GoPro: A Snap Decision For The Short Stack Portfolio

Short Stack Shove

I had to act fast.  The earnings were coming in one right after the other.  This was the week I swapped stock in The Container Store (TCS) for a stake in GoPro (GPRO) in The Short Stack Portfolio.  And that snap move may have saved this little experiment of mine from an early death.

What’s The Short Stack Portfolio and how does it fit in with my overall investing strategy?

As you may know, I’m generally for stock index funds and generally against trying to trade or time the market in any way.  I lamented about the perils of market-timing in my last post.

However, I still have that competitive urge to trade stocks and try to “beat” the market.  The Short Stack Portfolio is my way of satisfying that urge, while the bulk of our investments stays “safe” in index funds and on auto-pilot.

In The Short Stack Portfolio, I trade with hundreds of dollars of what I consider “house” money.  I trade with money I earned from writing a few freelance articles about stocks way back in the day.  I trade for fun.  I go “all-in” one stock at a time.  I bet on stocks I believe will pop quickly, and try to time my exit for a huge gain.

Sometimes it doesn’t go as planned…

Exhibit A: The Container Store takes me for a ride

At the beginning of last week I was still clutching stock in The Container Store (TCS).  I was still holding on even though I promised myself months ago I would cash out on any sort of rebound from the bottom.

That rebound happened.  It was a gift.  Somehow TCS climbed back to $6.28.  That would have been more than enough to get me back to positive on the stock.  Then the rebound faded.  Then Q1 earnings happened last week and TCS was in free-fall once again!

I pulled the rip-cord… finally!

It turns out I was right about the short-term prospects of TCS.  It was an undervalued stock… for a split-second.

But I was way too optimistic about the long-term viability of The Container Store as a company.  After TCS‘s initial pop, it became a very volatile stock – It had been a pretty sleepy stock before that.  The fog of greed blinded me, and the stock didn’t stay put long enough for the fog to lift enough for me to see clearly enough to run for the exits.

I had two chances to run for the exits!  

Here’s a crude chart of how it played out over the last 12 months from my perspective…

Great Container Store Ride 2

The Short Stack Portfolio lost 15% after that wild ride with TCS.  All due to my human desire for just a little bit more.

GoPro to the rescue!

GoPro saved my Short Stack assets last week.  Fitting.  Its cameras are called Heros.  But I was a bit lucky in the way it happened.  You have to be lucky when you trade stocks.

Like I said before, I had to act fast.

I knew I wanted to get out of TCS and into GPRO ahead of its earnings.  But I decided to wait for TCS earnings after-hours on Wednesday, August 2 before finally dumping that stock and moving into GPRO ahead of its after-hours earning release a day later on Thursday, August 3.

I was hoping for a double pop.  I was hoping both companies would beat earnings expectations, one right after the other.

I coin-flipped each stock ahead of earnings.  TCS came up tails and I booked a big loss Thursday morning.  I turned right around that morning and bought into GPRO with my depleted funds.  GPRO came up heads and that stock had a monster move on Friday, more than wiping away my TCS losses from Thursday.

Even though I’m disappointed I waited to sell TCS, I’m happy I bought GPRO when I did.  I expect GPRO to run a lot more into the holidays.

GPRO caught my eye a long time ago

It was a snap decision to buy in when I did, but I didn’t just decide to go with GPRO on a whim.  I have been eyeing this stock for a while.  Ever since it dipped below $10 per share.  It looked to be the perfect candidate for The Short Stack Portfolio.  Here are some things that caught my eye:

  • GPRO is a one-time stock-market darling that still has plenty of momentum potential.  Any whiff of a turnaround could send this beaten-down stock soaring.
  • GoPro’s products still have extremely loyal customers and its brand is still extremely relevant in the action camera category.
  • GoPro fell on hard times because of poor execution from management, not necessarily because people don’t like its products.
  • After a bout with shiny-object syndrome, GoPro has shifted away from its strategy of becoming a big action media company, and is focusing on more realistic initiatives.
  • GoPro is focusing on ease-of-use and making its products more phone and social-media friendly with apps like the recently launched QuikStories.
  • GoPro just (re)launched its high-end drone, Karma, in a fast-growing category, and it seems to be performing well.

