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Technology Stocks : America On-Line: will it survive ...?
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To: Pancho Villa who wrote (8205)2/24/1998 9:58:00 PM
From: PAL  Read Replies (1) of 13594
 
Pancho: The recent behavior of AOL stock has happened many times before. Just look at BRE-X, Comparator etc. Although I am not grouping AOL to those companies, but big money plays a big part in the runup and then dumping it.

From fundamentals standpoint, AOL is not worth the price it is trading now or even six months ago. But big money keeps pumping it up so that AOL stock defies gravity. Of course analysts are aware about the poor fundamentals, but they as a group just champion AOL.

The stock keeps climbing on a daily basis. Small investors are hestitant to be long because everyday the fundamentals do not justify the price. Yet big money keeps pushing it higher and higher.

Small investors are always the last one to jump in the bandwagon. They think that at 124 or 125 AOL will go to 140. Easy money. They buy at the tail end of the rally. For just over 10% gain with a big chance for 60% loss. Look at the probabilities for each and calculate the expected value. This is a zero sum game.

Just when those small investors jump in, big money abandons the stock. More likely after the split. Look at IOM after the runup.

If I were long, I should be happy to have my profit. I would at least short it against the box to lock in my profit.

AOL did gap down today. Once the slide starts it can be brutal. Get out of the way.
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