Phewwww ! EVI - the good, the bad, the ugly ...
We are in an interesting period here. One can make or lose a lot of money quickly. While I have allways primarilly been a buy & hold long term investor. I have starting trading here as a necessary survival tatic. I got hit hard and heavy on the April/May to June selloffs and did average down into the July selloffs for a substantial period as I saw no way possible that ''value'' investors, both individual and institutional would not step into these stocks at those values. Well finally I did see the light after quite a bit of pain. I did trade completely in and out of these stocks avoiding a couple of major selloffs and saved a great deal of additional losses. However I had done very well from the first of the year in aggressively trading some Financial/Bank stocks which are my area of expertise and real world experience. I had extremely good profits from this sector which were totally wiped out by the ''June Swoon'' in the oil sector. However; my near obsession with both the fascination of this industry, these companies, the commodity element (which I find much more interesting than Bank stocks) led me through a baptism under fire to a place where you allmost pick up an ''ebb & flow'' of this sector in the market and individual companies as well.
I have begun trading very heavilly in just a few stocks recently. In this madness in the 'patch the we are in the midst of; I noticed a high percentage of stocks here being sold off individually on 1 day blow-off dumps - totally disproportionate to the sector. DRQ, BDI, FGII, OMNI and today EVI all had these days where a fund or funds were just dumping to cash out for redemptions - as Big Dog just mentioned in reference to Cramers article. I made some very nice 1-2 day trades in & out on DRQ, TBDI, BDI, OMNI and spun out of FGII (whom I love and will be back in - on a dip) at a moderate profit for a quick trade to buy down today in 3 trades on EVI. I made a nice move (maybe some luck here) on FGII . I don't know if it is luck, but aggressively trading off these 15% 1 day blowoffs has worked wonderfully for me. Because of the quick moderate bounce of FGII I was able to ''spin'' out of a profitable trade into one I feel may be even more profitable; and I reinvested the money into EVI today.
My first buy was at $21 15/16ths, then $19 15/16ths and then doubled down at a tick over $18. I love this sector longterm here. I don't think anyone would argue that holding longterm here will not return 40-50% in most cases over 18 months. EVI today was a textbook lesson on mutual fund redemption pressure, programmed selling based on traders/fund managers immediately dumping a ANY stock that pre-announces an earnings disappointment. This is a great point her folks. This is where the little guy has a little advantage of not being locked into a strategy and can beat the big boys. Knowing that many of the fund favorites will be sold off immediately on ANY & ALL earnings disappointments or pre-announcements give us a great buying opportunity; ''IF" the miss or pre-announcement is not that major, if it has a unique circumstance such as a delayed contract etc. or if as today; and we see a disproportionate over-reaction in an excessive 1 day selloff like today - we can capitalize on it and play the ''bounce.''. We are just getting too many bounces off these blow offs here, not to keep using this technique. I am not doing it accross the board on any & all major selloffs. TBDI was borderline for me - I usually only trade in stocks that I do not mind owning longterm here like EVI, RON, FGII, BDI, OMNI, DRQ etc. This was virtual freefall to a limited extent in EVI today which did surprise me. But, one has to have faith that it was not going to $10-12 based on the rest of the sector, crude news, their basic fundamental value, overall quality-blue chip nature and the extent of the ''minor'' earnings disappointment. In a nutshell; the whole trade on EVI today is based on - did EVI deserve a $4 selloff on ''this'' news ? - I say no; oversold to the max and was primarilly oversold due to a confluence of fund redemption pressure and ''programmed'' sell disciplines on any disappointments.
Diana g - good point on waiting today, but I have to stick to my philosophy of buying in on any 10-15% selloff on a core hold that I am comfortable with at current price/values. On my buy at $21 15/16ths to start the morning - I'd make this again and again 100 times in a row. I'll be right far more often on catching a ''dip'' than I will be caught by a $4-$5 blowoff on a $20 stock... Allthough I honestly never buy with all of my earmnarked funds on any 1initial trade here anymore. My initial buy @ $21 + was a moderate position, I nibbled again $2 lower @ $19+ and then doubled down at $18. I am basing these buys here on my 110% to the bone, absolute certainity that EVI will go to $40-45 in 18-24 months even in a worst case near term scenario of a Chinese devaluation and a real Asian nightmare here; and not on the possibility that EVI can go to $15 or even $10. This doesn't concern me if it did, because I am positive I will see a $45 EVI with in a reasoanable period of time. I'll take my hits for a 50% return in 18 months - maybe more ... I don't think I am being unreasonable here with basing a strategy on EVI @ $45; the icing on the cake could be - EVI @ $60-70. EVI has an advantage over Drillers in downside earnings reality. We are buying EVI here for 6 times trailing earnings ! With the acquisitions not even synergized yet - and oil at a 10 year low; this is a Stone-Cold BUY. If one can remain unemotional here while the rest of the world is puking all around you; there are some great buying opportunities here; however as I learned out of the necessity of survival - one must be willing to be a trader and an individual stockpicker here. I f not - simply wait for crude to rise, or momenteum to return to the sector. I'm not chastising anyone here any longer for this stance; there has just been too much blood in the street. But; for the aggressive (who can trade this way) I firmly believe that this is a once in a decade or even perhaps a once in a lifetime opportunity to make serious money here via options, active trading and the terribly swift & deadly, double-edged sword of margin(once momenteum returns off of positive crude movement).
Another point on not fearing a total sector freefall here is my forray into the E&P sector - there is lots of pent up drilling demand here folks, lots of leases that have to be drilled and companies who are near being forced to drill & produce just for cash flow purposes - hence the importance of staying with companies with low debt and good cash/cash flow positions. Also the major Oils are stable here. If Exxon or Mobile sell off 40% that would be an entirely different story and I would be the first guy in all cash...
PS; I'm waiting with both barrells for a sell off on any "Clinton" news...this will be another ''classic'' play of an irrational emotional market reaction leading to a tradin opp.
Was this deserving of a $4 sell off ?
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