Stock Thread (18 Viewers)

[General Malaise]

All time high in Amaya....

DDD earnings tomorrow before the open. Anybody playing?

I have 25 shares at the current price, I'm holding. Was considering doubling up or selling all day. Think I'll hold and double up if it tanks.

IMO, Amaya is still 'cheap'.

 

[St. Louis Bob]

All time high in Amaya....

DDD earnings tomorrow before the open. Anybody playing?

I have 25 shares at the current price, I'm holding. Was considering doubling up or selling all day. Think I'll hold and double up if it tanks.

IMO, Amaya is still 'cheap'.

No way am I putting the black cat of death on you guys.

 

[Bob Sacamano]

All time high in Amaya....

DDD earnings tomorrow before the open. Anybody playing?

I have 25 shares at the current price, I'm holding. Was considering doubling up or selling all day. Think I'll hold and double up if it tanks.

IMO, Amaya is still 'cheap'.

No way am I putting the black cat of death on you guys.

Wait, we have to meet you in person if you buy the stock?

 

[St. Louis Bob]

All time high in Amaya....

DDD earnings tomorrow before the open. Anybody playing?

I have 25 shares at the current price, I'm holding. Was considering doubling up or selling all day. Think I'll hold and double up if it tanks.

IMO, Amaya is still 'cheap'.

No way am I putting the black cat of death on you guys.

Wait, we have to meet you in person if you buy the stock?

lol

 

[mquinnjr]

 

[St. Louis Bob]

USU, wait

 

[General Malaise]

USU, wait

You don't own this one, do you???

 

[Bob Sacamano]

USU, wait

You don't own this one, do you???

Any others we should NOT own at this point?

 

[General Malaise]

USU, wait

You don't own this one, do you???

Any others we should NOT own at this point?

Ooooof. We've affectionately called USU "USUCK" for years now. If I recommended that one, stab me. I have no reservations about the other crappy juniors. They all seem to be heading higher, despite the fact that spot price hasn't budged (it even ticked down the last couple of days). But there are rumors of buyers in the spot market and again, all signs are bullish for the metal.

We are thinking about starting a new fund designed to purchase uranium only (different than our existing funds which own a basket of metals). There's a very deep-pocketed group in the ME that wants to partner with us and buy physical. I'll keep you guys posted on this, but it's been 10 years since my boss (and too a much smaller extent yours truly) put the original uranium fund together in 2004. That fund launched my boss' career and when he liquidated in June 2007, he generated quintuple returns net of fees for original investors. Hoping history at least rhymes for us here.

 

[St. Louis Bob]

USU, wait

You don't own this one, do you???

Shockingly, no.

I did put the rest of my money into DDD today though.

 

[fantasycurse42]

Thinking about buying a little RNN

 

[St. Louis Bob]

USU, wait

You don't own this one, do you???

Any others we should NOT own at this point?

Ooooof. We've affectionately called USU "USUCK" for years now. If I recommended that one, stab me. I have no reservations about the other crappy juniors. They all seem to be heading higher, despite the fact that spot price hasn't budged (it even ticked down the last couple of days). But there are rumors of buyers in the spot market and again, all signs are bullish for the metal.

We are thinking about starting a new fund designed to purchase uranium only (different than our existing funds which own a basket of metals). There's a very deep-pocketed group in the ME that wants to partner with us and buy physical. I'll keep you guys posted on this, but it's been 10 years since my boss (and too a much smaller extent yours truly) put the original uranium fund together in 2004. That fund launched my boss' career and when he liquidated in June 2007, he generated quintuple returns net of fees for original investors. Hoping history at least rhymes for us here.

I want to retire so I'm more than hoping GB.

 

[General Malaise]

URG has me a little puzzled....I have to think all the websites and articles touting this one is largely to blame. Not that I'm complaining. I think it's great. But my god, this thing is up, what...35% YTD? Has a debt problem that my feckless sister would laugh at. Might produce, what...2 million pounds a year? The world burns between 170-180 million pounds a year.

I guess this is a case of equities leading the metal. Plus, they've been beaten down so hard for so long that perhaps sector rotation is coming in from other commodity guys.

