Ancestry.com stock implodes - who knew what and when
Ancestry.com reported earnings and gave forward looking guidance after the market close yesterday that led the stock to fall 17% today from roughly $28 to $23. Starting the week at $32 the stock began to sell off on Monday with double normal trading volumes and dropped to $28 by the end of trading Tuesday. On Wednesday trading volumes stayed high but retail(people like me but not me) must have come in and offset the institutional sellers.
There was no news on the company during those days, except for one of those unheralded brokerage firms upgrading the firm to a buy. With no news and significant volumes and stock price declines ahead of earnings, this was worthy of attention.
There were two reasons for this that one could consider. Reason one - an institution or several institutions with considerable gains were simply securing those gains ahead of earnings, given that there always can be surprises. Reason two - someone somehow had an inkling of what the earnings and guidance might contain.
With a gain in the stock concocted by buying too high early in 2011 and more than doubling the bet really low in late 2011, I considered the meaning of these pre-earnings release trades. If reason one was the right clue, I had no information and could act or wait and see as always. If reason two was the right clue, I should run for the hills.
I chose door number one. Now I have a loss in my position.
The reason that I own Ancestry.com is that the story is, I think, compelling and the management team looked exceptional when I bought in. In fact, the quarterly earnings reported yesterday evening were slightly ahead of analyst estimates as were revenues. There was a problem that can be quantified. The revenue outlook for coming quarters was not robust, but it was within the lower part of the range of 2012 projections by analysts. There was a problem that cannot be quantified from this perspective and that is the surprise that one of their key long time managers resigned and is now a "senior advisor", the kind of thing that happens when someone is gracefully fired, if there is such a thing as that.
If today's stock collapse has only to do with the numbers and the company maintains its dominating position in this esoteric area, then the idea would be to hold on and give it some time. The stock should come back. After all, this small and low capital intensive business has no long term debt and $311 million in shareholder's equity.
If today's stock collapse relates to an unraveling of the company's core management team, that's an ongoing problem. As said, this is not a financially capital intensive business, but it is an intensely human capital business. It's built on intelligence and creativity.
Which door does one choose this time?
It would be interesting to know where the selling was coming from earlier in the week and the rationale on which it was based. That's the SEC's job and the soonest that I will even be able to make a guess will be when the May 15th 13F filing is released. Oh well, just curiosity at this point, and a bit annoying.
There was no news on the company during those days, except for one of those unheralded brokerage firms upgrading the firm to a buy. With no news and significant volumes and stock price declines ahead of earnings, this was worthy of attention.
There were two reasons for this that one could consider. Reason one - an institution or several institutions with considerable gains were simply securing those gains ahead of earnings, given that there always can be surprises. Reason two - someone somehow had an inkling of what the earnings and guidance might contain.
With a gain in the stock concocted by buying too high early in 2011 and more than doubling the bet really low in late 2011, I considered the meaning of these pre-earnings release trades. If reason one was the right clue, I had no information and could act or wait and see as always. If reason two was the right clue, I should run for the hills.
I chose door number one. Now I have a loss in my position.
The reason that I own Ancestry.com is that the story is, I think, compelling and the management team looked exceptional when I bought in. In fact, the quarterly earnings reported yesterday evening were slightly ahead of analyst estimates as were revenues. There was a problem that can be quantified. The revenue outlook for coming quarters was not robust, but it was within the lower part of the range of 2012 projections by analysts. There was a problem that cannot be quantified from this perspective and that is the surprise that one of their key long time managers resigned and is now a "senior advisor", the kind of thing that happens when someone is gracefully fired, if there is such a thing as that.
If today's stock collapse has only to do with the numbers and the company maintains its dominating position in this esoteric area, then the idea would be to hold on and give it some time. The stock should come back. After all, this small and low capital intensive business has no long term debt and $311 million in shareholder's equity.
If today's stock collapse relates to an unraveling of the company's core management team, that's an ongoing problem. As said, this is not a financially capital intensive business, but it is an intensely human capital business. It's built on intelligence and creativity.
Which door does one choose this time?
It would be interesting to know where the selling was coming from earlier in the week and the rationale on which it was based. That's the SEC's job and the soonest that I will even be able to make a guess will be when the May 15th 13F filing is released. Oh well, just curiosity at this point, and a bit annoying.
posted by John Borden at 9:12 PM
3 Comments:
This company may be a mirage my friend. It depends on whether people become obsessed with their heritage, out of some conceit or pride. Most people may try it for a month or three, but for the most part it's a passing interest. This is not Facebook or even the weather channel link. Be careful. Let some others that were taken in by the creative design and access to data now buy the stock. Aim to breakeven and get out. Just my opinion.
KF - One month later ACOM still has no life. It even seems to have a lingering negative sentiment. It was recommended in Barron's as a top ten stock pick for 2012(red flag) and it was a Motley Fool pick eight months ago(yellow flag). But I did my own research and got pulled in. Maybe time to sign out now, or wait for the next drop and double down again. These decisions get down to just gambling in these small caps when most of the information looks adequate to good but something is obviously amiss.
I may just give up and protect some gains in other names from the taxman.
Bought some more ACOM yesterday. Dang thing then went up big today. Am I lucky or am I the AX on this lightly covered stock, covered by no one of any intelligence on the sell side.
We'll see. Ready to sell all if it falters, but based on all disclosed info this stock has little downside.
If not disclosed it's either fraud or, as said before, a management fall-out that is disruptive or destructive.
Post a Comment
<< Home