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Watch Citrix, F5 for Early Turnaround


First to bottom, first to tick back up.


Goldman Sachs (GS) keeps buy on Citrix Systems (CTXS), but removes it from conviction-buy list. At some point, there will be a "classic bottom tick" downgrade. I'd like to say it's today, but it just doesn't feel like we're quite there yet. I would love to be wrong about this, though.

  • We can't control when we bottom, but we can control our analysis and preparation. In doing so, I'm continuing to build my triage list for tech and at the right price Citrix is on that list - $22.50 today, good enough for inclusion. Citrix and/or F5 Networks (FFIV) have more consistent revenue bases built on a much higher percentage of recurring revenue than many other software-driven shops.

    Can they lose business, or fail to secure as many new customers in the credit-fear cyclone? Of course, but these are the types of stocks that will bottom first, and move the most when the turn happens.

  • I last sold F5 in the $28's and was a little miffed that I missed their higher move to the low-mid $30's. Needless to say, I'm thankful that discipline trumped short term gains and I've got those funds to deploy. I'm looking at both Citrix and F5 currently, but again, I'd still rather hide out in the financials and solars while waiting for clarity to return to the more traditional leaders in various technology areas.

  • With respect to the solars, I'm most surprised by their weakness today. They perhaps more than any other group (even financials), may benefit the most if the Senate bill is passed by the House. So I've added a new solar today: Rensola (SOL). Very good estimate growth, recent fundng, and I like how they're positioned in the space (as they make the building blocks), as well as who they sell to.

  • Again, I'm feeling a bit lucky here, as I was very close to purchasing them ahead of the first House Bill around $14. However, I decided not to push any preemptive trades in front of that event; today the stock is 35+% lower.

    So am I now hitting a preemptive long side trade? Possibly, but my view now is that the probability is higher on passage by the House now. Second, no matter what, we will know the outcome and I think more bad news is priced into many solar names than should be. Third, this bill trumps the House solar bill that would have likely been vetoed.

    Fourth, and lastly, while I'm not certain that the bailout bill will be a silver bullet for the broad market, (though I think it will help more than many think), I do think the passage and finalization of this will greatly benefit the solars, since it essentially removes any remaining hurdles for unfettered, sustainable growth. And these are the types of secular growth events that make some short-term downside risk worth taking.

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Position in SOL and various solars.

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