I Had to Sell TIE Yesterday

My father first got me to buy TIE. He had held it for a couple of years, after buying it at the point of bankruptcy about five years ago and then watching in horror when the company announced a 1:10 reverse split. The stock recovered, of course, on the expected strong aerospace cycle recovery and he made a multi-bagger before selling it in July of 2005. After years of him badgering me to look at the company, I finally did a little of my own research in the fall of 2005 .

I was amazed at what I came across. Not only was this kitten (sticking with the attached above graphic, of course) going to continue to run, but the run might last a few years! I bought TIE in November of 2005 (only to witness some serious volatility the following month) at an average cost basis of $11.50 (split adjusted) and rode the stock hard until May of 2006*** when I sold 80% of the stock and options that I had remaining at an average price of $42+ (there was profit taking along the way). Unfortunately, I also let the other 20% ride until May of this year when I sold everything (only to buy more in the low $30's in early June, swing trading until selling all of it today).

I sold today for technical reasons. I saw that TIE was failing to break through some tough resistance in the $34.50 - $35.50 range and I wanted to lock in profits. I was stopped out at $33.80 and was able to lock in a handsome profit with calls bought during the sell-off in August and a minor 10% profit with the stock.

This is what I was seeing:



The cup and handle formation is very positive, but the volume has been very disappointing. With the CCI signaling a potential pull back and the resistance giving a lot of head wind. I locked in profits. The P&F also still has work to do.

In addition, Q3 earnings to be reported in the next month will have its challenges IMO. Analysts are expecting $0.39 EPS from TIE (down from $0.40 only 30 days ago) and my model suggests that they will be hard pressed to meet this. Sponge and scrap have been under pricing pressure throughout the quarter and the company's inventory is high. Normally, I would be concerned, but the Boeing 787 program is about to go into full gear re-igniting demand and hopefully jump starting the stock again.

The easy money was made on TIE. Now, we will have to be really smart to count on 20% gains. I am looking for TIE to either clear the resistance shortly (where I will pile in for a trade) or fall back and allow me to bottom fish just above $30 (an area where should hold even with a disappointing quarter).

You may also notice that I have ATI and RTI on my watch list. I have also owned ATI frequently over the last two years and have shorted RTI (buying puts) either before earnings or as a pairs trade with TIE. I mention this because these (TIE, ATI, and RTI) are the three US players in the titanium business and it is important to under the sector and competition to fundamentally understand valuation.

*** I can't take all the credit for mostly getting out in May of 2006. Some veterans on the TIE Yahoo Message Board at the time (especially Superscenario, who I owe a lot) talked some valuation sense into a lot of folks during the height of momentum play with the stock. Most of these veterans moved to the Investor Village Board during the Summer of 2006 when Yahoo ruined their meassage boards with "improvements". You can still find many of the veterans posting from time to time and I guess that I am one of them.