About CGX:
To understand what is going on there you first must understand the stock market. The stock market is NOT rational. There have been studies and studies done that show that there is no coorelation between stock performance and P/E ratios. The stock market is full of people trying to get rich quick. This is true for both individual investors and mutual fund investors whose livelyhood depends on the performance of their fund.
Therefore, at any given time the majority of the market is chasing only a few stocks. These stocks are usually clustered in sectors. Each sector is broken into three groups: (1) category leaders, (2) second tier, and (3) junk. Category leaders are ALWAYS, without exception, expensive. Therefore, many individual investors buy (2) or (3). These are the stocks that get crushed (and stay crushed) when money is rotated out of that sector.
To make the big money in the market, you must know what sectors are hot, agree with the markets assessment based on your research of the industry, then pick AND HOLD the category leaders. I will tend to write calls on these leaders during 'breaks'. By far the biggest investor mistake is to sell winners for small 20% profits, and keep losers forever. They will sell their category leader in a hot sector to keep (or buy more of) a dog!!!
Other stocks in bad sectors may look a lot better on paper, but you must ignore these stocks. You cannot second guess the market. If the market doesn't value them, then forget about it! You cannot, by your will alone, move the market.
So, in summary, CGX may look good on paper, but it is out of favor, so I would avoid it, for now. It's worth putting on a 'watch list', though!
Good luck!
kp |
