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INVN hits an all-time low ?2

16:42 08-Jan-16


INVN has touched an all-time low of 8.29 today, and a few subscribers have written in to ask about it.  I think I've covered the long-term prospects pretty well, and also been quite consistent about mentioning the short term InvenSense-specific threats as well as the stock's vulnerability to broader macro concerns.  With regard to today's movement, I see the following:

Options expiring today mean that ~360,000 shares will be acquired at an average price of around $10.20.  That's enough to push the stock down a bit on its own, but the monthly options which will expire a week from today show a huge concentration (12K) of puts at the $12 strike price, with more below that.  What's even more surprising is that there were 2000 more puts trading hands today at the $12 strike.  A pointless after-the-fact downgrade from Rosenblatt and increased media attention to Apple sales, which should have been well-anticipated, aren't helping.  That could signal the return of institutional meddling in INVN shares; interest in the stock has certainly not dried up.

More broadly, what this means to me is that that market is doing what it always does: fleecing the incautious while eventually rewarding those with disciplined approaches and correct long-term analysis.  It's possible that INVN will bounce back after options expiration, but valuation and fundamentals are always most important.  Current valuation looks cheap, but we won't have an update on either until the earnings report at the end of the month.  Execution risk still remains, and over the the long term the real question is whether InvenSense is just a MEMs provider or something broader and more intelligent.  In the former case the company will always face pricing pressure from vertically-integrated competitors.  If InvenSense can be successful in the latter endeavor, it should eventually trade much higher than today's prices.

Probably the most important thing I can reiterate, though, is that my experience, both on Wall St and investing for family and friends, indicates to me that short-term trading is a game that typical retail investors simply can not win.  Available information is always changing, and there is always good and bad.  Even so, most investors should only be adjusting their positions in a given stock, at most, a few times a year.  Thus for those who do not already have a full position, it seems like next week could be a good entry point, but I think investors should NEVER violate whatever portfolio concentration rules they've decide are right for them.  Rather, they should remember such rules before making purchases as they try to leave room for other opportunities.  As an example, given the macro situation that I cited at the end of last year, I was seeking to have about 50% of my assets in cash before January. 

In order to provide better service, I may do a write-up of general investing principles and start posting some model portfolios for common situations in 2016.  I don't give specific investment advice, but I'm always happy to discuss how such principles should apply to particular situations.  That, and some perspective, are part of what you're paying me for.