Brian, thanks for the great analysis...i was also thinking the same thing, dump the 40's...but the way you explained it makes perfect sense...unfortunately options add a bunch more variables to an already complicated passtime...i try and stay with buying/selling the stock, but couldn't resist with vvus so strong lately...already have more stock than i should have.
To all, heres an article from forbes.com
just replace yhoo with vvus???
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Yahoo! Inc. may or may not have the makings of a great company, but right now it is a very dangerous stock.
The Yahoo! yo-yo
By Gretchen Morgenson
JEFF VINIK no longer runs the world's largest mutual fund-it's been a little over a year since he left as fund manager at Fidelity Magellan. But Jeff still moves markets.
Knowledgeable sources place Vinik squarely behind the breathtaking run-up in Yahoo! Inc. shares, an Internet navigator company. This hot little outfit had only $19 million in sales last year, on which it lost $2.3 million. This year, according to estimates, it will maybe make $3.2 million. But it has a market capitalization of $2 billion.
Yahoo! is a yo-yo. Since Goldman, Sachs brought it public in the spring of 1996 at a split-adjusted $8.67, it soared to $56.75 but not without frequent short drops along the way.
Is this for real? One hundred times revenues, 800 times losses. Or has the stock flown so high because some smart players are out to squeeze the shorts? There's a sizable short position in Yahoo!-as of August, 3 million shares, or 7% of the stock outstanding-a tempting target for players adept at forcing short-sellers out of their positions with big losses.
Guess who owns a lot of the stock? Fidelity Investments, of course, with 1 million shares, but Fidelity owns a lot of just about everything. Look who is number two holder of Yahoo! As of June, Vinik Asset Management, Jeff's new outfit, held half a million shares, and Vinik was reportedly buying more in early September. Perhaps to disguise his activity, Vinik spread his orders around, buying through Goldman, Sachs, Montgomery Securities and Volpe Welty. His buying does two things: helps push up the price of the stock and makes the short-sellers sweat.
They have other reasons to sweat. Put and call options on Yahoo! stock began trading Sept. 9 on the Amex and the Chicago Board Options Exchange. Traders know that stocks bounce when options start trading. Indeed, Yahoo! rose 11 points-almost 25%-during the week the puts and calls began trading.
If that weren't enough, the short-selling community took a hit from George Soros' Quantum Fund, which is calling in money it had farmed out to professional shorts.
Suddenly, in mid-September, Yahoo! took a tumble, dropping from 52 to the mid-40s, shedding some $400 million in market value before recovering some ground days later. If this means the shorts have already been squeezed out, Vinik may have decided to take his money elsewhere. We don't know. Vinik Asset Management, as is its custom, would not comment on its portfolio activity. We do know, however, this isn't the kind of stock ordinary investors should be playing around with. |
