Calix, Inc. (NYSE:CALX)

TSIF (99.95) Submitted: 7/12/2012 4:44:40 PM : Start Price: $4.81 CALX Score: +15.05

Reaching for that falling knife in the first few hours of it's sharp plunge will burn you more than 9 out of 10 times. In rare cases an equity will "undershoot" while the news is "digested". I reached for Calix, Inc after the more than 25% plunge and did catch the hilt as it turned, however slightly upward. The trick to catching a falling knife is watching the trend, the volume in relationship to normal volume, and the short interest and then only reaching if the news is digestible.

Other than the plunge on earnings I would not normally be a fan of Calix, Inc, it's product or it's financials. The broadband access equipment is a cut throat business and Calix is a small fish in the pond. They have not been profitable in three years but revenue is up YoY over 15% each of the last three years, meaning they are in the painful stage of growing expenses to capture market share.

The news that customers are lowering spending comes at a time when the markets are already unsettled. This usuallly accelerates selloffs. This is most likely a swing trade unless Calix improves metrics in the next quarter or so. P/S is sub 1 and it's now near book value. All cash, no debt, reasonable cash flow despite quarterly losses. Could be a long term growth story, but highly risky.