Runes,
No apologies needed. Speculation is an inherently risky enterprise. It is never more so than when one catches the falling knife.
Last Wednesday I noted the key reversal that had taken place in TYC and thought that if the CEO and CFO had decided it was cheap enough for them, then it was cheap enough for me too. I also noted that AD bought some shares the day before for a LT account. When you suggested taking a look at ELN, I was dismissive at first, mainly because I felt that the CEO was defending ELN's accounting practices without taking the necessary step of putting his own money where his mouth was. However, when I looked at its chart, it too seemed to have completed a key reversal on Wednesday. I had quite a high cash balance at the time and figured I would speculate on a ST turnaround. On Thursday morning I bought 500 more ELN at about 27, bringing my holdings to 900 shares. I also bought 400 WMB ~ 18.
TYC, ELN and WMB all had severe cases of Enronitis and I was simply placing bets that they would not be fatal and they would recover. That is still my expectation so I have not sold in spite of the beating. Today I bought 300 more TYC at 24.50, and I may add to my other Enronitis cases as well. Right now fund managers are dumping everything they feel they do not understand, and that is quite a lot.
At the bottom of every business cycle is the undoing of the fashion of the previous boom. In the wake of the Enron crisis, we are finally taking a hard look at financial engineering. This scrutiny is long overdue and extremely healthy. There probably will be other Enrons, but I am currently betting that investors perceptions get a bit carried away at times like these, and that bargains are appearing.
Right now all the momentum is on the downside. I am never averse to investing when there is blood in the street and I stay away from margin. We'll see what develops.
Sam |
