Updates December 2013

I like to keep tabs on the big movers in the markets, especially the big downward moves.  Sometimes those big moves are a market over-reaction to some less-than-positive news.  If the stock is healthy - if the price-dive really was an over-reaction and not a sudden correction - then the market usually corrects itself pretty quickly, sending the price back up.  A situation like this - when the madness of crowds is driving a price down instead of up - is a window of opportunity to make some money by buying the stock at the bottom of the dive and selling when it recovers.

I'll illustrate with one that I missed:  OSI Systems, Inc. (NASDAQ:OSIS).  On Monday December 9th this stock did a LOT of intra-day movement.  It went from over $65 a share at 10AM Eastern to $40.50 before noon.  The cause of the movement was a number of news stories concerning the Transportation Safety Administration having cancelled an order for OSIS baggage scanners. 

I was unfamiliar with this technology stock, but my research indicated that it was fundamentally sound, and that it would recover.  I guessed it would come back to $50 a share, at least.  This meant I could buy some shares at OSIS's noon-ish price of $40.50 and sell at over $50 in the near future, netting myself roughly a 25% profit.

The time it took to research, though, was too long.  It was back up to nearly $50 a share by around 2PM that same day.  This was a job for a day trader, which I am not. 

It's possible that if trading stocks was what I did for a living then I could have devoted myself to this opportunity and made something of it.  Mostly I found myself in a position to watch this opportunity go by, fast

However, another opportunity provided itself yesterday:  Jabil Circuit, Inc. (NYSE:JBL).

JBL reported quarterly earnings yesterday, and this quarter - while profitable - wasn't up to par with analyst expectations.  Guidance for the coming year was also adjusted downward.

In reaction, the stock fell over 20%, from $19.72 to $15.50 or so.  This struck me as extreme for a stock that, just this summer, was flirting with $24 a share. 

One of the many things that JBL does is make plastic casings for the iPhone 5c.  It also makes parts for HP, and has been making parts for Blackberry.  An issue affecting the immediate future of JBL is the winding-down of the relationship with Blackberry.

The stats aren't bad.  It appears that JBL has a good cash-to-debt ratio, and that it's actively netting a profit.

I decided to buy.

I had to sell another equity before I could buy, though.  I seldom have money in my investment accounts that's not already at work.

I sold Riverbed Technology, Inc. (NASDAQ:RVBD).  It's an American networking equipment manufacturer, and it looked good when I bought it on 31 October 2012.  I bought 100 shares at $18.36 each for a net cost, including fees, of $1,845.99.  It went up shortly after I bought it, to a 52-week high of $21.39, and in retrospect I should have sold at that time.  After that it dove again to a 52-week low of $13.77.  In the past months it's been working its way up again, but I think American networking equipment manufacturers have become suspect as a result of ongoing NSA revelations.  RVBD shareprice has slowly been approaching the price at which I originally purchased, and my plan has recently been simply to sell as soon as I'd covered my fees and would not be taking a loss. 

I hate taking a loss.  I did the math, though, and the potential upside on JBL was such that it was worth the loss on RVBD.

I sold my 100 shares of RVBD at $17.10 for a net total of $1,699.98.  That's a total loss of $146.01.

(I'm not going to try to do the math on the wasted year in which time that money probably lost additional value.)

After selling RVBD yesterday, I purchased 110 shares of JBL at $15.53 a share for a net cost of $1,718.29.

I need JBL to go back up to at least $17.04 in order to break even and make up for the loss on RVBD.  I think, though, that JBL will go a bit higher than that within the next year.  In a perfect world it will go back up to $24 a share, but we'll see.

JBL's high today was $16.58, so I'm confident I'll break even, at least.