James Hodgins DragonWave Inc. DRWI-T Dead) PAST TOP PICK Oct 17, 2014

Microwave backhaul where one network hands off to another (e.g. Verizon to Sprint). Have 90% of market share. Thinks you will see a tripling of sales due to consolidations in wireless where its largest customer was being starved of cash but now it has been acquired and will spend $8 billion in network upgrades.

Interesting company. Near-term opportunity is big, but be mindful that at the moment the company is losing money. Expected to lose $.86 this year and Feb 16/14, and $.25 the following year. Ranks in the bottom 10% of his database.

Their specialty is wireless backhaul using microwave. This company has had lots of opportunity, but unfortunately the earnings haven’t shown up. Stock has rebounded a little. Ranks in the bottom 1% of his database of about 730 stocks. Analysts continue to revise estimates downwards. Estimates for the February/15 year end is for a loss of $.31. There are better risk-adjusted returns elsewhere.

No longer has a material position. He was wrong to buy it. Expected some contracts out of the newly formed Sprint/Softbank/Clear Wire contingent. Maybe it will still happen. The company will probably run out of gas over the next couple of quarters if they don’t do any financing.

Believes they recently won a contract in India. Doesn’t think there will be a rise in the stock. Had an equity deal last fall that was sold on the basis of Softbank buying Sprint which they were going to benefit from. This doesn’t seem to be happening. Also, when they did the equity deal, it was structured in a way that the amount of warrants that investors received went up if the stock price declined. Stock price did decline, and they had to issue a lot more warrants. He has a small Short on this.

Formed a little bit of a consolidation, and then broke out and is now coming back again. Often you will see, when you get a bit of a breakout on a consolidation, a stock will come down and test the area, in this case at around $2. Watch to see if it can test the $2, and stay above it. The longer term chart is bearish. He wouldn’t trade it for the long term because the bigger picture is Down.

He has shorted it many times and made a fair amount of money.

Has been involved in the stock for the better part of a decade. Has been an under performer this year, although not extremely so. Tactically it is probably going to be the beneficiary of the end of tax loss selling, so he would expect a nice little bounce in a company like this that is showing some positive momentum in their backlog. Thinks they are going to have to raise more capital in order to fund the growth. Feels there is big growth eventually coming. It seems like ClearWire (which is owned by Sprint, and now owned by SoftBank) has finally got their act in order, in terms of rolling out the microwave backhaul part of their network and upgrading it. That, in addition to the contracts that DragonWave is winning in India, is good and is all positive. Tactically he thinks there is a bounce here to possibly $1.50. Be careful as it is a volatile name.

This was a $14 stock 5 years ago and is now trading below $1. Destroyed quite a lot of shareholder value, and their past quarter indicated that orders had been pushed further into the future. Last quarter was quite horrendous. It is now a really tiny company. They haven’t made anybody any money and they don’t pay a dividend.