RSS feedI know I promised to stop talking about individual investments, but I think this is necessary as part of full disclosure. Though I was planning to stop out of PJC, I have actually held onto it despite its bumps in the last week. At this point, Piper Jaffray is trading at around $55-$66 which represents almost a 15% decline from where I bought it. Well, below my usual 8% stop loss. So, why hold it? Well, as you already know, I’m essentially locked down for my investing for the rest of the summer. If I sell, I won’t be buying any new stocks which means the only thing I’m weighing in selling PJC is further downside versus letting my money sit as cash for the next few months accruing minimal interest.
So, what is the downside for PJC? Based on near-term technicals, the stock looks to have finally found some support around $55-$56. Things aren’t looking great as it’s broken down through its 50, 90, and 200 day moving averages on successive days for almost a week. This normally would be rather frightening if not for the fact that a look at IYG (the iShares ETF tracking the Financial Services sector) showing that much of the price movement in PJC was likely due to sector risk as opposed to a fundamental change in Piper Jaffray.
I admit now that buying Piper Jaffray on technicals may not have been the best idea. Part of the reason the stock was moving at the time was due to speculative buying based on the idea that Piper may get bought out. As a result, its recent fall from grace is partially justified. The question is, how far should it have corrected? At this point, the company has a market cap of around $1.06 billion. On the books, it has $1.26 billion in cash with only $300 million in short and long term debt. Thus, the stock is trading nearly at book value and continues to report positive net income. While its recent purchase of an asset management firm seems to take away some of its potential to be bought out, the company seems to be ready to begin spending its cash hoards. Cash on the books acts as a buffer for downside risk and spending cash (assuming its done wisely) should act as a catalyst for price appreciation. I’m willing to put my faith in Piper Jaffray’s management at least for a few more months. It may take a while to profit from this position (heck by the end of the summer we may no even get there), but if I sit tight, I do believe that I can improve from my current position.