 

[St. Louis Bob]

URG has me a little puzzled....I have to think all the websites and articles touting this one is largely to blame. Not that I'm complaining. I think it's great. But my god, this thing is up, what...35% YTD? Has a debt problem that my feckless sister would laugh at. Might produce, what...2 million pounds a year? The world burns between 170-180 million pounds a year.

I guess this is a case of equities leading the metal. Plus, they've been beaten down so hard for so long that perhaps sector rotation is coming in from other commodity guys.

I've had an itchy trigger finger myself since I'm basically back to even now.

I also really want to gamble that SLPS crushes earnings tomorrow. I put a buy in after ODP earnings drug them down below 12 but missed and it popped right back to $13.50 or so days later. All of the analysts expect them to disappoint. I don't.

Meh screw it. I'm taking a small position.

 

[St. Louis Bob]

I got 500 @ $13.42 with a tight stop at $13.20.

 

[Bob Sacamano]

USU, wait

You don't own this one, do you???

Any others we should NOT own at this point?

Ooooof. We've affectionately called USU "USUCK" for years now. If I recommended that one, stab me. I have no reservations about the other crappy juniors. They all seem to be heading higher, despite the fact that spot price hasn't budged (it even ticked down the last couple of days). But there are rumors of buyers in the spot market and again, all signs are bullish for the metal.

We are thinking about starting a new fund designed to purchase uranium only (different than our existing funds which own a basket of metals). There's a very deep-pocketed group in the ME that wants to partner with us and buy physical. I'll keep you guys posted on this, but it's been 10 years since my boss (and too a much smaller extent yours truly) put the original uranium fund together in 2004. That fund launched my boss' career and when he liquidated in June 2007, he generated quintuple returns net of fees for original investors. Hoping history at least rhymes for us here.

I didn't mean to imply I own it. I do not. Just asking if there's anything else to look out for.

I sold most of my URG in 2010 and 2011. Small loss on it again in 2012 and small gain in 2013.

I'm limited to UUUU (62%), URPTF (-4%), and DNN, mostly by way of RGT( )

 

[St. Louis Bob]

I got 500 @ $13.42 with a tight stop at $13.20.

OOF

ETA

Put a buy in for another 500 @ $11.45

 

[fantasycurse42]

grabbed a few small biotechs:

CHTP (already owned), SGYP, & RNN...

Waiting for Plug to fall on earnings, which with the current market cap and run up, it should... I'm establishing a long there next week.

& I'm putting a big chunk into AT&T - Like the safety, big dividend and low downside due to a P/E under 10.

 

[The Man With No Name]

GNCA - February 5th IPO was $12.00 . Late Tuesday I bought 140 shares @15.00 and it closed @14.92

Wednesday it closed at 16.37

Thursday it closed at 18.21

Today it closed at 22.45

Wow. Never had a stock go up so much so quick.

 

[The Ref]

grabbed a few small biotechs:

CHTP (already owned), SGYP, & RNN...

Waiting for Plug to fall on earnings, which with the current market cap and run up, it should... I'm establishing a long there next week.

& I'm putting a big chunk into AT&T - Like the safety, big dividend and low downside due to a P/E under 10.

SGYP I like. We got some "local favorites" here in the FFA who like that one. On top of that I had a former Wall St Broker (retired at 40) who laid out a case that SGYP will see $20 by the end of this year.

His favorite Stock right now is IDRA. He seems to think there is a real possibility that IDRA it can go ACAD on the way up to the 100's. The Bio Tech as about as safe as it comes as it has two previous generations of tech it's building off of. Almost more importantly is all the "right" bio tech hedge funds are the largest holders.

 

[fantasycurse42]

grabbed a few small biotechs:

CHTP (already owned), SGYP, & RNN...

Waiting for Plug to fall on earnings, which with the current market cap and run up, it should... I'm establishing a long there next week.

& I'm putting a big chunk into AT&T - Like the safety, big dividend and low downside due to a P/E under 10.

SGYP I like. We got some "local favorites" here in the FFA who like that one. On top of that I had a former Wall St Broker (retired at 40) who laid out a case that SGYP will see $20 by the end of this year.

His favorite Stock right now is IDRA. He seems to think there is a real possibility that IDRA it can go ACAD on the way up to the 100's. The Bio Tech as about as safe as it comes as it has two previous generations of tech it's building off of. Almost more importantly is all the "right" bio tech hedge funds are the largest holders.

