Thursday, March 6, 2014

Dot Hill Declines Despite Strong Q4 Results

Dot Hill is down over 19% so far today despite strong Q4 results. Hill was (in my view) clearly undervalued and overlooked as late as January of 2014, when it could be bought in the $3 range. But then momentum players and sell-side (Wall-Street brokerage house) analysts got wind of its success, driving it to a 52-week high of $6.06 yesterday.

My last article at Seeking Alpha on Dot Hill was: Nearly Quadrupling In 2013, Dot Hill Still Has 2X Potential In 2014 posted on December 29. I meant double by the end of 2014, not by March. Of course all stock prices are dependent on actual ability to generate profits, which is notoriously hard to predict.

Given that the 52-week low is still $0.9125 (March 15, 2013), only the most idiotic momentum players got burned. I still think $6 to $7 per share by the end of 2014 is not unreasonable, unless something goes wrong on the execution side. There is upside to that if more clients (OEMs who resell HILL's storage equipment) sign up in time to ramp some revenue in 2014.

The details are worth paying attention to, so start with my summary of the quarter and the analyst call today:

Dot Hill Q4 2013 Results and Conference Call notes

There are a lot of interesting comments on the data storage industry in general in the call, including on Lenovo's purchase of IBM's server business.

I am a long-term holder of HILL. Due to its run up in 2013 it is currently my largest holding. I reserve the right to buy more if the price drops enough, and to sell some of my holdings if I think it has become overvalued. I also own some Seagate stock, the disk drive maker.

Be sure to check the SEC filings and make sure you understand the company before buying.

Keep diversified!

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