Market Talk with Piranha is currently moving to its new home at chrisperruna.com. The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Wednesday, November 22, 2006

Listen to your Wife, KNOT

The next time your wife is so engrossed into something, pay more attention. I was married in 2004 and my wife planned basically everything on The Knot.com and was addicted to the site (the same way I am addicted to the market – ok, she's not as bad as me). If you speak to my wife, I am actually addicted to the computer; not the market.



Anyway, she used The Knot every day and told all of her friends how great the site was and they too started to use it (many of them became addicted). I am not embellishing the story as they were all extremely addicted to the tools, gadgets and services that The Knot had to offer.

I realized that the company had public stock after if popped up on a CANSLIM screen in 2005 (long after we were married) so I started to study the chart and the financials. Everything looked great and I was ready to buy but am skeptical of stocks trading below $10 per share. To me, I wanted the stock to prove itself before I could place a sizeable position when it was still trading below $20 per share without much institutional attention. I told my wife that I would use some of our speculation dollars to place a position for her. We would essentially call it her stock. She agreed but isn’t very interested in the market so I put it on the backburner but started to cover the stock heavily on MSW. Financials were and still are solid, the chart was and still is trending higher and it kept making new 52-week highs – my bread and butter (the CANSLIM way).

So what is The Knot? (from their site):

The Knot (http://www.theknot.com/) is the most comprehensive resource for couples seeking information and services to help plan their weddings and their future lives together.

The Knot Inc., Weddings for the Real World, is one of the world's leading wedding media and services companies, providing today's to-be-weds with comprehensive wedding planning information, interactive tools, and resources. With a fresh voice and real-world sensibility, The Knot has extended its brand to every venue brides and grooms turn to plan their weddings -- online at the #1 wedding website, TheKnot.com, and on newsstands and in bookstores nationwide.

Shortly after securing seed financing from America Online, The Knot Inc. secured additional rounds of funding from industry giants Hummer Winblad Venture Partners and QVC, Inc. In December 1999, The Knot raised $35 million in its initial public offering. And in February 2002 The Knot received additional backing from The May Company.

With over 2 million unique members and more than 4,200 new members a day, The Knot has the largest audience -- bar none -- of wedding-obsessed, cash-wielding brides.

Each year approximately 2.4 million couples get married in the United States, generating approximately $70 billion in retail sales annually. Presumed to be a once-in-a-lifetime occasion, a wedding is a major milestone and, therefore, consumers tend to allocate significant budgets to their weddings and related purchases.

The average amount spent on a wedding is approximately $20,000, excluding the honeymoon. (I wish my wedding only cost $20k; I could have taken the other half and placed it into The Knot and paid for everything and then some, all for a long term capital gain.)
*********End************

Since my initial coverage in August 2005, I actually placed the KNOT onto the MSW Index on 10/28/05 at $11.37 for a current 13 month gain of 142%. The stock is up 192% from August 11, 2005, the first official day I studied the stock and placed it on a MSW daily screen. I never bought the shares for my wife and regret every minute of the decision because I was only using speculation dollars and the risk wasn’t too bad as the stock was trending higher. I admit that I am uncomfortable buying low priced stocks and could have cut it if it reversed but it never violated the 200-d moving average so I would have held the entire time (for her).

She found and used a great service, a product that makes brides-to-be extremely addicted and I missed the opportunity when it stared me in the face! I knew it, I talked about it and even recommended it to a community of hundreds of investors but didn’t pull the ultimate trigger myself. The stock hit an all-time high yesterday at $27.53 and has been increasing volume since early 2005 as I would assume that institutional investors are finally jumping into a stock that makes money from a cash happy demographic. They fill a niche and turn a healthy profit so I consider them a solid stock. It is currently extended for an entry but I will continue to monitor the shares into the future.

Listen to your wife, especially when everything makes complete sense (it’s not too good to be true)!