IDRA has me very intrigued - Baker Bros just bought a lot of this fairly recently.

 

[The Ref]

grabbed a few small biotechs:

CHTP (already owned), SGYP, & RNN...

Waiting for Plug to fall on earnings, which with the current market cap and run up, it should... I'm establishing a long there next week.

& I'm putting a big chunk into AT&T - Like the safety, big dividend and low downside due to a P/E under 10.

SGYP I like. We got some "local favorites" here in the FFA who like that one. On top of that I had a former Wall St Broker (retired at 40) who laid out a case that SGYP will see $20 by the end of this year.

His favorite Stock right now is IDRA. He seems to think there is a real possibility that IDRA it can go ACAD on the way up to the 100's. The Bio Tech as about as safe as it comes as it has two previous generations of tech it's building off of. Almost more importantly is all the "right" bio tech hedge funds are the largest holders.

IDRA has me very intrigued - Baker Bros just bought a lot of this fairly recently.

In fact when you count the warrants they own they have over 40% of the company.

 

[The Ref]

So much of the IDRA story is based upon the big investment of Baker Bothers and Pillar. The below is a good explanation of their investment in IDRA and the agreements they made with the Idera BOD.

Hi Seel. Let me assure you that despite the decrease in the number of actual voting shares owned in the 4th quarter of 2013, the Bakers have done nothing but increase their stake in this company over the course of the past 9 months (covering three secondary offerings.)

The Baker Brothers own a combination of 3+ million (voting) shares and 40,000,000 pre-paid warrants that, if exercised, would give them a 40% ownership stake in IDRA. The warrants are pre-paid, meaning, for example, that in the last offering, instead of paying $4 per share, they paid $3.99 per warrant, with each one exercisable for a penny.

The Bakers are operating under an agreement with IDRA'a board to keep their common stock (voting rights) under 5% of the company. They would be allowed, with 60 days prior written notice to the IDRA board, to exercise enough warrants to own 19.99% of the common shares (voting rights) of the company, but never more at any one time.

This means that the Bakers, in an effort to own as much of the company as they can at this early stage - while staying on good terms with the board (two members of which are part of Pillar Investments, the other major IDRA stakeholder, which is operating under a similar agreement) that they were willing to tie their money up in the company in a very illiquid arrangement. They will not be able to unwind this investment quickly under any circumstances. This is a hugely bullish indicator.

The arrangement is noted by the company in one of the February 5th SEC filings, which you can look up (I'm too lazy right at this moment to go find the link... apologies, but it's late.)

If you total up the value of their stock and warrants, you will find that IDRA, despite its tiny size, represents the Bakers' 9th largest holding by dollar value.

The Bakers are all-in on this. You just have to read the fine print to know that. Don't let anyone frighten you by pointing to their sale in the 4th quarter (which they did in exchange for warrants in the last offering in order to keep in compliance with their agreement) and try to convince you otherwise

 

[fantasycurse42]

Yea, liking this story... Employees off of some of the biggest pharma houses & investments from the sharks...

I think I'm in tomm.

 

[The Ref]

So at what point does Plug Power pop? And when it does how big will the drop be?

$10K investment at the low gets you $615,333.33 at the bell this am.

And another $50K 3 minutes into trading..... just wow.

 

[The Ref]

So at what point does Plug Power pop? And when it does how big will the drop be?

$10K investment at the low gets you $615,333.33 at the bell this am.

And another $50K 3 minutes into trading..... just wow.

Mid day update - $690,000.... minus the $7.95 trade fee.

 

[The Ref]

1PM update $760,666,67

 

[Bob Sacamano]

I'm limited to UUUU (62%)

Oof

 

[NIU Kicker]

1PM update $760,666,67

Tough day for our theoretical PLUG investment, we lost over $300K today.

 

[GoBirds]

Tough to find value out there right now with the market at record highs.......any you all see that would be good entry point for a long term hold? Been waiting for a pullback but have some money I would like to get reinvested in a blue chip witha decent return I could reinvest for years to come. Recently add O (reit) which has a good return but also looking for other options.

 

[fantasycurse42]

Tough to find value out there right now with the market at record highs.......any you all see that would be good entry point for a long term hold? Been waiting for a pullback but have some money I would like to get reinvested in a blue chip witha decent return I could reinvest for years to come. Recently add O (reit) which has a good return but also looking for other options.

