Updates on Sandisk, FFIV and Riverbed

Okay guys, I’m back in the saddle from my doctor’s appointment in Las Cruces — it’s rural New Mexico where I’m living right now and I had to spend a whole day on the road just to get my check up. Anyway, let’s talk stocks as we’ve had a couple companies report earnings last night. You can drive an hour without any cell phone service out here, much less trying to find 3G so I can use my phone as a WiFi portal for my computer.

Sandisk first. I was wrong for having an 8 rating on this stock because I was wrong that the Sandisk’s customer base’s problems were more than priced in with the stock at 6x earnings. Now, with the stock down 10% plus this morning, we’re looking at a stock that’s trading at less than 5x earnings, when you account for the $3.3 billion net cash position on the balance sheet. The company’s guidance was 30% below Wall Street’s estimates for next quarter. Next year, I expect will be much better, but this next quarter’s guidance was awful.

I was right to tell you guys that we were likely to start seeing some better pitches that I might want to start swinging at, and Sandisk in the mid $30s is indeed a pitch I’m going to take some swings at. I’ll likely do a little bit of buying of common stock this morning and over the next couple weeks, I’ll probably add to my SNDK calls too. This has been a painful stock for a lot of you, but I don’t think the story is over here. As I wrote the other day:

“The company makes Flash and is a pureplay on Flash storage and Flash storage is a secularly growing business — meaning it will grow regardless of what happens to the broader economy. The flash market will be ten times bigger in ten years than it is today. Sandisk will be a big part of that.”

That’s no excuse for not having traded around these $30-50 top and bottom for the stock while we’ve been in it, although the last time we got the chance to buy Sandisk in the mid $30s, we loaded up on calls and made a mint as it ran above $50. Mea culpa for not having navigated this near-term Sandisk move better.

Riverbed, our second smallest position, is down 17% after reporting a less-than-stellar quarter. I’m not impressed with Riverbed’s execution, especially when our much larger position in FFIV, is executing so well and growing so fast. I’m not going to be adding to my Riverbed at all right here and I might even pare this one off the portfolio entirely in coming days. It’s a very tiny position, but I’m still pissed at myself for not having sold it entirely before the call.

Our much larger FFIV was up more than 10% yesterday after reporting a very strong quarter of selling wares to make Internet and internal networks run faster. I plan on holding my FFIV steady and maybe adding to it on any future weakness.

We’ve got a lot of new pitches that I’m starting to get more excited about swinging at, and you’ll likely start seeing me deploy capital and start buying some stocks and calls more aggressively with some of the big price moves I’m seeing out there.