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TheDumbMoney (38.51)

Oh F it All -- SODA at $41.70/share, after the Drop

Recs

16

August 11, 2011 – Comments (17) | RELATED TICKERS: SODA

I liked the report today, it has been on my watchlist for some time, and at one point today it was suffering a 38% drop.  I picked up a 1/2 position today at the above-referenced price.  I'll buy more either if there is 1) significant further stock drop combined with no perceived business deterioration; or 2) improved business conditions after next quarter, even if the stock has appreciated.

DTAF

17 Comments – Post Your Own

#1) On August 11, 2011 at 1:52 PM, EnigmaDude (93.39) wrote:

Good move.  I'm not sure I like the concept (for me personally I mean) but they sure seem to have a solid business with some great growth prospects.

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#2) On August 11, 2011 at 1:54 PM, citibeach (< 20) wrote:

Yep, I had to jump back into SODA, put a limit order in at 41.25 when I saw it hit 40.90 and bounce. I would be surprised to see the stock continue down, its not like they say business is bad, and they reconfirmed guidance. This is an over reaction and shorts pushing the price down even further. Looking for a significant bounce, especially tomorrow. 

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#3) On August 11, 2011 at 2:06 PM, TheDumbMoney (38.51) wrote:

Well, the numbers aren't perfect, but they show a lot of continued growth.  I can think what I want about the model, but in the end the numbers speak for themselves. 

My wife is b!tching at me to buy one, too, and she has two friends who got them and for whom it has turned into a regular usage thing, not a fad at all, at least if one defines "regular usage" as extending for over nine months.  Fads can of course extend much longer than that, but they seem really to like them.  The knock on SODA is this is not a new concept, a lot of folks remember it from way back.  But I think that may overly discount management, timing, and marketing distinctions.

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#4) On August 11, 2011 at 2:37 PM, ayaghsizian (97.76) wrote:

I bought in at 46.50 just now, half position based solely on your blog.  Then I did my research and realized there was no bad news.  Maybe it'll go to 30's but maybe it'll go to 70's again.  Seems like good risk reward to me.  

 

Ara 

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#5) On August 11, 2011 at 2:41 PM, ayaghsizian (97.76) wrote:

Why is it that stocks always go down after what seems to be good earnings?  Many times I sell my holdings the day before earnings and buy back a day or two after... at 5% less.

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#6) On August 11, 2011 at 2:41 PM, DaveGruska (96.04) wrote:

Nice call, esp. since it's sitting around $47 now. This is the craziest reaction I've ever seen - based on the earnings report, I was expecting a mild sell-off today, just based on the run-up before earnings.

Whatever - I'm holding at a small loss, and don't want to allocate any more cash to it. Glad you got a good price, though.

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#7) On August 11, 2011 at 2:44 PM, TheDumbMoney (38.51) wrote:

Please don't ever, ever buy anything based on my blogs, anyone.  I am non-expert nobody with totally incomplete knowledge.  I fully expect it can go lower from here.  Thanks for the recs though!

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#8) On August 11, 2011 at 3:52 PM, ayaghsizian (97.76) wrote:

No one has complete knowledge but your post seemed like an honest reaction to the price drop.  And (lol) all the stocks I own have gone lower in the last two weeks but thanks for the words of caution.  I can handle the risk and I hope others who invest in small caps can as well.  30% drops are a common thing. 

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#9) On August 11, 2011 at 4:00 PM, Schmacko (62.21) wrote:

This looks a lot like a momentum stock breaking, which is generally not a great time to hop back in.  Getting in near the day's low means your currently doing pretty good, but I'd guess that $50 becomes the new resistance level.  I'd also probably keep and eye out on it's institutional ownership levels.  The big boys might continue to exit if it's no longer perceived as hot, which could further drive the price down.  The market is crazy right now and this isn't anything I follow or have done any real homework on.  Good luck.

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#10) On August 11, 2011 at 4:45 PM, TheDumbMoney (38.51) wrote:

Scmacko, your point is a good one. That is why I stated my point 1 above.  I got ISRG when the wheels fell off the momentum wagon, and although I bought too early, it has panned out OK, at least over the last year.  In fact, most of my watchlist is situations where I am actively looking for and hoping the wheels fall off of some momentum wagons! 

I would not have bought today if it were a 15% drop.  But a 40% drop, in relation to that growth and some iffy guidance, giving away basically all of 2011's gains, and with the business improved in that time?  I'm fine with taking 1/2 position there in a company I admire.  

It's volatile.  I think there is a good chance I'll be able to pick up some shares of SODA below $30 at some point in the next three months, especially if the market tanks down to my own personal "buy-everything-in-sight" target of about 8,500 on the DOW.  I also think there is an excellent chance SODA shares will be worth $100 or more within four years though, and that's really what I care most about.

Or alternatively, I'm a boob and patsy.  It is because I recognize that possibility that I tell nobody to buy anything based on my pathetic blogging.  I will say that anyone who bought this year before the drop is likely MORE of a boob and a patsy though!  :-)

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#11) On August 11, 2011 at 5:02 PM, TheDumbMoney (38.51) wrote:

For me, the lesson I learned in 2008/2009 was this:  the time to buy JNJ and PG and KO is not during panics (contrary to the platitudes currently much in evidence around the interwebbles), though one can still do well.  Buying PG after the panic has gotten underway is akin to buying insurance after the fire hits.

I think panics are when you buy the damaged momentum darlings you have always liked but which traded at nosebleed levels, or when you buy the debt-ridden companies that have *just* enough juice in them to survive (though that's not my game).  So in last summer's panic I bought GOOG and ISRG.  And in this panic I'm looking at various stocks that are really attractive growers but that people who failed to buy PG three months ago or a year ago when they should have bought it are now selling in a panic.

