is what makes things interesting.
First, a moment for brief celebration. All three of these stocks, which for quite some time have been the poorest performers in my portfolio, are now ONLY down on the order of 50% from my average purchase price.
OK, so that's not that impressive -- but one of them, Taser, was down by close to 80% at one point -- so there is indeed at least a little cause for celebrating.
Taser (TASR -- click to register for free RT streaming quote), Overstock (OSTK), and Shanda Interactive Entertainment (SNDA) are all former stock market darlings.
Taser was going to revolutionize law enforcement with their "less lethal" stun guns.
Overstock was going to bring the best of closeout merchandising to the web and drive high volume sales and great customer loyalty that would make Amazon blush.
and Shanda was ... well ... big in China. And there are a lot of people there. And they play these online games, for a few cents an hour, and Shanda sells them the game time. Did I mention that they're in China. And they're on the Internet. Do you know how many people live in China? Wow, it's a lot.
Now that was just the prevailing sentiment on all of these stocks at or near the time when I first bought them, and I fell victim to the exuberance as much as anyone else.
But you know, these businesses are all pretty solid if you strip away the short-term messes they find themselves in. I regret that I've lost money on all of them, but they seem to have a lot of potential long-term upside at today's prices ... which is why I haven't sold them yet.
I have sold companies whose stocks have declined, but I have sold them becaue the business lost it's way or because I lost faith in the business' ability to grow or earn money. That was the case with Great Wolf (WOLF), and with Design Within Reach (DWRI) -- click on the tickers on the top left for those takes of woe.
Taser has recovered pretty remarkably -- I still am a little uncomfortable with the level of hucksterism we see from the Smith brothers who run the company, but I think now that the furor over wrongful zapping has died down and the press releases about every positive instance of Taser use flow freely from the company's flacks, things look a bit more positive. I have always believed that they sell a useful and important product that ought to be carried by every policeman, but now it looks like we're finally concentrating on the upside of the product instead of the downside and the market has really enjoyed that. Earnings are still lagging behind thanks to their well-publicized troubles, but I expect them to return in time ... hopefully no one will notice and we'll get to enjoy TASR chugging back to respectability for several years to come.
Overstock I am really having a hard time understanding. I am very pleased that Patrick Byrne brought in his dad to be chairman, and I still do think that the business model they're running has a lot of promise -- and their sales growth reflects some of that promise. This is the one of the three that I'm closest to considering selling, however -- and one more thing that makes me question management's ability to handle this business may send me over the edge. I think they're a little bit chastened by their huge mistakes from the last six months, and I hope Byrne will leave the short sellers alone and let his lawyers argue his points -- he must realize by now that his bully pulpit has ceased to have any impact on public opinion and now merely calls attention to what the press seem universally to acknowledge is his megalomania or, at worst, his lack of focus on the business. Hopefully daddy Jack can help him right this ship and get growth going -- they've now got the technology infrastructure in place, and the sober leadership on the board, and I like Patrick Byrne as long as he's using his energy to build the Big O, not detract from it. I'm still very much on the fence.
And several people have recently posted questions for me about Shanda here on the blog and at ADVFN. I'll give you the short answer: I don't know what's going on, but I think the next year will be better, not worse, than this past fall.
What it really comes down to now is how well Shanda's EZ system of home and portable devices performs and whether they can really establish a distribution pathway for all entertainment to the consumer, and whether their next wave of MMPORPGs gets to market in good time and to a good reception. I think the market is pricing in negative news for all of that, and I would not be surprised to see pretty weak earnings for this past quarter given their massive changes to their business with free game play and the new focus on the EZ system. That said, I think bad earnings are priced in, and although they don't really provide guidance I expect the news we hear about sales of EZ and advancement of the new games, as well as about the effectiveness of the new free play model for their older games, will be the determining factor for the short term stock price. It could be a wild one, but barring more bad news I'm holding on to Shanda for potential appreciation over the next several years as their market continue to grow by leaps and bounds.
So there you have it -- one company on a serious rebound in Taser, one that the Street and I both have an itchy trigger finger on in Overstock -- a business that should work but that has been beset by management mistakes and bad press, and one in Shanda that seems completely shrouded in mystery in the short term but still with great potential if they can successfully navigate their new business plan.
This is what makes things interesting.
This article posted by One Guy @ 2/13/2006 03:02:00 PM 0 comments
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