DaviesTown.com/blog

The Big Picture recently posted a nice compilation of links to Economist articles. Highly recommended reading for anyone who is inclined to find out more of the current happenings today!

http://bigpicture.typepad.com/comments/2008/03/the-economist-o.html

Also, from my post on Feb 25 on VDSI, VDSI has reached $14.00. It’s time to close it.

I’ll be working on adding new information starting on April 25th and onward since my last final exam takes place on the 24th of April.

Last Trade: $11.40

Short Description: VASCO Data Security International, Inc., through its subsidiaries, engages in the design, development, marketing, and support of hardware and software security systems that manage and secure access to information assets worldwide.
Market Cap: 424.13MM

Fundamentals:

This company recently missed analysts’ estimates. Its share price got slaughtered even though the company reached its internal estimates. That’s important. Anders Bylund from the Motley Fool says, “much of the disappointment was with unrealistic Street expectations and not the business itself … The business is still going great and the revenue shortfall will be made up in the next couple of quarters. I don’t see that the future looks any dimmer than it did one day ago. In other words, the time to jump on this opportunity is now, before a first-quarter blowout erases some of today’s generous discount.” That takes care of the fundamental side. Let’s dive in and look at the timing of this stock!

There is one factor that I consider when opening a position: the technicals.

It IS, in my opinion, the most important tool in an investor’s arsenal to maximize profits. Looking at the technicals, the chart weekly chart looks like poop. The daily looks better but still is pretty crappy. TRIX has crossed zero, price has closed below long-term support level @ 12.48, the price has closed below 200d-SMA, there is a 20d-SMA bearish crossover. This looks bad.

Can it get any worse? The keeners out there will point out that VDSI’s industry looks like crap too. That’s actually a really good point. If you’re bullish on this stock now, you’re essentially fighting the sector trend too .. never a good thing. Here’s a picture of the S&P500 YTD sector performance chart that was taken from Bespoke on Feb 22.

Alright, so I’ve shared my thoughts on VDSI. What would I do next? Sorting through all this poop, I think VDSI is going up. Now don’t get me wrong, I’m not saying this is the bottom; I’m saying this is a good time to open a position. Do not open a full position tomorrow. There are times when a good company looks like it’s a great bargain when it just fell 20% from its highs, and there are other times when the stock gets discounted so much, you just can’t take your eyes off of it (for more than one reason). VDSI has fallen roughly 73% in three months. Nice. Uh.. for those of us who aren’t in it yet.

I missed the rapid descent down, but I won’t miss the ride allll the way up. Although it looks grim for the tech stocks.. although the technicals look like screaming sells.. although the US economy is heading into a recession.. my gut feeling is that this stock will rebound back to AT LEAST $14 within 2 months. That’s a 22% gain folks. My stop will be set at $9.00. Please use stop-losses. The chances of the stock falling another 20% from here is unlikely. The fact is, I can’t see any company specific news events that will push this stock further down. The only REAL risk is the recession fears. When you’re a bull in a bear market, you better be damn confident. That’s me .. for VDSI at least. =D

BOTTOM LINE: Buy VDSI. VDSI is oversold. This fact grossly outweighs the downward pressures on this small cap stock.