Here are some of the analysis entries from MSW in 2005:

8/11/05:
Interesting Stocks forming bases:
KNOT – 9.41, deep cup shaped base that has shot up over 20% in the past two weeks. I was married not too long ago and I’m familiar with this company, due to my wife. Look for a handle to form on the right side of the base.

9/26/05:
KNOT – 11.30, the Knot has made five daily screens and I told many of the husbands or husbands to be to ask their significant others about this website and company. They are creating quite the buzz in the wedding world, especially here in the metro NY area. The stock is not perfect but the company is starting to turn a nice profit on brides-to-be. Up 20% since our first Daily screen on 8/11/05 at $9.41.

10/24/05:
KNOT – 13.50
, up 4.09% on volume 220% larger than the 50-d m.a. We have been screening the Knot Inc. since it crossed $10 per share. It is now extended but it is still in a solid up-trend.

10/25/06:
KNOT – 13.84, up another 2.52% on volume 126% above the average but I do see a pullback in the near future. The stock is moving up too high too fast to sustain this type of advance. A pullback should present a new buying opportunity back near $11.50 to $12.


10/29/05 – Weekly Screen Debut
KNOT – 11.37, I have been following the stock on the daily screens for two months as the stock became extended. With the recent move back to the 50-d m.a., the stock is now on our watch list.

11/17/05:
KNOT – 12.35
, I have screened the stock several times over the past two months as it holds the 50-d m.a. support. Today’s move on volume 158% larger than the average shows that this small company has some punch. Trust me guys (that aren’t married), brides to be can spend a lot of money and the industry seems to be recession proof for the most part. Today was a triple top breakout on the P&F.

Removed on 1/7/06 from the weekly screen! – What a mistake (it wasn’t too good to be true)!


Blog Mentions in 2006:

7/17/06:
http://marketstockwatch.blogspot.com/2006/07/msw-market-overview.html
Looking at the MSW Watch list from last week, we see one solid stock:
KNOT: -1.29% (down less than the major averages)

1/26/06:
http://marketstockwatch.blogspot.com/2006/01/mini-daily-screen.html
KNOT – 14.44, as you know, we cut the stock from the MSW Index when it fell below the 50-d m.a. but it has since reversed, gathered strength and moved to new highs. It will not be back on the Index but I thought it deserved some notice.

1/8/06:
http://marketstockwatch.blogspot.com/2006/01/recent-msw-index-results.html
Another stock has been removed (KNOT) but it was showing a 2% gain when it was cut yesterday. I decided to remove the stock before the very small gain turned into a loss.

12/4/05:
http://marketstockwatch.blogspot.com/2005/12/using-stock-research-and-stock.html
Our double digit gainers over the past two weeks include: AAPL, NWRE, CUTR, ESRX, OXPS, KNOT, HANS, & LMS. Three of them were priced within the $60-$100 range as these impressive gains accumulated over the Thanksgiving holiday.

Piranha

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3 Comments:

At 1:48 PM, Blogger Howard Lindzon said...

I kick myself on this. I also bug my partners at golfnow.com to look at their model because men and golf are almost as crazy.


great post.

That said, I have no idea why I don't own this but the trend following fund does.

 
At 5:53 PM, Anonymous DJ @ KSB Equity Research said...

With < $900MM market cap, KNOT is easily a takeout candidate.

We think YHOO continues to buy out names like this and KNOT is most likely on YHOO's hit list.


If we was KNOT's management, we'd work on building a customer lock-in platform so that users were incentivized to come back. You mentioned that brand loyalty is strong, which we like. Exploiting network externalities would be in this company's best interest and even better, selling the entire firm when competition rears its ugly head would be even better, for shareholders at least.

Chart looks phenomenal; balance sheet is clean -- but @ 13x sales, KNOT susceptible to short-selling. With less than 14MM in the float, volatility greatly expected.

REC: HOLD

 
At 12:21 PM, Blogger Chris Perruna said...

dj - I agree - volatility is a concern with small float!

 

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