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Minyan Mailbag - Brown is the New Black

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Thanks Adam!

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

Editor's note: The following was submitted to us by Adam Katz, Managing Director at M.S. Howells & Co. At the time of publication he did not have any positions in any of the stocks mentioned.



Brown is the new black... up is the new down... right is the new wrong... or was that the other way around? I continue to see some companies get punished for better than expected earnings and better than expected guidance.

Most recently, Interwoven (IWOV; IWOV is a subject company of our Research Department) reported their 4th quarter earnings of $0.07/ share. That's 2 cents better than the analysts' consensus estimates. IWOV's mildly conservative management team also raised its Q105 guidance. While companies like Ultratek (UTEK) have watched their annual net income erode by 92% on a sequential basis, their next big contributing product will likely be the anneal process they acquired in their purchase of Verdant, which is applicable to 45 nm process tools. Maybe I was asleep, but I'm still waiting for 65 nm process tools to bear fruit. And yet, the knee jerk reaction was to take the stock up 11%, that's with less than 7% short interest.

Now, it appears IWOV has bounced nicely off the lows and UTEK is trading back to the levels it was at before their earnings announcement. These are simply two of my low-lights within the last 30 hours and the list goes on. Frustration is moving this market both ways.

As a student of Professor Brian Reynolds, who is our Chief Market Strategist, I'm inclined to think this market should be traded with a long side bias and disciplined entry points. While I recognize that sound arguments could be made for both the bull case and the bear case, I am not a big fan of top down investing in range-bound, nervy markets. I feel that the bottoms up investors have been treated unjustly, the tides will likely turn.


R.P.

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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