Chris Lau - Seeking Alpha

Monday, December 29, 2008

Investor Conference Calls

Absolute Software is a software Company in Canada. The company develops software for notebooks that will "call home" if it gets stolen. Absolute first caught my attention when it produce very solid earnings in 2007. Its big win was getting a contract from Dell and from Best Buy. But by mid-2008, when I listened to an investor conference call hosted by the company to discuss its quarterly results, but things sounded odd. The company did not sound very positive. Answers to analysts' questions were not as concise as I would have liked. By next quarter, Absolute announced that customers were scaling back purchase of its product. Smaller companies were watching its cash flow and were cutting back on purchases.

Moral of the story?

  • Investors who buy individual stocks need to go that extra mile to understand a company by doing such basic research as reading quarterly reports and listening to investor conference calls (leaving that work for professional money managers is another option)
  • Small-cap companies will continue to suffer more so than larger companies in the coming quarters due to the credit squeeze and to the weak economy
  • Small-cap software (IT) companies will become even more attractive investments as valuations continue to fall.
Below is a chart for Absolute Software. Notice the stock broke support at the Fibonacci 38.2% line in September. Selling was heavy with volumes well above average. Recent trading pattern has not been convincing. Look for the stock to re-test the $2.55 level.

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