3SOF

Everybody here knows that trying to enter at the exact bottom of a falling stock frequently leads to bad things happening.

Conversely, trying to sell short at the exact top of a rising stock also frequently leads to bad things happening.

Why not wait for a trend to develop?

Being a contrarian trader, or being "ahead of the market" doesn't necessarily mean winning through anticipation and early position entry.... For instance, I remember the market at nosebleed levels during the internet bubble in, when was it... 99?  Most savvy investors knew there was little chance it would hold.  But the market didn't actually begin to plummet until tons of people became convinced that it COULD actually hold those high levels (and didn't want to miss out on the action).  I know a lot of the savvy investors who tried to anticipate the burst of the internet bubble but were too early.  They ended up losing money.  I lost quite a bit myself during those years trying to anticipate by shorting stocks I knew would fall.  Those companies no longer exist, but I still lost money because the share price skyrocketed and I had to cover my short position.  I'm sure I'm not the only one.

I don't see the well-educated investor yet convinced that these levels might hold in this market.  Many people are still betting against a rise, saying these levels cannot be sustained.  It sounds very familiar to me. 

When those same people start becoming convinced that these levels MIGHT BE SUSTAINABLE... that is when it is time to start entering on the short side   While those indications are fast approaching, we are not there yet, in my opinion.

Just my 2 cents... take care, and best of luck trading!

This is one theory I came up with...  NOTE: (1) ~15% of float was sold short as of November 10th.  (2) They issued new shares and warrants on December 1st.  (3) The float is fairly small.

If I were a big investor I know I will have some amount of new shares and warrants to get more at a certain price.  I could sell short a bunch of the shares leading up to the placement, driving the stock price down significantly (remember, low float).  I am now sitting on cash from short-selling ... oh, let's say 200,000 shares at around $5.00+/share.  Because the stock price is now way down, I get MORE shares for my money (average cost of shares = $3.94).  This happens because the warrant conversion price and stock purchase price is usually based on the average stock price over a given period (and I have lowered that average stock price by selling short).  So now I own a bunch of shares at $3.94 each.

At some point I need to cover my short, so I use 200,000 of those new shares I have to cover.  Who cares if the stock is up at $10... I really only paid $3.94 for those shares!  So I've made $5 - $3.94 = $1.06 per share... a cool $200,000 profit.  Plus, I now am sitting on a bunch more shares at a cost of $3.94 each.

Lemme see....
1. If the stock price is now $10, I've made a profit of $6.06 per share... about 54%... not bad.  Plus I've LOCKED IN the $1.06 per share profit (+27%) I made from selling short those shares at ~$5 in the bank since October (that I bought for $3.94).  That money has been in the bank since October as well   Not bad.

2. The investors probably know the company is worth at least as much as it was when they started short-selling shares

3. BUT... let's say I didn't take this short-selling strategy.  I would own FEWER shares at a price of $6/share.

Let me see.... immediate 27% return with money in the bank (pre-investment) and a bunch of shares at $3.94 each.... versus owning FEWER shares at $6 each... hmmmmmmmmm 

just want to point out... do be careful if this starts heading down (say, below .50)... it may be a good fib. retracement but it could also be the start of a head and shoulders pattern.

What is up folks?  I am in 8th place with a measly 2.9% gain?  Has the environment shifted away from higher-risk stocks or something, or did y'all just pick the riskiest plays possible in the hopes of winning big?!  heh... well, good luck.

I will quickly plug my one-page web site as well (http://www.scatterbrainbackup.com/stocks/).  I have a nice link to the 3SOF web site on there... I'm looking for a 3SOF logo now.  Hopefully I will send some people this way and vice versa   Take care all, and I hope the bleeding in the $1000 contest portfolio stops soon!

Well, KOMG was my stock-picking contest pick for last month and I still follow it, even though I sold shortly before the end of the contest... it was due for a rest after all it's hard work climbing that hill.

With that said, I re-entered today at $32.77.  There is excellent news today of mergers/buyouts with the biggie hard drive makers.  Less price competition can't be bad, and like the press release said, I think there is doubt that things can "really be that good" looking forward with Komag.  So, the negative sentiment is there again.  Plus, a lot of weaker hands have been shaken out, hopefully, with this lull after the run-up.

Plan: If we hit $34 today I'll take quick profits.  If we close below $32, I'll take a loss and look to re-enter sometime later.  Otherwise I'm pretty comfortable holding at this level. 

Well, for better or for worse I jumped in today (it's Tuesday here still) and bought with 300 shares at a little over 18, so I'm in   There is still a lot of selling at these levels it seems, but high volatility might provide a quick profit over the next few days.  Best of luck to all.

I believe that Aloha airlines re-emerged from bankruptcy today and will be keeping its flights/pilots/etc.  I have no clue what this means in terms of MESA's planned Hawaiian inter-island service.  Hopefully they will issue a press release to let us know if the expansion is still on, and/or if they will lose money from any changes in plan for their Hawaiian island service.  This is most likely why MESA was down to $9 in after-hours trading.  I am feeling the pain looking at MESA in my portfolio but I have no real reason to sell, so I will continue to hold in hopes of better times...

I saw that, and my thinking is that the transaction price is likely listed at $0 because the price at which he aquired the shares was less than $0.01. 

