This week marked the thundering climax of the 2014 first-quarter earnings season, and stocks, both large cap and small, were lurching wildly up or down, displaying a sort of hyper-reactivity that is both exciting, and, it must be said, a bit troubling. It's the perfect time, in other words, to launch a new weekly column. Close Calls will focus on the major market events of the past week, news affecting the market and relevant emerging trends. It will include a recap of my stock picks for the week, both bearish and bullish.
I'll be reappraising one or more of my past calls each week, pointing out what has gone wrong and right, and determining whether or not an opportunity still exists. Sometimes I'll provide updates on the winning calls I've made, but I won't shy away from discussing the calls that have begun to go awry, nor even those that have blossomed into spectacular, embarrassing fails. Having just begun my twentieth year following the markets, I've long since made peace with the fact that this happens to me, just as it happens to all of us, from time to time.
All market writers should mine their own mistakes, as there is much wisdom to be gained in the process, but not many do.
To kick things off, I'm reversing myself today on this bearish call on Universal Display Corp (OLED), published on September 16, 2013. OLED opened that morning at $33.85. The company manufactures Organic Light Emitting Diodes (or OLEDs), which are used to make large screen, flat panel, high resolution television sets. I said investors should dump the stock based on its valuation, as well as concern over the enforceability of the company's intellectual property. In retrospect, it appears that the intellectual property issue was a phantom, but the stock has fallen since then on concerns that its largest customer, Samsung, might be looking at other suppliers, so I can count this as a win.
Today, OLED is trading at $27.14 and I am now bullish on the stock, due in part to the strength of its first-quarter earnings report. The company earned $0.09 per share for the quarter, up from a $0.10 loss in the year-ago quarter and well above the expected number, $0.03. The company's revenue growth is even more impressive, having risen by 152% from the year-ago quarter. All in all, this is a far more attractive stock than it was yesterday, despite the fact that shares rose 12% today.
Recap, Bear Positions taken May 5, 2014
Company Initial Price
Micron (MU) $26.00
Trinity Industries (TRN) $73.80
NuStar GP Holdings (NSH) $35.60
Westlake Chemical (WLK) $70.72
Recap, Bull Positions taken May 9, 2014
Company Initial Price
GenCorp (GY) $17.59
Ebix (EBIX) $15.37
Splunk (SPLK) $48.51
InvenSense (INVN) $18.70
Cree (CREE) $44.99
Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.