11/30/05 Intra-Day Notes

...CNVR - I unloaded 2/3 of my shares yesterday to avoid holding a trading position in this volatile stock through their earnings. They are reporting after the bell tonight. I have had some bad experiences through the years trying to anticipate how the market will react to earnings reports. Given the nice run this stock has had, I am playing with house money so to speak with the remaining 1/3, so am sitting back to watch the action.
...And the action has been interesting. In the after hours trading sessions last evening, Yahoo Finance reported that the stock had traded down $3.11 from the day's close. That certainly got my attention. I checked on the Nasdaq website, but found nothing there regarding the trade. They showed only 3 trades for a total of 700 shares with a low of $16.54 when I checked. The stock had closed the regular session at $16.63.
...Today CNVR opened at $16.54.
...Business Week Online also ran an article on Convera 11/29. http://www.businessweek.com/the_thread/dealflow/archives/2005/11/the_long_and_sh.html
That was interesting because I wondered why a publication as big as Business Week would care enough about a company that had generated a total of $5.5 million gross revenue in the previous quarter to write an article about it the day before that company reported earnings. I still wonder about that.
...One thing the article did point out was that Convera is a stock that people either love or hate. During its 222% price gain, short interest has climbed the entire time, too, and is now over 15%, according to the article. That is certainly reflected in the tone on the Yahoo Finance bulletin boards when folks discuss CNVR. The bulls seem to think it is the greatest thing since sliced bread, and a threat to Google, while the bears try to scare the bejabbers out of everyone, as they always do. Me, I'll sit back with my position, and wait for the dust to settle after everyone reacts to the numbers. If this really is going to be a good long term story, there should be plenty of time to add. If it is going to be a train wreck, time will tell that as well.
...Regarding the Yahoo Finance bulletin boards, I frequent them sometimes to come across a nugget here or there. Many of the posts are drivel, and many posters, taking advantage of the anonymity the forum provides, use it for all sorts of purposes, since they can say anything without fear of reprisal. But it is where I found the above mentioned article about Convera. It is also where I first found out that earlier this year, Bill Miller of Legg Mason Capital Management bought into Convera to the tune of 5.5 million shares in a private placement.
http://www.washingtonpost.com/wp-dyn/content/article/2005/10/24/AR2005102401708.html .
Analyst issues: I never cease to be amazed at how many people pay so much attention to the pronouncements coming out of the sell side brokerage houses. Gotta love 'em. As I've stated here before, XTO is a core holding for me. I keep a long term core position in the stock, and then trade around that core position from time to time, adding or subtracting and on occasion even going short (as a trade, not the core position) when I think it is going to take a hit for a while. But I check on it every day, which is how I ran across the following: The analyst for J P Morgan who follows XTO issued an upgrade on it 10/4/05. Since I was painfully aware that the stock had been getting clobbered regularly for a while, I decided to look further into the analyst's performance on this stock. Here's what I found:
...On 3/1/05 JPM downgraded the stock from overweight to neutral. It closed that day at an adjusted price of $32.33 (per Yahoo Finance - actual close was 43.28, but closing data was adjusted for subsequent 4:3 stock split on 3/16.)
...Then on 10/4/05, JPM upgraded the stock from neutral to overweight.
...How did those recommendations work out, you ask?
...From the 3/1 DOWNGRADE to the 10/4 upgrade, the stock went UP 40%.
...From the 10/4 UPGRADE to last night's close the stock has gone DOWN 9%.
...But hey, we're talking professionals here folks, don't try this at home.
...It is almost enough to make someone think that the 3/1 downgrade was intended to force weak hands to sell the stock so that someone could accumulate shares on the cheap for a position, then the 10/4 upgrade was to bring liquidity in so that those shares could be dumped? Nah. They wouldn't do that.
...Actually, I happen to agree with the upgrade. On 10/20, XTO reported record earnings and revenues. They are one of the most efficient of the oil/gas producers, and I like the fact that they are entirely located here in the U.S. Hopefully, that lessens the chances of geopolitical risks.
...Another note regarding bulletin boards and XTO: Mr. Simpson, who runs the company, gets bonus compensation that pay him on the levels of a rock star, maybe even a baseball player. People on the boards get apoplectic every time this issue comes up. And I wish the company had another system in place. The compensation sometimes does seem excessive. But, at the same time, this stock has been an outstanding performer, and unless something changes in the economy or the company, I expect it will be solid for the foreseeable future (but who knows? I don't, it's just my opinion.)
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