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Splunk goes KA-SPLUNG, Crammers Lemming run...time to....

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March 25, 2014 – Comments (19) | RELATED TICKERS: SPLK , KRED

 

Disclosure:  I own no SPLUNK and I have no current intentions to take a position.  If I did, I'd tell you long after I did it so you couldn't front run me, and I'd only tell you if I made a killing on it.  I would not tell you if I lost my shirt and if I won small, I'd exaggerate.

 I've never been a fan of Crammer, I doubt I could ever be one, but if he make enough calls, he's bound to finally hit one...

......other than his showmanship and that he was/is an insider, I'm not clear what he offers his listeners.  All in all, I would short him without looking if I was pressed to make a call on something of his.  If you like Crammer, and he works for you, then by all means, enjoy…some of us perhaps like to understand something, and some like to be told what to do.

His berating the market, and seriously, the way I heard it, his own followers , for being chicken-livered and selling Splunk along with the herd was quite entertaining.   Splunk tried to rally this morning, but soon went KER-SPLUNK some more after yesterday's debacle.  His minions are in for another chiding.

Most of Crammers calls are heavy MO-JO that you need some reality blinders on to follow.  I'm not good with extra doses of MO-JO stocks.  I miss out on some that have momentum and I'm trying to get better at understanding/tolerating, and maybe someday embracing forward pricing based on growth rate, but it's hard sometimes to imagine a perfect world where there is no competition, few barriers to entry, and if you are making a profit, and growing it that someone doesn't try to steal it......

Sometimes you may have a good idea, but no way to make it work financially.  KRED for example will have a problem with the 200 Walmart stores, countless food chains, and now the USA volleyball CUP, as it tries to squeeze all the juice from every Hawaiin CoffeFruit (whatever that is) on the island to fill even the 50 bottles it might actually sell....let alone millions....

I digress, back to Crammer and Splunk....having a moat is a bit subjective....today's weapons can cross most of what we use to think of as moat.

Overall, though, I like distressed equities...hard to define distressed as just because something was selling for XX more XX days ago, doesn't mean it was ever worth that or that a metric hadn't changed...

Many, Many investors would have you think that.  "But, But... it was $$ a week ago" is a common whine/theme/excuse for being wrong and/or buying more.

Back to KER-SPLUNK..... Splunk is a high growth proposition, good YoY/QoQ growth, but was slipping favor last earnings as the size of the S&G grew and grew.  Crammer compares it to Amazon....dump your profits back in, you don't need 'em right now...you need to expand the moat, take the market share, grow, don't hoard that money....a bottom line profit is meaningless if you don' t have that growth.....

Of course I can't say it the way he does, but in short, I have no issue if money is poured back into a business.

The other advantage to Splunk, (now that I upthumbed it, guess I'd better stop the KER-SPLUNKING)....is that it's in what I consider not only a growth field, (analytical/Big Data), but a speculators field, dare I say a bubble growing, blowing field, where those around it have tremendously deep pockets and would think nothing of snapping up a $8B company that is growing. I have no problem buying into a growing bubble...many don't burst for a long time and if you buy it when it's a "tiny bubble", when/if it does burst, you'll probably still have a bigger bubble....... got that??

 Now, personally, I don't listen to rumors and I NEVER buy on the premise that a bigger fish will hand me a premium, but it's kind of nice to think that's an option as it helps put the HUGE growth metrics already factored in even after a 25% haircut.

P/B > 10,  P/S >27’ 53% YoY Growth,

$900M in cash with an $80M or so burn rate assuming growth rate/sales rate are maintained.

So I'm anti-Crammer, but I'll take something that burst 25% under him as many of his lemmings ran..... again if you throw enough stuff, something might stick.... I'll work on my acceptance companies with growing market share, higher costs, and what seems like a high P/E. (about 550, hard to say with the growth eating the profits).

Warning:  Broke bollinger/50day/etc below 80...could mean more pain before gain.  A 25% drop, does not make it a buy…..

Disclosure 2:  If I knew anything would I be blogging here...after all, unlike most of the daily bloggers left here..I'm not trying to sell you anything, except the last bottle of KRED juice for the season...... 

TSIF

The sky is not falling today, but it's raining somewhere.....

19 Comments – Post Your Own

#1) On March 25, 2014 at 7:07 PM, awallejr (83.83) wrote:

Well I wish you luck but I try to pick stocks of companies that actually make earnings.  I still shake my head at Amazon.  I will gamble on a $2 stock but not one in the $70s except in CAPS.

