Back InI got back in today at $6.00. I was watching it after getting in then out with a loss in the 10-15% range in Sept-Oct of last year.
At that time I was into this purely as a momentum play (I was in this a few years back as a long term play, and didn’t trade the ups and downs then), picking an exit point of a loss of 10-20% from the highest daily closing price it reached while I held it.
I’m glad I got out when I did, in the $17’s. (Lest any longs think I am gloating, I have ridden other stocks down to a substantial paper loss on a position, so I have been there. Actually, I still am there on some.)
After the news of the distribution “suspension” and the drop to around $5, I decided to watch for another entry point. Here is how I picked my entry point, why I got in, and what concerns me still about this stock:
- I believe this is fundamentally worth something more than $6.00, although admittedly don’t have a ballpark figure of what I think it is worth.
- I am again in this as a momentum play. I decided to watch the trend after the big drop, and looked for an entry point of relatively steady sp rise of at least 20% and over at least one month, but pretty much ignoring volume. We are there now. This is kind of arbitrary, but seemed a good enough way to me to roughly call a trend.
- I wanted to not buy before tax-loss selling was done (if any was going on), but overriding was still my entry point.
- I was debating whether I should wait for their final call on distributions, but I think we can count on none for a good while. The risk is that there will be another drop once they actually announce no or greatly reduced distributions, but I think any dip after that will be fairly temporary. (This should already be accounted for in the stock price, but I would not discount the likelihood that some will still sell on the news.)
- While the business as a whole seems reasonably solid – I am not as pessimistic as some about this – there is still the risk that CRW is in a declining business and that, unlike previous changes in technology that they did a fantastic job of anticipating and rolling with, they may not catch it this time. There is also a good possibility that Q4 sales (typically their best, I believe), are not going to be up to snuff. Indications are that North Americans were not spending as much this year as recent years. And, there is a good chance the US is heading into a recession, so people will spend less next year. Despite that, my gut feeling is that this will not hit business that hard, at least not in the next two to three quarters. This is a very shaky premise, of course, so I will be watching economic indicators and share price action very closely.
- Again, I am picking an exit point of 10 – 20% drop from highest closing price it reaches while I hold it.
GLTA
HC