It was the fall of 2012 and Netflix (NFLX), a company and stock we have always liked, was languishing in the $50 area. At the time, it sure looked like the stock was ready to take the next turn to the downside.
That was until October 1st, 2012, when Whitney Tilson came out with a presentation on Netflix (NFLX) at his Value Investing Conference, where he compared the company with Amazon (AMZN) in its early days. I clearly remember at that time he was getting trashed for that crazy comparison. Even the folks at CNBC (when I used to watch it) were mocking him. Funny thing is, we also thought the stock was ready to take off after forming a triple bottom.
Sure enough, Netflix (NFLX) took off over the next few days and never looked back, providing some serious money making opportunities for option traders over the course of the next 16 months.
So here we are again, with Whitney Tilson coming out after the close on Friday, with a company he says is his next "Netflix (NFLX)." That company is Magicjack Vocaltec LTD (CALL) - a company with a checkered past and a founder that can be categorized as a 'loose cannon.'
I actually wrote positively about Magicjack Vocaltec LTD (CALL) back at the start of 2013, as the company finally shed the problematic Daniel Borislow, and announced a new CEO. Seems I was a year early on the story, though. The company never had problems generating revenues and profits, its issue was selling the story to the investment community as well as executing on its business plan, or any plan for that matter.
After a year at the helm it seems the new CEO, Gerald T. Vento, is well on his way to re-invigorating the company and the brand and it sure looks like Whitney Tilson's timing couldn't have been better, with the stock under $14 before Monday's open.
We noticed the 165,000-share stake Tilson and T2 Partners took in Magicjack Vocaltec LTD (CALL) last week, and added $15 February calls on the filing. Here is what we said in our watchlist last week as well as Twitter:
I added some CALL calls this morning. CALL is a stock i have watched for sometime and yesterday Whitney Tilson showed a 165k share position in the company from a filing. I think the stock can bounce from $14 regardless of the Tilson position, so I believe the $15 calls offer a nice risk versus reward. I may add some more today into strength.
Those calls are up nicely, but we think this is just the beginning of a multi-day/multi-month run over $20-30.
Magicjack Vocaltec LTD(CALL) has $60 mil in cash, no debt and a market capitalization of only $255 million. Pretty impressive for a small-cap company.
Whitney outlines the bull case very nicely, and we couldn't agree more on Magicjack Vocaltec LTD (CALL) long term prospects. 10 bagger? It's possible, but we'll take a 2-3 bagger for now.
Stay tuned for more updates. We currently hold the February $15, March $17.50, and September $25 calls and may sell or add to our position at any time.
Happy trading!
- JB