T with DRIP...

You aren't going to set the world on fire, but a good long term hold with lower risk.

 

[GoBirds]

Tough to find value out there right now with the market at record highs.......any you all see that would be good entry point for a long term hold? Been waiting for a pullback but have some money I would like to get reinvested in a blue chip witha decent return I could reinvest for years to come. Recently add O (reit) which has a good return but also looking for other options.

T with DRIP...

You aren't going to set the world on fire, but a good long term hold with lower risk.

Not a bad idea.....I got in at a few dollars higher unfortunately but might not be a bad idea to add some and average down.

Main holdings now are T, F, GE

 

[fantasycurse42]

I'm loading up on CHTP

still holding

 

[identikit]

I'm loading up on CHTP

still holding

As am I.

Oy.

 

[fantasycurse42]

I'm loading up on CHTP

still holding

:removesbag:

 

[St. Louis Bob]

 

[identikit]

PLUG making a comeback of sorts after the bloodbath.

What a ride.

 

[fantasycurse42]

PLUG making a comeback of sorts after the bloodbath.

What a ride.

$8MM in revenue

The company is trading 30x revenue. Their CEO comes off as a penny stock newsletter pumper to me, $5-$6MM in Q1 revenue... I don't understand the excitement.

Also, he mentions $150MM in bookings, is this bookings just for 2014?

 

[Mystery Achiever]

Also, he mentions $150MM in bookings, is this bookings just for 2014?

From WSJ:

Plug Power reported bookings reached $32 million in the its fourth quarter, as strong product sales and maintenance orders were received from large companies such as Wal-Mart Stores"......"I firmly believe that this continuing momentum will carry on throughout 2014, and that orders for this year will total more than $150 million--almost four times our total for 2013," Mr. Marsh said.

 

[fantasycurse42]

Also, he mentions $150MM in bookings, is this bookings just for 2014?

From WSJ:

Plug Power reported bookings reached $32 million in the its fourth quarter, as strong product sales and maintenance orders were received from large companies such as Wal-Mart Stores"......"I firmly believe that this continuing momentum will carry on throughout 2014, and that orders for this year will total more than $150 million--almost four times our total for 2013," Mr. Marsh said.

But this include orders that will be delivered beyond 2014, such as Walmart... Revenue this year won't exceed $70MM.

This is all hype right now IMO.

 

[Mystery Achiever]

Yes, $70 mil rev. estimate and EBITDA of 1.5-3mil.. I posted that quote because you asked about bookings.

 

[siffoin]

Tough to find value out there right now with the market at record highs.......any you all see that would be good entry point for a long term hold? Been waiting for a pullback but have some money I would like to get reinvested in a blue chip witha decent return I could reinvest for years to come. Recently add O (reit) which has a good return but also looking for other options.

For more than a year I worked on this concept:

Would it be possible to consistently beat the $SPY by investing into the single strongest sector(s) and rotate regularly. I wanted some simple and a method that was easy to determine strength. For a while I tracked (and invested into):

XHB

XLK

XLU

XLI

XLF

XLE

XLV

XLP

XLY

QQQ

IWM

Based upon which ETFs sectors were the strongest performing and inside an early Bull Trend. The concept proved to be quite difficult to manage.

Summer of 2013 - I decided to simplify and examine only 6 sectors that were essentially based off the diversification concept from the American Association of Individual Investors. The 6 sectors comprised of:

IVV - Large Cap

IJH - Mid Cap

IJR- Small Cap

EFA- International

ADRE - Emerging Mkts

IEF - Bonds

Rather than diversifying into each of these funds, I backtested a strategy to see what would happen if I invested 100% into the strongest sector and rotated monthly. I call this the SH Monthly Rotation Strategy and I bench marked that to the $SPY that was a buy and hold..

The results of a 10 year back test are pretty strong.

Beginning with a portfolio of $10k in 2003 - today:

The SH Portfolio balance would currently sit at $135k vs the $SPY at $26k.

While the past couple of yeasr the $SPY has outperformed this strategy by a couple of % pts each year. The SH Portfolio Rotation Strategy in 10+ years has never suffered a losing year.

