Look Inside To Know When to Sell
By Jerry Knight
Monday, September 22, 2003; Page E01
How can you tell when the stock market may be getting too hot?
Two of the best clues are when insiders decide it's time to cash in millions of shares and speculative penny stocks go through the roof.
Washington investors last week saw both signs of a raging bull market. Which as anyone who can remember as far back as the last millennium knows is not necessarily good.
The most compelling evidence that some stock buyers have already forgotten about the bad old days is the astonishing spike in the shares of Xybernaut Corp., a Fairfax company whose "wearable computers" have long enthralled amateur investors.
Since the beginning of September, Xybernaut has announced two new orders, totaling $2.1 million, and the market value of its stock has increased by $200 million, nearly tripling from 74 cents a share to $2.17.
Now $2 million is a lot of new business for a company that generates $10 million a year in revenue, but how that makes Xybernaut worth three times what it was in August is a calculation only the people buying the shares can make.
Logical valuation has never been an issue for folks who gamble on Xybernaut, a stock far too volatile to be an investment. Since the company went public in 1996, the stock has traded as high as $23.75 a share and as low as 21 cents. On Thursday it was the most active issue on the Nasdaq Stock Market, trading 83 million shares -- 16 million more than Microsoft.
Spikes like the recent one have occurred several times before, each followed by a crash when the smart speculators bailed out and left somebody else holding the bag.
What drives Xybernaut stock is a steady stream of press releases and a hyperactive, hyperbolic following on Internet message boards. Reading the comments posted in the course of just 15 minutes of Xybernaut chat on Yahoo provides an update in state-of-the-art profanity and absolute proof that some people never learned the lesson of the Incredible Exploding Tech Bubble or the Perils of Penny Stocks.
Reminders of the Roaring 1990s also abound in the willingness of investors to buy stocks from insiders who want to bail out.
story cont: washingtonpost.com |
