6/26/2014
By Charles Payne

On Feb 25, 2013, we went long ACTG @$29.49. After a continued decline, I finally asked subscribers to take a loss on July 19 at $22.00.

However, this was a flawed idea from the beginning: my rationale was rapid growth, a leadership position in the patent licensing industry (also called patent trolling), cheap valuations (9x forward PE) and a PEG ratio of 0.6.

Red Flags

The stock had recently been hammered; I moved in too soon.

On April 18, the company had a horrible earnings miss after the bell, and the next day the stock got hammered, but I didn't close it out.

On July 18, the company posted another earnings miss (June quarter), and stock went from $25 to $22, and then we closed it out.

The fact of the matter is that I should have bailed out after the April release, since the income statement was riddled with red flags

Three Months Ended June 30, 2013, released to public April 18, 2013:

Since that big earnings miss, the company has continued to post earnings a million miles less than Wall Street’s expectations. Even though we all hate taking losses, this stock fell another 10 points, which would have been a more significant blow.  As it was, we were able to move on and learn a valuable lesson.

 

Charles Payne
Wall Street Strategies

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