I've participated in the strategy since Nov 2013, and update the latest rotation on my site.

You can see all of the data here.

http://steelhedge.com/top-sector-monthly-rotation-strategy/

 

[Rattle and Hum]

If only one could retire on back-tested results! I'd be, well, more rich than Warren Buffer.

 

[fantasycurse42]

For more than a year I worked on this concept:

Would it be possible to consistently beat the $SPY by investing into the single strongest sector(s) and rotate regularly. I wanted some simple and a method that was easy to determine strength. For a while I tracked (and invested into):

XHB

XLK

XLU

XLI

XLF

XLE

XLV

XLP

XLY

QQQ

IWM

Based upon which ETFs sectors were the strongest performing and inside an early Bull Trend. The concept proved to be quite difficult to manage.

Summer of 2013 - I decided to simplify and examine only 6 sectors that were essentially based off the diversification concept from the American Association of Individual Investors. The 6 sectors comprised of:

IVV - Large Cap

IJH - Mid Cap

IJR- Small Cap

EFA- International

ADRE - Emerging Mkts

IEF - Bonds

Rather than diversifying into each of these funds, I backtested a strategy to see what would happen if I invested 100% into the strongest sector and rotated monthly. I call this the SH Monthly Rotation Strategy and I bench marked that to the $SPY that was a buy and hold..

The results of a 10 year back test are pretty strong.

Beginning with a portfolio of $10k in 2003 - today:

The SH Portfolio balance would currently sit at $135k vs the $SPY at $26k.

While the past couple of yeasr the $SPY has outperformed this strategy by a couple of % pts each year. The SH Portfolio Rotation Strategy in 10+ years has never suffered a losing year.

I've participated in the strategy since Nov 2013, and update the latest rotation on my site.

You can see all of the data here.

http://steelhedge.com/top-sector-monthly-rotation-strategy/

A little confused by this...

Doesn't this raise your capital gains instead of buy and hold? If you like a particular sector, why not just pick 3 or 4 within the sector and stay long?

 

[siffoin]

For more than a year I worked on this concept:

Would it be possible to consistently beat the $SPY by investing into the single strongest sector(s) and rotate regularly. I wanted some simple and a method that was easy to determine strength. For a while I tracked (and invested into):

XHB

XLK

XLU

XLI

XLF

XLE

XLV

XLP

XLY

QQQ

IWM

Based upon which ETFs sectors were the strongest performing and inside an early Bull Trend. The concept proved to be quite difficult to manage.

Summer of 2013 - I decided to simplify and examine only 6 sectors that were essentially based off the diversification concept from the American Association of Individual Investors. The 6 sectors comprised of:

IVV - Large Cap

IJH - Mid Cap

IJR- Small Cap

EFA- International

ADRE - Emerging Mkts

IEF - Bonds

Rather than diversifying into each of these funds, I backtested a strategy to see what would happen if I invested 100% into the strongest sector and rotated monthly. I call this the SH Monthly Rotation Strategy and I bench marked that to the $SPY that was a buy and hold..

The results of a 10 year back test are pretty strong.

Beginning with a portfolio of $10k in 2003 - today:

The SH Portfolio balance would currently sit at $135k vs the $SPY at $26k.

While the past couple of yeasr the $SPY has outperformed this strategy by a couple of % pts each year. The SH Portfolio Rotation Strategy in 10+ years has never suffered a losing year.

I've participated in the strategy since Nov 2013, and update the latest rotation on my site.

You can see all of the data here.

http://steelhedge.com/top-sector-monthly-rotation-strategy/

A little confused by this...

Doesn't this raise your capital gains instead of buy and hold? If you like a particular sector, why not just pick 3 or 4 within the sector and stay long?

Though as unlikely as it may seem...it is possible that one day we will experience a bear market. That's where rotation really pays off because you'll be placed into a bond/cash fund.

If you just want to buy and hold...I doubt you could do better than just long the $SPY as the one single holding in your portfolio (as an ETF).

It's just an idea to share. Do with it what you want.

 

[fantasycurse42]

A little confused by this...

Doesn't this raise your capital gains instead of buy and hold? If you like a particular sector, why not just pick 3 or 4 within the sector and stay long?

Though as unlikely as it may seem...it is possible that one day we will experience a bear market. That's where rotation really pays off because you'll be placed into a bond/cash fund.