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#2) On March 25, 2014 at 7:27 PM, TSIF (99.96) wrote:

IT took me a LONG time to consider nibbling at growth stocks. 

I wouldn't have touched, and still won't touch Amazon, but I woudn't mind a piece of it at $50 five years ago...or priceline PCLN five years ago at $60.  NEVER saw that one coming with the economic turmoil, but my caps pic at $500 is doing well.

There is NO difference, ZERO between gambling on a $70 stock and a $2 stock from a potential standpoint...and a 50% increase in revenue, assuming it can make the bottom line some day is a lot of growth.....

It's the reaching the bottom line some day that is the next concept I'm working on refining....

TSLA scares me a l lot more than Amazon, and infinitely more than SPLUNG 

Thanks for the thoughts and checking in!     It's very quiet around here, but I'm use to talking to myself....  :)

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#3) On March 26, 2014 at 3:16 AM, awallejr (83.83) wrote:

Yeah I now. Shoulda coulda woulda.  But at least I sleep at nights owning value.  My goal is to have my holdings yielding more than my current income by the time I will retire.  I think it will.  Now if I was a lot younger my goal would be to see my holdings in general growing as much as possible.

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#4) On March 26, 2014 at 11:19 AM, Mega (99.95) wrote:

TSLA scares me a l lot more than Amazon, and infinitely more than SPLUNG 

Why isn't SPLK scary too? It trades at a higher sales multiple than TSLA. Do you understand their technology well enough to have a lot of confidence they will grow into the valuation?

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#5) On March 26, 2014 at 11:22 AM, Mega (99.95) wrote:

FRAN went splunk this morning. Growth investors are fleeing.  Could be a buying opportunity ... or wait a few months for the business to get back on track.

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#6) On March 26, 2014 at 1:33 PM, TSIF (99.96) wrote:

I don't know if Fran was a Crammer pick or not, but it seems to have just oscillated back down to where it was a few months ago.  Not a MOJO stock.  Looks like it repeats that cycle regularly, possibly a trading stock if one believes the weather thesis, but generally in retail, sales are not made back up later. 

Regarding TSLA and SPLK, both are scary, I'm high multiple/growth/mojo phobic.

As far as understanding SPLK, hard to say which I understand more (or least).  Tesla sells batteries mounted on four wheels that go vroom if you can find a charging station for them.  SPLK is Big Data, a dude who lives in Texas and shops at the Big and Tall store.

Overall, I probably understand big data and software better than Electric Cars. For example, I'm not clear how you can sell your electric car for 3X more than your competitors will be able to, especially if you don't have a distributor ship.  I understand growth, but not how you can sell a fraction of the cars of GM, but half half their market cap.  Growth is limited in any market to a defined user base.  Some market bases grow, (Data), not sure if car market space grows for a yuppie car that needs plugged in and won't commute to my day job without needing charged before coming back home...some application.....but scary at these values.

I'm confident SPLUNK will grow thier valuation.

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#7) On March 26, 2014 at 4:57 PM, Mega (99.95) wrote:

Speaking of going splunk, there were a few babies being thrown out with the bathwater today. Check out GMAN down 10%, PNRA down 9%, C down 6% and RJET down 6%.

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#8) On March 26, 2014 at 5:17 PM, TSIF (99.96) wrote:

That usually happens, which is why I like a good old fashion shakedown sometimes as long as it's just jitters and it doesn't go broader market....the top is in, no it's not debate has been ongoing for.....hmmm...depends on who you listen to, but for a long time.  My sentimeter was still postive until Monday....its' starting to hover on the zero mark and rocked negetive slightly at one point today....either we are consolidating or resetting.

C seems to be hit pretty hard, relatively speaking on news of Fed blocking a dividend raise..... this could be "read" several ways.....

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#9) On March 26, 2014 at 5:27 PM, awallejr (83.83) wrote:

Stay away from C.  I have warned people about that bank.  It is the only one still trading at what it did in 2009.  I loved it back then but when they did the dilution later on I stayed away.  If you need a bank stock go BAC before C.

I am just sticking with yield.

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#10) On March 26, 2014 at 5:47 PM, Mega (99.95) wrote:

The only problem is that you can't buy BAC at 8x forward earnings and 0.9x tangible book value, and you can buy C at that price.

C is actually more profitable and better capitalized. They are just weirdly bad at explaining their business to the Fed. That is a fixable problem.

