On December 19th I described a trading position I had on this name (an addition, I bought in the $25s) - now as we close out the year, the stock has breached $30. Again this has been a minor position, so while a good trade, it did not affect the overall portfolio much. I am still trying to get a handle on this stock, as its relatively new to me, and trades with very little respect to technical moving averages. Today's move of +7% comes on not much volume. Strange.
Another reason this stock is confusing is from a fundamental point of view I think it should be worth at least $10 more from here. Yet it was hitting mid $20s two weeks ago. So either this is the value of the century or I am missing something. At this point I am going to wait and see on the name, and will buy more on a breakout if it proceeds that way. By breakout, I'd like to see the stock break through its 50 day moving average ($32.50). Since my fair value for this stock is far higher than that, I have no issue buying a stock for higher than I am selling now. As I stated in my previous post on this name, I generally don't go overboard in buying stocks below key technical moving averages because they can stay that way for months (see Blue Coat Systems, Crocs etc). This is indeed an interesting stock I've held for a month [A New Position Started: KHD Humboldt Wedag] and could become a big winner in 2008 - however it is under the radar right now so I want to see how the market treats it before going 'all in', with a larger position. But it is one of the few ways to play some of the emerging market themes of the Middle East and Eastern Europe so I am watching it closely and trying to dig up new information to feel more confidant that this is not 'too good to be true'. The stock action could simply be a condition of a very thinly traded stock OR harbinger of something bad I don't see yet. For now, I will take these trading gains, keep a very small position, and either buy more on a pullback or a breakout.
Long KHD Humboldt Wedag in fund, no personal position