People don't usually want to see that CEO Joe bought shares at $12.32900425 on the forms... they prefer $12.32.  And they often don't round up - they just ignore the trailing digits, truncating the actual purchase price.  So my take on this is that he bought GZFX for under a penny, and thus it was reported on the form like 0.0094 (or somesuch number), and Mr. Form Alie T. changed it to $0.00.

Ramsburg - Thank you for the rule clarification/modification.  I've gone ahead and made Middleby (MIDD) my pick!  This site is the best   Thanks all for the wonderful ideas and mucho entertainment.

Stock Pick: Middleby (MIDD)

I don't enjoy the whiplash experienced with most micro-caps or high beta stocks (thus my pick of KOMG last month).  Like Komag last month, I've already purchased Middleby (MIDD) in my personal account, and it seems to be out of the gates before the start of the race... I am sitting on a nice 7% gain already.  Still, I will pick it for the contest.

Reasons for the pick:

(Reason 0) Market cap of $641 million.  No whiplash.  Check.
(Reason 1) I agree with Jim Jubak's assessment of possible sector rotation going into 2006 in his article entitled, "5 stocks ready to ring in 2006" http://moneycentral.msn.com/content/P137243.asp
(Reason 2) The point is to be ahead of the game.  Once I find a sector that is not receiving a whole lot of attention, I look for (a) value - I don't invest in highly overvalued companies, (b) either good performance that shows no sign of slowing (the stock price is not taking a major dive) or indication that the stock chart sucks worse than imaginable and might be improving soon, (c) some sort of smaller news that indicates all is going as planned.

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(a) Here is the value:
2006 expected earnings between $4.36 and $4.60 per share.  Recently revised upwards by 6 analysts to a mean of $4.49/share.  This gives me a forward P/E of about 18.  I like.  Quarterly revenue growth is 14.6% year over year. 

(b) Performance (see chart below)

(c) Smaller, good news keeps coming out:
http://www.fool.com/News/mft/2005/mft05120806.htm?source=eptyholnk303100&logvisit=y&npu=y

Anticipated news (personally anticipated news that could give the stock a boost):
Possible announcement of a stock split
Hint of future dividends (est. 2007-2008)
...and a nice bonus: High short interest: 12.6% of the float was short as of Nov 10th (wish I had Dec. numbers).  Short ratio of 7.7.

And here's the chart:

A question to Ramsburg -- is there any way to make an exception for daily volume lower than 100k?  I am looking into picking Middleby (MIDD), which has a market cap of $637 million -- definitely no small cap by any means.  However, the stock trades at over $80/share, so the average daily volume is, understandably, about 71,000.  What do you think?  Am I just out of luck, or is that cool?  If it's not okay, I'll continue to search for another one I believe will show pps growth and consistency (none of these whiplash high-beta stocks for me).

This is a great contrarian and value play.  Just be careful of catching falling knives.  The chart looks technically ugly, but the volume today is good.  Also, SFCC appears to have had really big down days where it crashed hard, but not much continuation in the crash over the next few days (which tells me people have run for the doors very quickly when bad news has come out... the stock seems to have many skittish investors).  I am in at $17.90.  Disclaimer: I can't pass up $500 in a day if it is offered to me (esp. in these market conditions), so I have a limit sell order for $18.90 if it hits it today.

Perfect contrarian pick, thanks for turning me on to this one!

I couldn't resist quick money... out at $18.78... I'm sure I will regret it, but I can't complain about making a quick buck!

congrats to all in EYII.  But, do be careful... what is that saying?  even a dead cat will bounce if you throw it off a 20-story building... or something like that (of course it isn't true, I've tried it... heh, as one of my cats rests on my lap).  I'm not saying it will go back down, but be careful about using an argument of "it was up before, it will be up again."  This may be the case with most stocks which still have charts (!) but there are plenty you don't see that didn't go up again.  Burned once, ok.  Burned twice, not good.  [Hopefully recent EYII holders won't be burned twice]  Burned 3 times - time to start thinking - maybe there is a reason it is burning you.

Dunno where I should post, but in the interest of full disclosure, I sold my position in KOMG today for a nice gain.  I know tomorrow is the official end of the contest, but (1) GTE is the clear winner -- congrats! and (2) KOMG is looking overextended after a big run-up this last month, institutions are beginning to offload, the trading action today is a little weak, and volume is slowing down.  My goal is to be ahead of the trend, so if I miss out on a few dollars, it's okay.  Of course, I do tend to sell early.. but then again, hindsight is always 20/20, and about half the time I've looked back and said, "darn, sold too early," and about half of the time I've said, "phew, glad I sold early."  Of course I remember the biggest losses and largest missed gains the most, like most other people on the planet...

I know that I've checked out the $1000 results once or twice to search for interesting picks, and I wanted to let others who might be doing the same that I'm taking profits today. 

Don't forget -- the dividend of extra shares was awarded to holders on record as of 11-26-05.  So, not only would the share price move downward, as with normal dividends, but it looks like a bunch of people sold ... as speculated upon before, it is likely people held tight to get the dividend, but after getting the extra shares there was less reason to hold... result: selloff.

Anyway, keep this in mind when looking at these large price moves... the share dividend on 11-26 had a lot to do with it.