Could someone please explain exactly how the market makers and others profit from "manipulating" Cube stock? I've always been fairly skeptical of conspiricy theories, and it is hard for me to figure out how a bunch of individual market actors, without explicitly conspiring to act in concert in buy or sell decisions, could manipulate the market. It seems more likely to me that it is some sort of feedback loop with a lot of people acting independently on the same technical factors, which makes the action appear to be concerted, but I haven't got much experience from which to judge.
Also, can anyone explain the huge short interest in Cube? Is this due largely to skepticism over Cube fundamentals, is it technical in nature, or is it part of some artbitage play (e.g., short Cube and long ESST)? I can understand (just barely) being short Cube at $36, but depending on your assumptions about fundamentals, the value has to be between $30 and $60, so you'd have to be pretty sure of your assumptions to think being short Cube at $36 was a smart move.
By the way, I am a newcomer to Cube, and am long 100 Cube at $43, and another 1000 at $37. I am not happy about the crazy price gyration in Cube lately, but fundamentally, the companys seems to be undervalued to me. As has been stated recently in this thread, their VCD business alone seems like it justifies $35/share. And the video encoder/decoder chip business seems like it should really boom over the next few years. I think we should all be happy that we still have an opportunity to buy more of this great company at the current price.
On a more philosophical note, its always nice when the market starts to figure out a company's fundamentals right after you buy (any other recent ATML or AMAT $30 buyers out there?), but I don't believe I'm smart enough to make picks like that consistently. As long as a growth stock is 30% undervalued or more when you buy it, and you can sell it at fair value or above within 2-3 years of when you buy it, you're going to do very well. I certainly think Cube has been fairly valued or above at some points during the past year, and I expect it to be again at some point over the next few years. |
