NEW RESEARCH REPORT RELEASED TODAY
We have just released a new research report on a company that is a real midget, with a market-cap of around $15 million. This is a $50 million company trying to walk on its knees. Only a matter of time before it gets up and people realize what is at hand. All the angles are there: it has a value angle, a restructuring angle, an activist angle and it's even a China play. 3 page report outlining all the facts. Available to current members. Join...
WHY COMPANIES LIKE NFLX WON’T GIVE BEARS THE TIME OF DAY
This article also published on TheStreet.com Every bull market cycle has them, a few stocks that defy gravity and smash expectations. Frustrating both bears who consistently make attempts at shooting down these high-flyers and overanxious bulls, who find themselves pulling the sell trigger prematurely. NFLX is the most recent company to take home the title of most frustrating stock for both bulls and bears. There is a complicated market dynamic at work in NFLX at present. It is a dynamic that involves a lack of faith from both bulls and bears. This lack of faith or disbelief in the virtues of the company, causes bulls to offer stock after gaps similar to the earnings explosion we had this past Thursday. And it causes the bears to offer stock at the very same time, as they feel it is an ideal opportunity to get short or add to short positions. Chronic disbelief syndrome, or CDS for the purposes of this article, causes the bid and offer equation to remain consistently unbalanced, thus driving the stock higher. CDS often times makes a mockery of tried and true technical patterns, indicators and the seasoned traders who have come to rely on these tools. CDS essentially gives life to the bulls by creating an underlying bid in the stock as a result of a consistent state of anxiety amongst a majority of the shareholders regardless of their opinion - bearish or bullish - on the stock. When a consistent state of anxiety becomes the psychological backdrop behind a momentum driven move in a stock it causes bears who initiate a short position to cover their positions, as both technical and fundamental reasoning become obscured. It also causes bulls, who are fearful that their profits will evaporate, to constantly have to buy back into the stock, chasing it higher as they come to realize that they have taken profits prematurely. This cycle, often times, continues for much longer than any market participant would expect. What is most elegant about this type of momentum driven move, fueled by anxiety, is that it becomes a sort of self-fulfilling prophecy or reflexive relationship between the stock price and fundamental outcome of the company whose price is being driven through the roof. The fundamental outcome for the company often times ends up being greater than any market participants would expect as a direct result of the stock price fueling management, employees and partners desire to innovate, succeed and structure the company in such a way to maximize the perceptions that currently exist regarding the company. Therefore, the company ends up being influenced by the stock price, as opposed...
10 CHARTS THAT PAINT A VERY CLEAR PICTURE FOR THE COMING WEEK
(click on the charts below to enlarge)
TOP 3 MOST POPULAR CHARTS FROM THIS PAST WEEK
1. AAPL - DAILY CHART FROM 1/24. BEARISH. 2. NFLX - WEEKLY CHART FROM 1/25, BEFORE IT EXPLODED UP. VERY BULLISH. 3. AAPL - WEEKLY CHART FROM 1/23....
TOP 3 MOST POPULAR POSTS FROM THE PAST WEEK
1. APPLYING POKER THEORY TO SPECULATION IN THE FINANCIAL MARKETS 2. LASR (GSI GROUP) ANALYSIS AND BREAKDOWN OF WHAT WENT INTO OUR DECISION TO BUY LASR 3. THE THOUGHT PROCESS BEHIND A NEW STOCK WE'RE...
LASR (GSI GROUP) – ANALYSIS AND BREAKDOWN OF WHAT WENT INTO OUR DECISION TO BUY LASR
(Some of the prices that appear below are pre-reverse split prices) We initiated our position in LASR during the first quarter of 2010 at 2.55 per share. It is trading close to $12 as of 1-28-11. We have been scaling out of the position throughout January. The following is the research, reasons and facts that compelled us to make this our largest position: What appears below is from our current research report with respect to LASR. LASR was, at one point, our largest holding. We have been taking profits on the position since the beginning of this month. I am still very bullish on the stock and wouldn't hesitate for a second to recommend it for investment. I feel it will eventually be bought out by a larger company at a price that will, at a minimum, be double of where we are now. However, we are micro-cap investors, and this stock has gotten way out of my comfort zone. Add to this the fact that we are discovering new opportunities that we need to allocate capital into. What is missing from the research report below is the step by step process of what made us get into and continue scaling into LASRD. Although the company was in bankruptcy, at no time did we have any doubt that the company would come out of bankruptcy with shareholder value intact. Here is a summary of what took place from beginning to end: - In 2008, near the peak of the market GSI Group (LASR) acquired a company by the name of Excel Technology for $32 per share or $360 million. - The acquisition of Excel was partly paid for through the issuance of long-term debt securities, as well as cash. - In December of 2008, GSI Group announced that they had some errors in accounting. The prior financial statements they had issued could no longer be relied upon. This caused investors to jump ship and begin losing faith in the company. Shares plummeted as investors could not come up with a way to value the company given that their financial numbers were no longer reliable. - In late 2009 things began to unravel very quickly, as GSI Group was delisted for failing to provide the necessary filings to remain on the Nasdaq. - In late 2009 the company was forced to file for CH. 11 bankruptcy as a result of their continued delayed filings and the subsequent breach of agreement with Noteholders. - Stephen Bershad became involved with GSI Group in 2009. Stephen Bershad is an industry veteran and former CEO of Axsys Technologies. - Stephen Bershad began acquiring large...
