I shorted actm and hprt, selected from the list of stocks to be dropped from the Russell 3000 and Russell 2000 indexes. Both have management problems, as well as super low RS, negative earnings, negative cash flow ... all the usual broken stock attributes.
ACTM is in the same business as EA -- electronic assembly. That's a business that requires good management to eke out a profit, in competition with a handful of giants. ACTM looks to have the worst around: in their audit after December, it turned up that a monstrous amount of inventory had 'disappeared', and nobody in the co. or the auditor could figure out what became of it, so it was written off as a huge loss. Nobody says who sneaked off with all the stuff ... I would assume it never existed, and had been piling up on the asset sheet just to make losses turn into profits until the auditor came around, but then I'm a cynic, and anyway it doesn't matter because horrible inventory control is surely about the worst disease such a low margin assembly business can have. ACTM has already been discovered by shorts, but that's okay as long as the stock continues to fall.
HPRT tries to sell its own proprietary way of doing heart bypass surgery through a catheter. How you can patent a method of cutting people up I don't know, but they have dozens of patents. They recently gave up trying to sell the bits and pieces of apparatus the surgeon needs to cut you up the HPRT way, so that marks one failure. Then they bypassed the ceo, out with the old one and in with the new one who hopes to achieve a better focus, further suggesting they weren't on the way to success. It's still trading at high multiples despite a terrible fall. They have about 10 quarters worth of cash left, so liquidity won't be a big problem until the next millenium. But I'm assuming the story won't suddenly get better and justify the high multiples. HPRT already has a significant short interest. The chart has been one soothingly smooth slide downward. |
