The Blog of Evermore

Holding insider’s coattails through cautious times

February 27th, 2011

It’s getting difficult to find attractive investing opportunities at the moment. Many of my current holdings are doing well and I still have a lot of my money in cash. Since my last post, I did take initial positions in three companies while taking profits in another.

I purchased some LSI shares at $4.45 a while back and have since sold off about 72% of that initial position in two sales ($6.02 and most recently at $6.74). I have now pulled out my initial investment and the shares I hold now represent my profit.

In combination with the most recent sale of LSI, I purchased shares of Exar at $6.33 (currently at $6.58). Exar is what is termed a “fabless” semiconductor company; meaning that they perform the sales and design work for new semiconductors but contract out the manufacture of the end product. My reasons for taking a position in Exar are as follows:

• The price recently fell due to a somewhat disappointing quarter and a projection that the current quarter will also be soft.
• Optimism for recent design wins that could start hitting the bottom line towards the end of the year.
  A sizable purchase of shares by the CEO and a steady and continuing significant accumulation by Soros Fund management.
• Downside limited by the fact that the company has about $4.50 per share in cash on hand.

I don’t expect anything to happen with this stock over the next several quarters but I am hoping that it will turn out to be a good investment 12 months from now.

I also picked up some shares of Biosante Pharmaceuticals (BPAX) at $1.87. The stock subsequently took a quick run up to over $2.50 and has now settled back (as of this posting) at $2.14. This stock will likely be volatile for the foreseeable future, so it may represent a good candidate for those interested in day trading.

Biosante is definitely a “story stock” in that it is currently nearing completion of trials for LibiGel, a product that the company is hoping will do for women (and investors) what Viagra did for men. While the company has other products in the pipeline, in the near term this company is a bet for or against the approval of LibiGel. There has been significant options activity regarding BPAX and there are large number of shares sold short (which may represent hedging as much as a pure bet against the company).

Other companies have failed to be successful in getting a testosterone related product to market for women, so I wouldn’t bet the farm on this one. However, given the recent insider purchases and the looming milestones coming up this year, I thought it worth taking a stake and keeping an eye on it. This is a good candidate for taking a position to hold and then trading around with some shorter term trades to take advantage of the volatility.

I have had Comverge (COMV) on my monitor list for some time and recently took a small position in it. The stock is very volatile and spent most of the past six months bouncing between $6.00 and $8.00 per share (it had been as high as $13.00 in 2009). Per the company’s profile: “Comverge, Inc. provides peaking and base load capacity solutions to electric utilities, grid operators, and associated electricity markets in North America.” So to some extent, this is a play on the smart grid that is supposedly coming our way.

Like Exar, this is a company that recently had a disappointing quarter and has seen its stock price fall to multi-year lows. Also, like Exar, the company has seen steady accumulation by insiders. It’s always nice to get shares at prices less than those in the know, and you can do that right now with this company.

Entry Filed under: Finance