Many financial publications are predicting a resurgence in the small cap market. Take a look at this press release from last spring.
Wall St's speculative fervor worrisome--analysts
By Betty Wong
NEW YORK, May 6 (Reuter) - Wall Street's recent speculative binge hit a feverish pitch on
Monday as Comparator Systems Corp (IDID), a little known penny stock, skyrocketed and
became the most actively traded issue in Nasdaq history.
The market's increasing frothiness points to an aging bull market where investors turn to ever more
speculative issues in the hopes of wringing out profits in a market that saw spectacular 1995 gains,
analysts said.
"We're starting to see a speculative frenzy here," said Peter Green, a technical analyst at Gruntal &
Co. Comparator Systems, which traded at three cents a share just a week ago, soared 23/32 to
close at $1 a share on 151.4 million shares out of 538 million shares outstanding.
The previous volume record on Nasdaq was Intel Corp's (INTC) 69 million shares traded on
January 17 when the stock was at about 450 a share. While 122 million shares of Comparator
traded on Friday, the stock did not officially make Nasdaq's top 10 volume list since its criteria is a
stock trading above $1 a share.
Some analysts pointed to a similar speculative frenzy in Iomega Corp (IOMG), which has also
jumped on short-covering. They also pointed to a groundswell of interest in Zenith Electronics Corp
(ZE), IMP Inc (IMPX) the so-called Son of Iomega and Advanced Viral Research Corp (ADVR).
Advanced Viral has risen to a 52-week high of $1.90 from a year-low of one penny on hopes for
its Reticulose, an antiviral peptide-nucleic acid solution.
Zenith has climbed from a 7-1/4 close last week to Monday's 52-week high of 22-7/8 after news of
an alliance with U.S. Robotics Corp (USRX) that has helped transform Zenith's image from a
struggling television maker to a player in the booming Internet market. Iomega ended at 66 from a
52-week low of 4-3/8 amid continuing rumors it will be awarded contracts for drives by big
computer manufacturers.
"The OTC market is going nuts and the Dow is obviously struggling badly. In the old days, it used to
mean the market was topping out when you got this rampant speculation and it almost has to mean
that," said Thom Brown, a managing director at Rutherford Brown and Catherwood.
"We had the same exact thing in 1980-1981 in oil companies. That was because at the time people
thought oil would go to $80 or $100 a barrel." "It's very characteristic of the late stages of the bull
market. This could go on for another five months," Brown said.
"Then it all hits the fan and all these things which ran up big start to correct. They take them out
behind the barn and they shoot them. But in the meantime you can make a lot of money," he added.
Nasdaq declined comment on any speculative fervor in its market. Nasdaq's director of media
relations, Marc Beauchamp, said Comparator's activity was "absolutely an abberation." He said the
small cap market normally accounts for 10 percent of overall volume, but accounted for 34 percent
today. He said Comparator accounted for 22 percent of Monday's small cap volume. When asked
if there was a Nasdaq probe into the company's stock activity, he replied: "Bells and whistles go out
whenever you have price and volume movements like this that are so out of whack."
Comparator on Monday said it plans to unveil its new line of fingerprint identification systems at a
trade show in Atlanta.
Gail Dudack, a market strategist at UBS Securities, said Wall Street now has a riskier stock
market.
"I look at indicators relating Nasdaq volume to the NYSE's. Whenever Nasdaq's is 15 percent
above the NYSE's, it's an above average sign of speculative activity. We started to see the signal
last week," she said.
Analysts said cable modem makers, such as Zenith, was just the latest "hot" area.
Gruntal's Green said: "The Internet has been hot for some time, but the leaders like the Netscapes of
the world are calming down. Some people are now picking stocks out of the blue when three
weeks ago they were buying Merck."
-- Wall Street desk 212 859 1721
Rtr 18:54 05-06-96 (Eastern Standard Time) |
