Thursday, February 15, 2007

Value Bounce

Looks like the equities market has bounced back so it wasn't a correction, just a minor nervous pullback.

So here's my strategy that's making me the most money. I call it the value bounce - I look for a company that is well run, profitable, growing and just announced ahead of earnings call that they missed their earnings by a small margin (5-10%) and maybe cut their guidance by 2-5%. This usually causes a 20-40% drop in their stock price.

Here's the trick, let them hit bottom, buy and wait until the earnings call then ride it up and jump off before the peak. Don't get too greedy.

I've done this on these stocks:

LYTS - bought Jan 11, sold Jan 25 (22% bump)
HP - bought Jan 4, sold and then got back in this week (20% bump)
NTRI - bought, sold, bought again in the past 2 weeks @ around 41.52 (looks like 23%+ bump)

Cramer hates all of these companies but there is opportunity wherever there is panic and greed. Don't panic and don't get greedy and you might get lucky.


Anonymous said...

You'd do well in Vegas.

On another note, what do you think about fiber-optic broadband? Verizon offers a FiOS service that is getting rave reviews.

sanj said...

Actually, I am terrible in Vegas. After two decades of annual visits, I have yet to win a penny. I suck at card games and don't really trip on games of chance.

I used to own a company that supplied raw and backroom optical materials to the RBOCs and cable companies so I actually have a bit of experience in that field. My gut feeling is that subs (end users) don't need more than 100Mbps for the next decade so fiber is nice but not necessary and Verizon is going to have to spend a lot more money than their peers who aren't running fiber the last mile. I'd love to have it at home, think it's great for new construction but I think the expense is unnecessary right now and is a business disadvantage since HD/VOIP/Torrent over dsl/cable/wireless will do an equal job for the next decade until the next killer bandwidth app comes around.