Amazing trend persistence- (MNCS.OB)
I read about an amazing stock- Manchester inc. (MNCS.OB) on Stock Coach's blog which he called the "dubious stock of the week". Manchester has no revenues or assets to speak of, but currently trades with a market cap of 263 million. After unsuccessfully trying to become a copper, nickel or platinum miner, it is now changing its business model and will be trying to use a roll-up strategy to become the "pre-eminent leader" in the "Buy Here/Pay Here" used auto business, where they sell and finance used vehicles to credit-impaired borrowers.
Manchester recently bought Nice Cars, Inc using a revolving line of credit supplied by the Palm Beach Multi-Strategy Fund L.P. which sounds like some kind of hedge fund. The acting CEO and principal financial officer is/was a leading malpractice defense attorney. It is not clear how this qualifies him to run a used auto dealership.
But the reason I am writing about Manchester is certainly not because I am recommending it as a long or short. I often look at the trend persistence of an investment. Manchester has the most amazing trend persistence I have ever seen for an individual stock. Based on Yahoo data, it's closing price has been up or unchanged for 101 consecutive days!! The last down day was on May 16, and it was only down by a penny that day.
Manchester completely disproves the efficient market theory which says stock movements are a random walk. The odds against a stock like Manchester "randomly" going up 101 straight days is something like 2**100 to 1. I wonder why some economics professor hasn't jumped on this to try to win a Nobel Prize :>)
I often look for trend persistence when I invest in open-end high yield bond funds. For example, I currently hold a fairly large position in SHYOX- The Salomon Brothers High Yield bond fund. SHYOX has been up or unchanged every day since Sept. 21, which is pretty good, but it doesn't come close to Manchester's persistency.
I think part of the reason for the trend persistency is a kind of group mania. There are active discussions of MNCS.OB on the Raging Bull and Elite Trader message boards where many people are quite bullish on the stock based solely on the technical chart pattern. Many of these people plan to sell if and when the stock ever has a few down days. You can easily see a mass exodus as they all try to get out the door at the same time. Another odd thing about Manchester is that Yahoo doesn't show ANY institutional ownership-- not even Palm Beach Multi-Strategy Fund, which is very rare for a stock with a 260 million market cap, especially one with such great trend persistency. Most hedge funds would LOVE to be as consistent as that, even on a monthly basis. |
