TPS Position Update – September 20, 2016
. . . . LRAD Corp. (LRAD) – SELL
We recommended the stock in March at $1.74. Today, it closed at $1.89.
Last week, because of our concerns about a setback for tech stocks, we advised a sell for Netlist. This week, we are recommending that positions in LRAD Corp. (LRAD) should be closed out.
LRAD designs, manufactures, and sells acoustic hailing devices (“AHDs”) and advanced mass notification systems. Its primary customers are police departments and military organizations.
Once again, we are selling a company that we see making progress. Since our buy recommendation, the company has turned losses into profits.
Earlier this summer, LRAD reported Q3 Fiscal 2016 net income of $277,000, after reporting a loss of $64,000 for the corresponding quarter in 2015.
There are other positive developments, notably a new $1.2 million deal to sell acoustic gear to the U.S. Army. But we are concerned about an overvalued market, and but this is a risky stock to hold. We would like to collect our modest profits of 9%, protect our money, and move on.
. . . . McClatchy Co. (MNI) – SELL
We recommended McClatchy in August 2015 at $0.96. The stock went through a 10:1 reverse split and closed trading today at $14.98.
We are selling for two reasons. First is our concern about the general direction of the market. The combination of Federal Reserve Board members focused on increasing interest rates, the high price/earnings ratio of the market, and election uncertainties puts us in a cautious mood.
There is also the future of the newspaper business. We invested in McClatchy because it is a well-managed company with a disciplined approach to diversification.
It has launched a digital marketing agency. Its CareerBuilder product, HR software for recruiters, has acquired WORKTERRA, a cloud-based benefits administration and talent management platform.
But the core business, newspaper advertising, continues to suffer. Print advertising revenue was down 16.6% in Q2 following a 5.2% decline in Q1. The company’s papers include the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The Raleigh News and Observer, and the Fort Worth Star-Telegram.
In July, the stock reached a high of $19.77. We are concerned that the future erosion of print revenue will drag the stock price down more.
We would like to be cautious. Selling at today’s market close of $14.98 gives you a 56% return.
Action To Take
- SELL LRAD CORP. (LRAD)
- SELL MCCLATCHY CO. (MNI)
Category: TPS Update
