Time to take profits on this japanese video game company
Update on GREE’s outlook
In February, we introduced GREE as a newcomer in our Active Picks list with this article Since then, we have been following how their apps are doing and it is looking so far like they are not able to maintain Heaven Burns Red as a top-tier game in Japan.
We decided to sell our position as of March 30th at a 35% profit, and will outline the reason behind that decision.
Decrease in revenue and stock appreciation is a strong signal to take your gains
As one can see, there was a daily revenue spike that led us to buy in February, but it is looking like the revenues are slowly dwindling. Our research shows that this is mostly because Heaven Burns Red, their latest title, is loosing some steam, driving their revenue down.
It is still significantly higher than pre-release, but we are disappointed by how quickly it is going down the ranks. It seems like they were not ready to support it with live operations as soon as it needed it.
Here is a chart of the estimated revenue as a moving average of 8 days, against the share price. We do not like to see those lines crossing in that direction at all.
Meanwhile, the stock price went up 35%. So the decision was made, we sold at a 35% gain, or a 30% alpha against the Nasdaq in less than 2 months.
Whilst it’s not as much as we were hoping with such a successful first week of release, we decided not to risk it and to take our profits on March
Conclusion
Given the stock has appreciated by 35% already, we believe there is as much downside as upside from here and decided to sell. GREE therefore already moves to our Closed Pick list at least for now. We rather take the 35% profit than risk it. We will be monitoring it though, and may enter again if either they are able to keep the revenue up, or the stock tumbles for no good reason in the future. We have seen that happening many times over.
Below is our Buy/Sell chart for GREE:
