Monday, May 1, 2006

Time to shed some ERTS ?

Electronics Arts have been a disapointment so far in my portfolio, Madden is the best selling football game ever, the stock doesn't tick, jamdat is bought for more exposure on the growing portable market, nothing happens. Recently it's been trending up (despite all technical indicators down, see below) a bit, and my loss on it is reduced to roughly 5%. I believe ERTS will continue to lead the videogame market for eternity, but it looks like that fact is already discounted into the price of the shares, no good news is good enough.

On the other hand the market for videogames is in a transition form generation 2 to generation 3 consoles. Gamers are buying new systems with a huge price tag so they don't have money for games yet, or they're saving up for the PS3 and still don't spend.

Whatever it is that is happening, the stock isn't anywhere near where I expect it to be. I will probably hold on until the next or next next quarter, but I might shed 30% of my position to free up some cash, maybe a good bet on video game would be Gamestop (GME)?

On the technical side, the MACD just crossed over, but as it happens below 0 the move shouldn't be that huge, I hope it'll be big enough to shed at a profit, but the long term technicals are so bad that it will take great news and a bit of luck to be on the long winning side.

From a long term perspective, I am confident that ERTS is great company and possibly great stock, but I am trying to maximise mid term profits and could certainly find another stock with similar if not higher odds of making me some dollars.

Also, there is a bit of risk in the fact that EA's games are mostly franchise and repeats, and somehow at some point you can't expect NBA street 7, NFL street 6, NBA live 2011, The sims 5, and NHL 24 to create a "growth" image around the company.