For his Precedent-based portfolio, Covestor model manager John Ward uses a combination of fundamental and technical analysis, and tends to take concentrated positions. Ward averages 35.57 trades per month, and the portfolio’s current top holdings include IPG Photonics Corp (IPGP), JDS Uniphase Corp (JDSU), Netflix Inc (NFLX) and 3D Systems Corp (TDSC) (as of end of day 3/7/11).
On March 4, Ward added the positions in JDSU and IPGP to the model. JDSU is a provider of communications equipment for telecommunications suppliers. Investment Underground at Seeking Alpha wrote about the company’s turnaround and seemingly high valuation:
After 10 straight years of negative EPS, through December 2010, it was $0.06. So [as of end of day 2/11/11] shares have a P/E of 411.
Robert Weinstein at Seeking Alpha believes buying the company at these levels is only justified by ignoring its past and focusing on its most recent quarter:
Almost all my trading is shorting stocks that have run far above a pace that can be maintained, and JDSU appears to be one that looks great – until you dive deeper into the numbers. For example, even looking at the latest earnings release in a positive light, it is difficult to get around the trailing twelve month (TTM) P/E ratio that is in the hundreds. For JDSU stock to not fall back under $20 again, JDSU must maintain the growth rate it just reported, and not slow down. This appears to be somewhat like an elephant riding a bike – if there is any slowdown, disaster awaits. One has to ignore everything this company has done over the past few years and completely buy into the idea that this one last quarter represents the future of the company. Some may buy into it, but I believe it will not be enough to continue the price appreciation.
IPGP designs and manufactures fiber lasers and amplifiers. Weinstein has also written about IPGP, noting the heavy insider selling, and his worries that this may be a pump and dump scheme.
I looked at EDGAR Online and I saw that management has sold an eye-popping 12 million shares in the last year. IPGP is a company that has averaged less than seven million shares of trading per month. Over 14% of the trading is by insiders selling shares. All alone, that has the appearance of a penny stock pump and dump with management dumping shares on the market as fast as they can. But wait, it gets better. In the recent run-up, management has sold over 11.1million shares in the past 90 days.That means the selling by insiders is accelerating. Who is the number one person selling stock, including shares within the past few weeks? Dr. Valentin Gapontsev, the CEO of the company
In the broad market pullback of 3/7, these stocks took a beating, with JDSU falling 6.87% for the day and IPGP falling 2.75% vs the NASDAQ’s 1.39% loss.
Sources:
“What You Need to Know About These 11 Tech Bellwethers in 2011” Roger Choudhury. SeekingAlpha, 3/1/11. https://seekingalpha.com/article/255726-what-you-need-to-know-about-these-11-tech-bellwethers-in-2011
“JDS Uniphase: Investors are Way Too Excited” Robert Weinstein. SeekingAlpha, 2/13/11. https://seekingalpha.com/article/252552-jds-uniphase-investors-are-way-too-excited
“IPG Photonics: Eye Popping Chart Due for a Pullback?” Robert Weinstein. SeekingAlpha, 2/15/11. https://seekingalpha.com/article/252895-ipg-photonics-eye-popping-chart-due-for-a-pullback