TODAY’S THOUGHTS
"Today's thoughts" is something I send out nightly to our members. It usually involves the performance of our current holdings or the performance of the markets. This is tonight's "today's thoughts". I thought it would be good read for everyone: You know, I haven't always been a penny stock or micro-cap investor. It's actually something that I frowned upon until only a couple of years ago. I used to think that penny stock or micro-cap traders were on the lowest ring of market totem pole. I thought of it as a cesspool where individuals who were, more or less, casino roulette players could come and get their daily fix while they prepared for their day at the mercy of the wheel. For the most part, I think I was correct in my assessments. Penny stocks do tend to attract the scoundrels, scum bags and general nefarious types who smell of odd substances and carry around heavy backpacks. It's a lot easier to manipulate a stock that has a market cap of $10 million than a $5 billion company. They are unregulated, for the most part. And could be considered the wild west of Wall Street. In studying my trading over the 16 years that I've been doing this, trading literally thousands of names and millions of shares, I noticed one thing that made the light bulb shine like it was hooked up to a nuclear reactor. In all my years of trading, as the market cap got smaller, my success rate increased. Not only was my batting average of winning trades much better, but the gains I made on those trades were far superior to say mid-cap or large-cap stocks. I can now attribute this to a number of reasons that were unbeknownst to me prior to say 2008: 1. Penny/micro-cap names are a lot more transparent in their price movement than stocks with tens of thousands of participants. This makes the price action "cleaner". Penny stocks tend to tell the truth much more readily to those who are experienced enough to decipher what they are trying to tell you. 2. The participants in penny stocks are almost exclusively individual investors. If you know how they think, you've got a leg up on them. This goes hand in hand with the price action. Again, their actions are transparent and easier to decipher than the daily moves in Intel. I touched on this fact extensively a couple days ago in a blog posting entitled "Applying Poker Theory to Speculation in the Financial Markets". 3. Good research goes a lot further in these stocks. I like to think of penny stocks as option contracts...
OUR BANKRUPTCY REORG TECHNOLOGY PLAY WILL BE REVEALED AND DISCUSSED IN A BLOG POSTING TONIGHT
This is now considered a completed investment. We initiated the position almost exactly one year ago, when most thought the end result would be the shareholder equity in the company being dissolved in the bankruptcy. We have been in the process of liquidating for the past few weeks after a 400% gain in the stock since we initiated the position. Tonight I will be going over all the research that went into this stock, both as a demonstration of how we do things here at Zenpenny and so that you can educate yourself as to the benefits of investing in restructurings. A company that is undergoing restructuring scares away most investors, which is exactly why the gains can be absolutely monstrous if you catch the right one at the right time. Institutions and individuals, for the most part, just sell these names and forget about them. This lack of understanding and patience, makes it lucrative for those who do their homework. Make sure to visit later to get all the juicy details of the thought process behind this very successful, year long investment that is now nearing...
WHY JANUARY TOPS ARE A RARITY
January tops following a bullish year in the past year are not a common occurrence. If the market wants to begin a topping process, it will typically retest and exceed a January top in February or March and then begin the painful period of correction. This market is no different as human psychology and pressure upon fund managers to perform is no different, regardless of the period of time. When the markets have been bullish in the past year, as they were in 2010, the pressure of performing begins to build on the vast number of fund managers who were left behind. When they see that January is bringing much of the same bullish performance from the markets...they simply start pressing the buy button indiscriminately. The same goes for short sellers who underperformed in the year prior. They are holding out hope that the next year will be different. However, when they see that the first month of the year is much the same as the previous 12 months...they become panicked and begin buying in their shorts. It's a classic final capitulation type scenario that tends to last for a majority of the month. Your job as an investor is to not fall for it and recognize exactly what is happening. Over the weekend, I will be reviewing all the signs that point to the fact that this is not the time or the place to be dancing naked in the streets with a load of high-beta stocks on your back. It is time to pull in the horns a bit and allow the markets to recalibrate the bids and offers...as things are getting a bit out of...
THE POPULAR GUY: UPDATED NFLX CHART
NFLX is the popular guy around campus this morning. Let's take a look an updated chart. In case you missed it, please read the analysis of NFLX from 1-25 in order to understand this chart better: (click chart to enlarge)