- CHART- know how to read charts. I firmly believe I can improve the price of buying or selling from an understanding of chart action.
Recent Bearish Divergence; -1
- ANALYSTS- read analyst reports but come to your own conclusions.
5 strong buys and 5 holds (according to CNBC); 0
- INSIDERS- if the people that know the company the best are not buying it, why should you?
Lead independent director Kevin Burns has made 3 purchases since May 7 totaling 20,000 shares at a price range of $15.27-$16.15. Chairman and CEO Rudman has made 2 purchases during the month of may totaling 125,000 shares at a price range of $14.97-$15.99. CFO and COO have also made purchases during the month of May; +1
- MANAGEMENT DISCUSSION 10Q AND 10K- this is the only truthful thing you will read about a company. It’s composed by management, the auditors, and the firm’s lawyers. If all three of them can agree on the verbiage, it’s passed a big hurdle. Read it carefully. Pay particular attention to the Risks, Litigation, and Related Transaction sections. These are the things you will wish you had taken the time to read if something goes bad with your investment.
Acquired email marketing services company “iContact” on Feb. 24, 2012. Management paid a large premium for the company and are running it as a standalone affiliate of Vocus. Stock could be prone to dilution due to a large amount of preferred stock convertible to 3.0256 shares of common stock per share of preferred until 2017 including a large portion owned by JME Equity Fund equivalent to a 13% stake in Vocus. A large amount of preferred stock was also issued in connection to the iContact acquisition. There is a buyback program to try and offset conversion of preferred stock. Vocus is very focused on the email aspect of their cloud marketing services and if spam filtering keeps becoming more stringent then it could negatively impact the company. There is a strong reliance on third-party sources to maintain email databases. Salesforce.com just acquired Buddy Media, a company providing the same type of services, and will most likely be a direct competitor to Vocus tied to a pre-established, reputable brand name. This now begs the question; was Salesforce in the running for iContact? Their acquisition of Buddy Media is in close proximity to the iContact deal and it may prove to detract from the value of Vocus. Salesforce is the giant in the internet sales and marketing space and will most likely make it very easy to integrate the services of Buddy into its current offerings for a nominal fee, reaching their already massive customer base. This could draw business that would have otherwise gone to iContact. Salesforce’s competitors may see the acquisition of Buddy as an indicator that they need to offer the same services to stay competitive with Salesforce. This could peg Vocus as a potential buyout candidate. With the immense premiums being paid for these types of acquisitions, there is potential for a huge score with a bet on Vocus. (Currently there are no talks of M&A associated with VOCS); -1
- RELATIVE PERFORMANCE- If the stock has a superior relative performance to the market in the short term
After missing guidance for Q1 2012 and adjusting to new levels, the stock has followed the NASDAQ and recently started to outperform at the beginning of May; +1
- SECTOR OUTLOOK- buying a good stock in a bad sector can be a humbling experience
Tech sector has been closely tied to S&P for 12 months; 0
- CASH FLOW- cash flow is more accurate than earnings. Earnings can be more easily manipulated.
Operating cash flow saw growth in the three quarters preceding Q1 2012 and nearly doubled from 2010 to 2011; +1
- PEG RATIO- it’s good to find a company growing faster than it’s multiple.
2.07 (according to Yahoo! Finance); -1
- VALUATION- contrary to popular opinion, it does matter what you pay for a company. Check its discounted cash flow value. Buy it for less than what it’s worth, a 1, less a -1, about the same 0.
Negative operating profit margin gives the stock an intrinsic value of 0 according to the DCF model.; -1
- CATALYST- what’s going to change the status quo?
Vocus is part of a young industry. With the ever increasing use of email and social media marketing there are definite opportunities and having a cloud based platform makes the company even more attractive. Right now they need to beat their guidance for the next quarter or they could witness another sharp decline in share price; 0