I realize I'm taking risks, but I'm experimenting with money that it is OK if I lose, and moreover I don't think over the long-term I will lose it, though an individual stock here or there may perform quite terribly.

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#12) On August 11, 2011 at 9:05 PM, ElCid16 (95.69) wrote:

For me, the lesson I learned in 2008/2009 was this:  the time to buy JNJ and PG and KO is not during panics

So true, my man.

The time to buy low beta stocks (MO, DUK, TGT) was a month ago.  Now is the time to buy the stocks that are down 25% in the face of a market that is down 15%. Green thumbs on most blue chips during major market corrections (or crashes) are going to lose you points.  In a real life portfolio, moderately hit blue chips will turn out to be good buys, but the stocks that are severely beaten (GLW, TEVA, NWL come to mind) are probably going to be your positive-green thumb point plays.

In RL, I snuck into some FCX at $41.XX the other day - almost the exact same time I saw you snuck into some RIG...good luck.

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#13) On August 12, 2011 at 12:38 AM, awallejr (85.41) wrote:

The knock on SODA is this is not a new concept, a lot of folks remember it from way back. 

Yup. That would be me.  The problem is while in concept it sounds great, in reality people are lazy.  Kids want to grab that can of soda out of the frig, not waste time making it.

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#14) On August 12, 2011 at 1:35 AM, HarryCarysGhost (99.70) wrote:

I picked this on CAPS just to back up my outperform pick of-

No frickin' way.

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#15) On September 06, 2011 at 4:30 PM, TheDumbMoney (38.51) wrote:

JPMorgan (three weeks after I said it) now agrees with me on Sodastream, though they are more eloquent:

http://wallstreetpit.com/83175-sodastream-international-soda-upgrading-to-ow-as-valuation-has-gone-flat-jpm

Which of course, standing alone, does not mean I am correct.  My more complete views are expanded upon in response to other people's blogs and links are available in the comments to my pitch.

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#16) On September 06, 2011 at 4:45 PM, EnigmaDude (93.39) wrote:

I wonder if the JPM upgrade will cause the 76% of short-sellers to get nervous?  Could see a short squeeze as a result which would send the stock higher (up 8% today).  I liked your call before and am liking it even more now.

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#17) On September 06, 2011 at 5:56 PM, TheDumbMoney (38.51) wrote:

Enigma,

D.Y.O.D. of course, if you are thinking of buying.  I'm down 10% on this myself, though like all of my positions, it has started out as a small one.

I don't know what that sketchy website is talking about re: short interest percentage of 70%.  I only posted it because of the description of the JPM research.  When expressed as a percentage, short interest (as I understand it) is the number of uncovered shares sold short divided by the number of shares outstanding.  SODA has 14 million shares (18 million diluted).  The absolute largest number I see for a listing of what is shorted is 3.6 million.  So that is nowhere near 70%.  It is still quite high though (over 25% of 14 million).

See here:  http://www.nasdaq.com/aspxcontent/shortinterests.aspx?symbol=SODA&selected=SODA

Now volume has been wild on this stock, and the stated days to cover of 1.04 (i.e., the short interest ratio) is thus artificially low.  That is because volume has been so high in the past month.  I'd say the "real" days to cover version of the short interest ratio is about 4-5 days, looking at a larger number of months to form the average  High, but not insane.  It is actually high enough for the shorts to profit without being subject to a potential short squeeze they could be if the short interest ratio got up to 8-10 days.

Looking at that table, the real time to short (and to be terrified of this stock) was in May and June and early July of this year.  The number of shares sold short has declined fairly significantly since that time, though it is still quite high.

What I'm trying to say is I don't view this as a stock where there might be a massive short squeeze that would be beneficial to longs.  My read is that the smart shorts "won" on this stock, either through luck or skill, and that a sort of "momentum shorting" is ongoing, but on a smaller and generally declining scale. 

I hope that is correct.  That is because I am not a fan of going against massive short interest (for example, what one would have had to be doing to buy this stock on July 1st).  I think shorts are usually pretty darn confident when they pile into a stock and have pretty good research.   (That doesn't always mean they're right, but I don't want to bet against them.)  So I definitely think twice about buying a stock if there is huge short interest; it is a real gut check. 

In fact, even the existing level of short interest on SODA is a big turn-off for me, though not a game-changer.  That is because my game is just to look for companies that look reasonably valued in relation to their reasonably certain short- and medium-term growth.  SODA didn't look that way at $70/share, and it does at $40/share; that's really what matters to me.  I think the shorts were substantively right at $70/share (at least in the short term; which is why I didn't buy it there), just as I think the shorts that think this thing is going bankrupt because of one mildly unenthusiastic report (which was, to boot, the first widely followed report for the fall/winter season since the stock's IPO and major introduction to the U.S. market) are probably not the same smart shorts that were circling this fizzy wagon train in early July. 

 I think they are the dumb shorts, imitators, just like the people buying at $70/share were the dumb longs who were imitating the longs who bought at $30/share ten months ago.  Alternatively, we are going into a major recession in Europe (which is where SODA does the vast majority of its business) and in America and I have it all wrong, wrong, wrong.  But I think even if that is the case, the company has no debt and a better buying opportunity may thus arrive for me to complete the second half of my position.  The only thing I am really concerned about in the next year or two on this company is equity dilution.  I don't mind some signfiicant options grants in a young company, as long as revenues are going well up and earnings per diluted share is growing strongly, but if I see any indication of an offering of more shares to the public from a company like this, I'm gone. 

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