Sold MTI Wireless Edge

I don’t often write follow-up posts about ideas I post on the blog. When I have done in the past it was usually because I sold at a loss.

Today I think it’s appropriate to write an update about my investment in MTI Wireless Edge. Mainly because I responded to a comment on that original post a couple of days ago, when I was still long the stock, but it’s also nice to write about an investment that worked out well.

I decided to sell my shares today, but it was not a result of the comment or my response. The stock price simply moved up.

MTI Wireless reported results today: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11870109.

The company has regained profitability and reported a $426k profit for the year 2013, compared to a loss of $246k in 2012. Before today, the stock had already moved up since my initial post after reporting a decent 3rd quarter and after reporting a $1m contract win in early January. In today’s announcement the company also declared a $0.68 dividend, payable on April 4th, 2014. The expectation that a dividend payment would improve investor sentiment a bit was one of reasons I bought this stock.

When I bought MTI Wireless it was trading at a price of 6.80p and a little below 0.60x NCAV. After today’s results the stock is trading around 11p. I sold my shares at 10.85p. NCAV today stands at $10.64m. At 10.85p the company was valued at $9.31m and trading around 0.87x NCAV.

When to sell a stock is pretty hard to determine. MTI Wireless was never a high conviction stock in the first place and I therefore made my position small. There are some things that I don’t like about MTI. The main one is it’s relationship with MTI Computers, which owns 52% of MTI Wireless and has been losing money for years. Also, the earnings record of the last five years is pretty bad, although the company traded pretty close to break-even levels in most years, revenues had stabilized and it was not burning cash. I never thought this was a great company, but things weren’t as bad as the market price implied either.

Taking all this into account, I think today’s price is probably reasonable. I don’t have the conviction to hold the stock at this point. If MTI Wireless can regain its former profitability (in the years 2006 and 2007 the company made around $4m), today’s price will look like an absolute steal and I will look like an idiot. I have no idea if they can do that though.

MTI Wireless was a cigar-butt investment for me. I bought at a very depressed price and decided to sell now that the price and the sentiment is a little less depressed. After taking into account fees and exchange rates my return is 61.8%. I held the stock for just over 4 months. I didn’t anticipate selling so quickly, but I do think that taking the “free puff” and moving on is the right thing to do for me.

Disclosure: no position in MTI Wireless Edge

Posted in European Stocks and tagged .

NeverLoseMoney

Author of ValueInvestingBlog.net. Private investor.

3 Comments

  1. “MTI Wireless was a cigar-butt investment for me.”

    Those are the beat kind, if you ask me. They’re some of the largest/consistent profits value investors can make.

    Congrats on the nice return!

    Evan

    • Thanks. Stock up again today and some trades at 13p and higher. At 13p the company is trading at $11.2m and above NCAV.

  2. Pingback: Holders Technology: a Graham net-net on AIM | ValueInvestingBlog.net

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