We are buying to cover $AVAV. Friday’s closing price is $25.33. Our original short was based on the thesis that drone business has become more competitive and margins are declining while the Wall Street stays enamored with the apparent sexiness of drones killing terrorists.
FY2011 defense budget submission creates more uncertainties for $AVAV. Based alone on its defense business, we would have stayed short on the stock. However, based on the hype surrounding home charging stations for LEAF electric car from Nissan, it is prudent to take advantage of recent sell off and cover the position. Earlier, we took advantage of the hype to add to our short position. Should the stock move up again on hype, we will short it again. Technically speaking, home charging stations are simple devices and likely to be commoditized quickly. As for the existing agreement with Nissan, Nissan is projections sale of only 5000 LEAF cars, not meaningful to AVAV numbers.
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