REDF

[David Randolph]

Ok guys, I'm throwing down the towel on REDF short. I have 2 strong reasons to do it:

1) REDF short yesterday almost killed the performance on the Stocks on Fire Portfolio, which rose just 0.3% because REDF rose 7.78% and it is a 10% of capital position.

2) My analysis has a flaw  And it's not Cramer's «REDF is India's Google», it is much more profound than that ... the thing is, each American Depository Shares only accounts for 1/2 of REDF shares ! Honestly this is the first time I see something like this. So, with 25.76 million ADS outstanding, there are half of that number in shares outstanding, so the number of shares outstanding is 25.76/2 = 12.88 million shares. That said, the market cap is 12.88M * $21.45 = $276.28M (Yahoo has $552M, Market Watch has $308M). Still expensive when compared to revenues, but my bearish case on the stock was killed by this information:

«We are offering 3,026,480 of our American Depositary Shares ("ADSs"). Each of
our ADSs represents 1/2 of one of our equity shares.

Our ADSs are traded on the Nasdaq SmallCap Market under the symbol "REDF". On
November 8, 2005, the last reported sale price of our ADSs was $ 18.66 per ADS.»

I live and learn. When I see that I am wrong I take a loss, paying for the tuition fee. The lesson taken is: when trading ADR or ADS, check to see if they represent 1 full share of the company's stock or not.

Thank you market !

[Lucas Scott]

DR and I seem to be on opposite sides of the coin with REDF. Maybe due to some strange cosmic phenomenon, I don't know. I was buying when DR was shorting, and shorting when DR was buying (to cover) The open was a great spot to short because it was almost a double top (22.12 the 52 wk high set on 12/12. And with earnings in two days, I smell a selloff. Only problem is Ameritrade told me "no shares available to sell" so my short is a paper-short. Monopoly money. Maybe when I cover I will be able to afford to buy houses on Ventnor Ave and Marvin Gardens

[winner919]

David:
I do not understand how you calculate market cap. Assuming is half share for ADS, which is 12.88 M shares. but the price of half share is $22, so a whole share is $44. the market will be still 12.88x44=~500M. Am I wrong?

[David Randolph]

David:
I do not understand how you calculate market cap. Assuming is half share for ADS, which is 12.88 M shares. but the price of half share is $22, so a whole share is $44. the market will be still 12.88x44=~500M. Am I wrong?

Oh my God, probably you're right. My brain can't look at this issue now, it seems so simple, and I'm sure it is and probably you're right, but I'm totally blocked.

I'll take the following actions:

1) Remove this thread to the Previous 3 SOF picks board, letting some more people talk about the subject.
2) I'll avoid trading REDF for some time, maybe forever, since I have problems understanding it 

Thanks for your contribution, totally puzzled by this simple math thing 

[422fwhp]

Pullback before buy to cover? 

Happy trading...Jody

[KCScott]

Cramer is on a personnal crusade for this stock.
3 Mentions in 3 days.

They reported earnings of .0123 and it was losing Mo and he gave them another pump on tonight's show.

Un-Freaking Real.

Wished I had been as "clueless" as David and bailed out.

It will go down, eventually, but playing to wait is a sucker game.

Probably out sometime late tomorrow

[Lucas Scott]

KC - good thing you covered Friday . What a monster!!

[winner919]

unfornately, I got caught by cramer. short at $20 and do not know how long I need to wait. fortunately, I did not short too much. correct david calculation abd believed REDF is overvalue. but that is stockmarket

[willey]

Hi Folks,
Taking all my profits as a long in REDF today!...I was the other side of the trade with David on this puppy & it worked out this time!
:-)))

Remember, there are "hidden hands" behind this one & think long and hard before you ever short this...It's now ridiculously overvalued & I'm now out!

willey

[shawFund]

It is hard to make money by shorting stocks unless you are very sure that you are shorting a
really bad managed company.

[Lucas Scott]

Nice trade Willey. I wish I had stayed in, but I didn't want to take a chance with the earnings report. I could've jumped in right after though. Sometimes in a group like this there is a risk of getting caught up in groupthink (this is sometimes referred to as "drinking the Kool-Aid"). For example, with REDF the groupthink was REDF is way overvalued and a surefire short. The chart vehemently disputed that assessment the day REDF gapped up and had incredible volume. I had a small sip of the Kool-Aid which may have contributed to me not buying back in after earnings. On one hand the chart looked great and the earnings risk had passed. On the other hand, you can't help but have it in the back of your head all the analysis about REDF being the most overvalued stock since the dot bomb days. Willey, applause to you for a good trade and seeing something most of us could not see with REDF!

[Jimbo]

Time to short................again 

Down AH to $29.50,  -1.68 (-5.39%) after Cramer's downgrade tonight :

"HERE'S THE DEAL:  WE ARE NOT GOING TO REPEAT THE ERRORS OF 1999; WE ARE NOT GOING TO OVERSTAY OUR WELCOME. RIGHT HERE, RIGHT NOW, I AM DOWNGRADING REDF. SELL, SELL, SELL!  I RECOMMENDED IT AT 16.00 AND I GOTTA TELL YOU:  BULLS MAKE MONEY, BEARS MAKE MONEY AND HOGS GET IT MADE INTO JIMMY DEAN SAUSAGE, AND I CAN'T HAVE IT HAPPEN.  REDF - RING THE REGISTER!  WE CAUGHT A DOUBLE FOR HEAVEN'S SAKE!"

[Melf Elf]

Taking all my profits as a long in REDF today!...:-)))

willey,

Nice play, and great timing!  Applause.

Remember, there are "hidden hands" behind this one

Based on Jimbo's post (applauded), I'm going to hazard a guess that those "hidden hands" are attached to the arms of a guy named Cramer.

Down AH to $29.50,  -1.68 (-5.39%) after Cramer's downgrade tonight :

"HERE'S THE DEAL:  WE ARE NOT GOING TO REPEAT THE ERRORS OF 1999;

Interesting post about Cramer's comments, Jimbo, (Applause) particularly that comment.  If a guy like Cramer can keep pounding the table on a stock like REDF and move it 124% in 11 trading sessions, aren't we kinda repeating the errors of 1999?

   

I watched his show at Harvard.  Cramer certainly has entertainment value for some, but I thought what a shame it is that those young people are getting caught up in the idea of making instant "Mad Money," ala 1999/2000 "internet stock" mania. 

Sadly, those kids are in for a rude awakening.  BOOYAH will quickly turn into BOOHOO for many of them after they get burned a few times on Cramer's stocks, like some of them will on REDF.   

Cramer is on a personnal crusade for this stock.
3 Mentions in 3 days.

Pump...pump...pump...

It will go down, eventually,

Evidently, Scott, it's going to go down because Cramer says it's going down.

DUMP...DUMP...DUMP...

[winner919]

feel relieved. hopefully, I can buy back at my short price

[ScottishTrader]

Maybe today is the day to short REDF on Cramer's day - not just cos he said so, certainly helps and stymmies any more of a bull run, but because of all the reasons david laid out in the first place.  I won't but I'm sure a lot of other people are thinking about it....