If you just want to buy and hold...I doubt you could do better than just long the $SPY as the one single holding in your portfolio (as an ETF).

It's just an idea to share. Do with it what you want.

I was being serious with the question... Are you saying rotating in a sector is better during a bear market to protect yourself?

Also, how do you choose what you are rotating into?

 

[BeTheMatch]

A little confused by this...

Doesn't this raise your capital gains instead of buy and hold? If you like a particular sector, why not just pick 3 or 4 within the sector and stay long?

Though as unlikely as it may seem...it is possible that one day we will experience a bear market. That's where rotation really pays off because you'll be placed into a bond/cash fund.

If you just want to buy and hold...I doubt you could do better than just long the $SPY as the one single holding in your portfolio (as an ETF).

It's just an idea to share. Do with it what you want.

I was being serious with the question... Are you saying rotating in a sector is better during a bear market to protect yourself?

Also, how do you choose what you are rotating into?

Well, duh, whichever sector is the strongest.

 

[siffoin]

A little confused by this...

Doesn't this raise your capital gains instead of buy and hold? If you like a particular sector, why not just pick 3 or 4 within the sector and stay long?

Though as unlikely as it may seem...it is possible that one day we will experience a bear market. That's where rotation really pays off because you'll be placed into a bond/cash fund.

If you just want to buy and hold...I doubt you could do better than just long the $SPY as the one single holding in your portfolio (as an ETF).

It's just an idea to share. Do with it what you want.

I was being serious with the question... Are you saying rotating in a sector is better during a bear market to protect yourself?

Also, how do you choose what you are rotating into?

Well I have an investment philosophy that states: There are Bull Markets and there are Bear markets. One should be invested in a bull market. And one should be in cash or hedged in a bear market. One of the cores to successful investing is the ability to recognize whether the current market is bullish or bearish, and swiftly ACT accordingly.

To me this is a logical and practical approach to investing in the markets of today. However, many many people do not subscribe to this investment philosophy. I don't have a qualm with that.

So my goal is: how does one consistently beat the $SPY - a benchmark? And is there a simple process for doing it? To me it seemed logical that if I was able to ascertain which was the strongest performing sector at the moment an investment into that sector would (over time) beat the $SPY. But which sectors should I examine - there's lots of them, and because of that it was a time consuming task without much reward. So I looked to simplify.

All this strategy is doing is looking at 6 major market sectors that encompass the global markets. And by comparing each sectors' strength against the others I can rank them (1-6). I do this on a monthly basis. And from that ranking select the single strongest performing sector (#1) and rotate 100% into it. Some sectors can remain ranked #1 for a series of months. On average there would be somewhere between 5-9 trades in a calendar year.

For tax purposes gains would be classified ST capital gains. I've long sense determined that I personally would rather pay taxes on ST capital GAINS than have write off on LOSSES because I was too stubborn and held positions. Your financial adviser may take a different approach. In my perfect world I'd never have a losing stock position and every year would pay lots of $ in taxes from all those gains.

I believe the results of this strategy will remain consistent moving forward in time because the backtest is done within a small universe of 6 ETFs and the data isn't cherry picked. Price = strength. And the data set of price of these 6 ETFs from the 2003-2014 isn't changed to fit any ideal. Raking is based upon strength. And over the past few years the strategy HAS NOT beaten the benchmark $SPY.

I believe the concept of Buy and Hold is for suckers. This ain't your daddies investment era. Though at market peaks Buy and Hold seems an ideal strategy.

My purpose in throwing this out there was to answer GoBirds who was having trouble finding value in the market.

To note: I'm personally invested in this strategy. I don't think it presents any more risk than buying the $SPY, and I think in a bear market it will help protect gains.

A significant percentage of successful investing is keeping your gains and adding to them vs. trying to make up for losses.

With all that said - people should feel free to do what they think is best. Like I said it's just an idea I thought I'd share.

 

[Judge Smails]

I'm in the healthcare software space in a company that is equity backed by Silverlake. We're considering exit strategies. They typically like to flip for 5-7X of their investment. The market is getting so hot they are considering an IPO later in the year. So then we see this today. Company I know very well, used to work at the company the founder started previously. Absolutely crazy freakin' valuation. 13M in revenue, 3B valuation. Insane. Makes me nervous about a bubble..

