TPS Position Update – August 20, 2013

| August 20, 2013

August 20, 2013

. . . . First Marblehead (NYSE: FMD) – Hold

Well, I didn’t see that coming. Of course, judging by the reaction of investors, no one saw it coming.

In case you didn’t see the news, the IRS – who is currently auditing FMD – believes the company incorrectly handled the transactions associated with the sale of a trust certificate.  The resulting adjustment would mean a $300 million hit to the company – according to the IRS.

Of course, FMD shares plunged on the news.  We went from having over 100% gains all the way back to our initial buy price.

Here’s the thing…

FMD believes they have a strong case against the IRS and management plans to aggressively fight the adjustment.

Before this news came out, I really liked the direction this company was headed.  So, I’m willing to give FMD some leeway here.  While it’s never good to see profits evaporate overnight – we haven’t lost any money on this investment either.

I believe it’s worthwhile to give the company a chance to clear its name.  If it happens, the stock will shoot back up.  As such, let’s hold on to our shares for now.

. . . . Glowpoint (AMEX: GLOW) – Hold

We had a nice breakthrough this month with GLOW.  The shares have exploded higher and are now trading over $1.50.  That’s over 50% gains for us.

Why the big jump?

The company recently posted excellent earnings.

Revenues climbed 28% year over year to $8.7 million.  And, adjusted EBITDA increased to $1.2 million compared to $850,000 a year ago.

The gains were driven by a previous acquisition as well as efficiencies in the business model.

Clearly, GLOW is headed in the right direction and management’s strategic decisions have been paying off.  Even better, the company has plenty of upside potential remaining.

With the recent move, we’re moving our position to Hold.

. . . . ZaZa Energy (NASDAQ: ZAZA) – Sell

ZAZA looked like they were going to get on track with the sale of their Moulton assets. Unfortunately, the company’s problems run deeper than high debt.

In the most recent earnings report, revenues fell 23% year over year.  And, net loss increased from $0.49 a year ago to $0.57.  In other words, the numbers are heading in the wrong direction.

From our perspective, it’s going to be awhile before ZAZA gets their act together.  In the meantime, we can find better uses for our capital.  Let’s sell our shares now and move on to other opportunities.

Please Note:

We don’t necessarily review every open position in each Position Update.  We focus on the positions experiencing significant news, notable price movement, or a change in recommendation.  Please refer to the Performance page on our website for our current buy, sell, or hold recommendation for any positions not mentioned in the Update.

Action To Take

  • Move Glowpoint (AMEX: GLOW) from Buy to Hold
  • Sell ZaZa Energy (NASDAQ: ZAZA)

Category: TPS Update

About the Author ()

Comments are closed.