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August 9, 2009
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I have been fascinated with the stock market for last 5 years.
Here is my conclusion about the true price of any stock in Universe. These apply to short term price movements last under 30 days.
A. The price and volume action is the basis of stock price in a given time frame. Nothing else matters. Sure I check the fundamentals and news for stock before buying and selling. Fundamentals take a back seat some what.
B. Shoot first ask question later? AKAM missed their earning by 1 cent market promptly brought the stock to their knees dropping 20% on huge volume couple of down grades by experts fueled the fire. Then insiders decided to buy and an upgrade from so called expert made the stock go up from 16.15 to 19.46 or 25% plus in 4 days. The huge volume selling day from $20 to $16.15 was mostly institutions meaning those hedge funds and mutual funds or big investors meaning they had no clue to the actual value of company. Then why did they buy it? Then the same guys(may be) bought it back at a higher price. I took some contrarian view in personal trading account and made some chump change.
C. Tune out the noise every one has been saying that Industrial / commercial real estate is in trouble just check out ETF IWF and RWR the stocks in that sector beat the rest of market by wide margin in last 3 weeks. Either experts are wrong or stocks in that sector or stocks are full of hot air - you dcide. JLL, JOE, BXP, KRC,
D. Stocks are forward looking instrument and have no real co-relation to what the current price is. Once train starts moving every one want to take ride.
Examples DTG, CAR - DTG went from $1 to $20 in 3 months did the fundamentals change by 20 times in 3 months? Does the stock price has any correlation to PE or Book value or cash on hand or any solid data? I have not been able to find it.
E. News driven system - Some one time good or bad news shifts the stock mean price to a new higher and lower level and most of the trades over next 15 days are more or less with n Average True Range. Day time price variations are no more then white noise. Some one wanting to buy offer a few extra cents and some one wanting sell reduces price by few pennies and trading goes on.
Some Examples - Any corelation to fundamentals?
MFC - Reports Q2 EPS of $1.09 vs. $0.62 two-analyst est. (24.26 Stocks drops 10% from 24 to 21 it dropped another 60c on Aug 7 to a total of 11% in 2 days
Stock Sees EPS of $0.32-0.35, excluding $0.04 from a lower than expected tax rate, vs. $0.25 First Call consensus; sees Q2 (Jul) revs of 212.3 mln vs. $209.97 mln consensus. Co issues in-line guidance for Q3 (Oct), sees EPS of $0.95-1.03 vs. $1.03 consensus. STOCK GOES UP 8%
MGNA - Reports Q2 (Jun) loss of $1.29 per share, excluding non-recurring items, $0.28 worse than the First Call consensus of ($1.01); revenues fell 44.8% year/year to $3.71 bln vs the $4.1 bln consensus. STOCK GOES UP 1%
AKAM - Reports Q2 (Jun) earnings of $0.40 per share, $0.01 worse than the First Call consensus of $0.41; revenues fell 2.7% year/year to $204.6 mln vs. the $211 mln consensus.STOCK DROPS 18% ON 6X VOLUME
Reports Q2 (Jun) earnings of $0.09 per share, $0.10 better than the First Call consensus of ($0.0 STOCK GOES FROM 45 TO 58 IN 7 DAYS OR 24%
I will like to form a group of like minded investors who are willing to add value as a group on this web site. I am not sure how to go about to form a group. We can call it momentum plays or contrarian plays for longer / short term holds with stop loss in personal trading account and this web site. Example I bought TSH at open on Friday and e-mailed to a few friends. I did my home work on Thursday night and got excited. I did not add to this web site as 50% of the potential profit is now built in close of day price.
I will like to communicate night before the trading day for this goup.