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#11) On March 26, 2014 at 7:26 PM, TSIF (99.96) wrote:

Banks are probably the only "real" company  (earnings, not biopharm, exploratory, etc).....that I have trouble using Book Value as a metric.  What they have loaned out, in reserves, against bad loan allocations, etc, never seems to balance into a proper book value.....similar to cash per share.

And then every sector and region of the world has it's "normal" P/S/ P/B ranges.

I would agree that if metrics look low, share price is distressed, that you're taking a risk that others in the market are giving it, so if you have a risk tolernace and a timeframe, C looks interesting.

I understand awallejr is more into low risk, retirement planning mode...in which case BAC looks like a nice option for a balanced portfolio, but even it doesn't fit the bill ...yet on dividends. 

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#12) On March 26, 2014 at 8:04 PM, awallejr (83.83) wrote:

I wouldn't trust C's numbers.  They are still trading near their bottom from the crash.  Not so for all the other majors.  There has to be a reason.  And that is market thinks it is poorly run and quite possibly could take another round of hits but this time from the emerging markets where it has invested. 

There really is no compelling reason to invest in them as opposed to say JPM or WFC.  C has literally been dead money since the crash while the others at least return some yield.

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#13) On March 28, 2014 at 12:50 PM, Mega (99.95) wrote:

Banks are probably the only "real" company  (earnings, not biopharm, exploratory, etc).....that I have trouble using Book Value as a metric.  What they have loaned out, in reserves, against bad loan allocations, etc, never seems to balance into a proper book value.....similar to cash per share.

I don't understand what you mean about bank balance sheets not balancing.

Book value is useful for banks and insurers because it is less volatile than earnings. You can quickly glance at book value and estimate - can they get to 1% ROA/10% ROE? Can they get above that? Then you have an idea of what it's worth. Extrapolating earnings trends doesn't work as well with the turmoil in banking the past decade.

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#14) On March 28, 2014 at 12:54 PM, Mega (99.95) wrote:

I wouldn't trust C's numbers.  They are still trading near their bottom from the crash.  Not so for all the other majors.  There has to be a reason.  And that is market thinks it is poorly run and quite possibly could take another round of hits but this time from the emerging markets where it has invested. 

There really is no compelling reason to invest in them as opposed to say JPM or WFC.  C has literally been dead money since the crash while the others at least return some yield.

Another potential reason that C has underperformed is that the market is wrong. Happens all the time.

Obviously, I'm not buying C for yield. I'm buying it for capital gains.

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#15) On March 28, 2014 at 1:03 PM, TSIF (99.96) wrote:

Sorry Mega, I disagree with you on a few points.

You can glance at book value and it's a very useful tool.  My issue is that I can't trust the number itself. Book Value implies that you know what something is worth.  I don't think Banks have a clue what their assets are worth.  If I trusted it I would use it.  Book value of Banks is the most subjective which is what helped fuel the crash.  If a bank is stable it should be more accurate.  BAC and C are not stable compared to other banks.

Regarding the market being wrong.  The market is never wrong, but I feel  Tesla is over valued.  At any given time, however, the market is right, I/we just don't agree with it.

 

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#16) On March 28, 2014 at 3:03 PM, awallejr (83.83) wrote:

Another potential reason that C has underperformed is that the market is wrong. Happens all the time.

Obviously, I'm not buying C for yield. I'm buying it for capital gains.

Well it has been over 5 years and it stalls out all the time at $50 ($5 pre-reverse split).  While I don't wish you to lose money I personally would just swap C for WFC since they are close in price.

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#17) On March 28, 2014 at 3:34 PM, TSIF (99.96) wrote:

C is a double from the "crash", but you are correct awallejr, it has hit $50 THREE times since then and broken back down,....BAC is similar...WFC is up over 50%..underperforming the S&P, but certainly less rocky and not giving much back along the way.

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#18) On March 28, 2014 at 8:24 PM, awallejr (83.83) wrote:

With C remember that $50 is really $5 because they did a 10-1 reverse split. There simply isn't any catalyst to hold it.  They have to be hurting in emerging markets. With BAC, however, they didn't do any reverse split so that price of theirs really is climbing, unlike C. All I can say is for spec/growth take BAC over C, and for a bank pick take WFC over C.

Tim and Karen from Fast Money really have this stock wrong. Bove is right.  But, alas, that is just my opinion.

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#19) On March 28, 2014 at 10:59 PM, TSIF (99.96) wrote:

I took the $5 in to account... BAC is not doing any better the last two years....

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