Castlight Health: Most overpriced IPO of the century

By Aaron Pressman

15 hours ago

In hindsight, it’s kind of funny that the big tech bubble debate this week focused on Candy Crush Saga owner King Digital Entertainment’s IPO filing. It’s funny because, on Thursday night, Wall Street priced the craziest deal since the heights of the Internet bubble and almost no one complained a bit.

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Castlight Health Soars in Debut; Shares More Than Double Wall St. Cheat Sheet

Castlight Health IPO May Be Goldman's Latest Mispricing This Friday Seeking Alpha

That deal was for Castlight Health (CSLT), a company that offers health information via the Internet to inform medical choices and reduce insurance costs. Sounds like a pretty good idea, and Castlight says it has helped some of its corporate customers reduce their health costs by more than 10% a year.

Goldman Sachs, Morgan Stanley and other lead underwriters priced Castlight’s shares at $16, above an already raised expected range of $13 to $15, giving the company a valuation of $1.4 billion. That's billion with a “b.” Last year, Castlight had $13 million of total revenue. That’s million, with an “m.”

Then the stock opened on Friday at almost $40, giving it a valuation of over $3 billion!

Insane valuation

Jay Ritter, a professor at the University of Florida and my go-to source on IPOs for the past few decades, tells me that Castlight's insane level of valuation – 107 times revenue (not profits, as they had huge losses last year) – of the original IPO pricing hasn’t been seen for a tech deal since the year 2000, the twilight of the 20th century. Of the prior 13 deals priced at 100 times revenue or more and sales of at least $10 million, the average 3-year return was -92%.

Investors have been attracted by the siren song of market potential. With trillions spent on health care and everyone trying to save money, surely there’s a big market for Castlight’s services?

That’s probably true but it’s also obvious to a lot more folks than those at Castlight. Try the numerous private competitors, companies such as Change Healthcare, backed by investors including Blue Cross Blue Shield, and Healthsparq, which recently said it served 60 million consumers. And the big health insurers themselves, Aetna (AET) and UnitedHealth Group (UNH), for example, are already experimenting with similar services and giving them away free to major customers.

To be sure, it’s a great idea. One of the biggest hurdles to controlling healthcare costs is the complexity and obfuscation in the market. It’s hard to be a smart shopper when you can’t compare the quality of different providers or even know how much they’ll end up charging. Castlight and its competitors collect vast amounts of data and display relevant bits in a more clear and simple way to help consumers make smarter choices.

The next Netscape?

But there’s no way to tell who will win this theoretically huge potential market in the future, nor is there any way to predict how profitable it will end up. Castlight seems far more likely to end up as the next Netscape, which got obliterated when Microsoft decided to give away an Internet browser for free and wipe out Netscape’s whole business model of charging.

Investors who agreed to pay $16 a share for Castlight Thursday night seem more focused on the inspiring performance of other cloud-service stocks, such as Benefitfocus (BNFT), which went public at $26.50 a share last September and currently trades at $58, off its all-time high of $77 in January.

It’s pretty clear a bubble is inflating in this sub-sector of Internet stocks and Castlight makes that incredibly obvious. In early trading, Castlight's $3.5 billion valuation is more than double the value of Benefitfocus though it has about 1/10 the revenue. Next week the bubble may inflate further when a couple more cloud service providers are expected to price their IPOs, including banking specialist Q2 and HR benefits provider Paylocity.

Meanwhile with all the competition for Castlight, the company is spending like crazy on marketing, R&D and the like. On its $13 million revenue base last year, it spent $34 million on sales and marketing, $15 million on R&D and $9 million on administrative costs. Bottom line: a $62 million net loss.

And then there’s the curious case of Castlight’s present business. The company already has 24 corporate customers in the Fortune 500, including Walmart Stores (WMT). The retailing giant, which covers more than 1 million people under its employee health plans, was responsible for 16% of Castlight’s revenue, or about $2 million, under a contract which expires at the end of 2015.

Does that seem like a massive revenue stream from one of the single largest healthcare providers in the nation? Not exactly. Again – they already have one of the biggest clients on the planet and the revenue is peanuts. Yikes.

 

[St. Louis Bob]

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