It is part of my ritual looking for the holy grail in investing. I try to look at my big winners and big losers to find out the reasons of the big gains/losses, so I can adjust my buy criteria accordingly.
Sometimes I cannot find good reasons or the reasons are not logical or convincing, or some events I cannot control. When this happens, I just ignore these irrational reasons, which could do more harm.
The following is one of the many of such stocks. GTIV just appreciates 50% in 10 days I bought. It seems most experts are wrong and in this case I am right. However, do not bet against the experts. First, the experts are still good to follow, but for some strange reasons, they all rate potentially good stocks to Sell. It could be these stocks have been down for a long and hence very risky, while and the experts do not realize they are headed for a rebounce.
IBD's composite score is 10 out of 100 and usually it is recommended not to buy any stocks with the scores less than 70.
Fidelity's Opinions from advisers is Sell. Usually it is a good advice as the score is according to how the advisers performed historically on the stock.
ProTrader has a grade of F, the lowest.
ValueLine does not have a predicted 3-5 year return.
Zack (the free version) has a rating below average.
To conclude, most newsletters/advisers do not favor this stock. Its sector (health care) is not favorable either and it could be due to the unpredictable ObamaCare. That could be the reason why it had lost 34% in the last 30 days.
At bottom or early recovery, almost all ratings on these stocks are Sell. It happened in last bottom (in 2003), March, 2009 and hopefully today. Do not buy the stocks just because they have Sell ratings. You need to further analyze whether they would go to zero.
Today many companies are making good profits, a lot of cash and low P/Es. In 2003, some companies struggles. At that time I ensured the company could survive in 2 years by dividing the cash position by the burn rate.
I bought this stock based on:
- huge expected earning - from the predictions of the experts even they do not like this stock.
- low P/E esp. with respect to the historical P/E.
- huge net short term asset %.
- this sector could be bottomed out.
This is my contrary stock that works so far. I'm an optimist, so the chance of doing one on a loser is pretty slim as we all look for #1.
(c) TonyP4 2011. Written in 11/11/11. Updated 11/11/11.
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Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
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