I have to admit, I didn’t do much more analysis than that before I bought.  I didn’t dig deeply into GoPro’s books as much as I should have before buying in.  And most experts would say wait until after earnings before committing to a stock.

The great thing about The Short Stack Portfolio, is it allows me to take these coin-flip risks on more of a hunch.  I’m playing with “house” money I can easily afford to lose and I’m more willing to listen to my gut.

I knew I wanted to get in on GPRO before numbers from Karma started to sink in.  I wanted to get in before it was clear that a turnaround was taking hold.  I thought this quarter had good chance to surprise to the upside and I didn’t want to miss the boat.  Luckily, I was right.

GoPro beat analyst expectations on both the top and bottom line.  GoPro beat earnings by 16 cents per share!  That’s a lot.  GoPro also beat expected sales by $27.4 million, with revenue up over 34 percent from the same time last year.  Here’s the earnings release.

Yep, with GPRO‘s big gain after earnings, I’m happy to say The Short Stack Portfolio is back to about where it was this time last year… before my wandering odyssey with The Container Store.

Short Stack Portfolio_GPRO

I know, I know

I know I’m not exactly following the original plan for The Short Stack Portfolio.  I said I would write up one of these articles before I shoved my chips “all-in” on a particular stock.  I said I would do more diligent research on the stocks I invest in.  I’ll try to do better next time.

Even if I don’t do better, though, it’s okay.  These aren’t my most popular articles, anyways.  I’m not known as a stock-picking guru and I don’t plan on ever becoming one.  In fact, I don’t recommend anyone follow what I’m doing.

So, why do I write these articles?

Because I said I would.

And The Short Stack Portfolio is mostly for my own reference.  These write-ups are a way to record my thoughts along the way as I try to build The Short Stack up really huge.  This way I don’t have to wonder when I’m looking back someday…

Hmm, how exactly did I build 130 bucks into 14.2 million smackers?

It’ll all be here, in black a white, on my crazy little website 😉

I’m not a stock guru or investment advisor.  Do your own research before investing in the stock market, especially if you plan on trading individual stocks.

 

 

 

 

 

 

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4 comments

  1. Nice work man. When I did individual stocks, I limited my research to 1) is it trading at historically low levels? 2) do I like the product or know anything about it? Pretty weak. I guess I looked at PE ratios but didn’t know how much that really factored into long term growth. Ask me over that coffee about adventures with my Netflix stock. 😅

    Liked by 1 person

    • I should dig deeper than I do, Cubert. That’s what the Short Stack articles were supposed to force me to do. But I’ve been slacking and have just been writing them up after the fact. I’ve been going with my gut too much too. I’m going to try to get better at it though. I want to see where it leads and have some sort of journal looking back. Thanks for reading!

      Liked by 1 person

  2. Nice blog, taking us with you on your risky but exciting short stack adventure. And a good job on describing both the risks and the advantages. I’m glad it turned out good… this time :p exciting to read more! Do you also have blog posts about how you determine what to invest in on a safe way (so I guess, with your main portfolio)?

    Liked by 1 person

    • It’s definitely risky. I try to calculate them out a little bit. I’m glad you like the series. The next stock pick, I’m going to try to write up my argument BEFORE I buy, and I’m going to dig more into the numbers.

      As far as the rest of our portfolio, we’ve just got most of it in the Vanguard Total Stock Market ETF. We’ve got some stocks in there that are left over from when I really liked to stock pick. I’ve been winding down our AAPL position, for example. My criteria was to look for value in established companies and stocks that paid dividends. I would’ve never picked a momentum stock like GPRO back then. GPRO’s only good when you’re willing to lose all your chips.

      Thanks for reading, Nick!

      Liked by 1 person

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