Speculation Returns To Markets!

[brker_guy]

I believe Jason Zweig had a nice article about this in the WSJ this weekend (subscription might be required)...

 

http://online.wsj.com/article/SB125149410400267863.html

 

I think Sanjeev might be right on his theory.  Because of a low capital base, I usually do my fishing in the lower cap space.  I notice recently that there are a tremendous run up on stocks in the microcap areas with HUGE volume for no apparent reasons.  Also, the Chinese stocks that are traded here have seen the run up as well.  I don't think many people can easily analyze Chinese-domiciled stocks trading here, but I notice that a lot of activities of huge run in these stocks.

 

I think we might be due for a correction....

[alertmeipp]

... the microcaps that I have haven't run much... so I am not sure what u are talking about :)

[SharperDingaan]

 

Cardboard

 

Keep in mind that there is a major difference between a 50% gain in a fundamentally strong coy, & its frothy counterpart. The coy doesn’t need to have a high price, & the gain is very much a function of the courage you had to execute on the opportunity. Those gains occur because you analysed the stock better than the market.

 

Case in point.

 

We recently tripled our holding in SFK common for essentially the same initial investment, & got the huge increase in share volume because the price was so low. As virtually all the literature would deride it as a classic penny stock investment, buying required both conviction & courage – but that original $10 investment now has 3 shares making us rich versus 1.

 

As at close of business today the share price has effectively doubled. There is a reasonable probability that it may well do so again on the Q3 earnings announcement. If it occurs we will be 12x better off for making the decision, within roughly 3 months  - & almost entirely because we had the b**** to execute.

 

Put bluntly we put on an offensive hedge, & lucked out on the timing.

Don't knock it!

 

SD

 

[Guest kawikaho]

Lehman.Pk rallied over 200%!  haha.  Definitely a speculator's market.  Freaking casino. 

[rszutu604]

From the perspective of the number of opportunities I'm find, it's a tough market. I don't know if it's because I was so spoiled for good choices in March 2009 but it seems to be slim pickings now.

 

The following article discusses a SocGen report on the matter. They used a Ben Graham screen and only found 14 stocks meeting the criteria from the MSCI World Index.

 

http://online.wsj.com/article/SB10001424052970203706604574372943465964818.html

 

[scorpioncapital]

Two comments:

 

- Rule-based screens are not a comprehensive test for value, there are thousands of stocks in the world that are cheap that won't show up on any value screen one cares to construct.

 

- In March, when the stock market was 40% below the current level, stocks were actually very expensive - if the world economy was going to go into the Greatest Depression and stay there for say 30 years. It is only in retrospect that we see they were cheap relative to a more benign Recession scenario. But what of current prices? How can we know that they are also not cheap relative to a 'Normal' economic scenario - or expensive for that matter? How do we know that the screens won't pick up more stocks next year if we were to use today's price - but there is a catch, next year's price may reflect that expectation and the stock won't be on the list. The point of this paragraph is to say that it has never been truer that an investor needs to skate where the puck is likely to be not where it is in investing. What looks pricey today could very well be expensive - but it could also be cheap, in hindsight. Only our talent and superior perception of a company's business value can provide a guiding light to the many variables at play.