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Biotech / Medical : VVUS: VIVUS INC. (NASDAQ)
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To: AlienTech who wrote (19643)3/12/1999 2:11:00 PM
From: VLAD  Read Replies (1) of 23519
 
Alien......OT......

Do you remember our discussion about Komag?

Just thought I would point out the classic brokerage house pump and dump scam.

Just a quick review:

Company has had four consecutive quarters of large loses totaling a loss of $6.98/share.

Company has a debt of $260M and is in technical default on some of its loans.
Company is in the worse industry relating to computers.

Now for the good part:

On October 8 & 9 it traded at a 52 week low @ $2.00/share.

On no news it makes a move from 2 to to 8 by November 6th. That's a 400% gain in 4 weeks of trading. Do you wonder who was loading the boat from 2 to 8?

Then on December 14 Goldman Sucks upgrades to a market outperform (stock closes at 9 9/16 up 5/8 for the day).

Then on December 22 NB Montgomery upgrades from a hold to a buy (stock closes at 11 up 1/16 for the day).

These upgrades were the obvious pump as you can bet that these two brokerages had loaded the boat in October and November. So then the stock runs up to as high as 15 5/8 on January 15. You can bet that Goldman and Montgomery were dumping all those shares they bought from $2 to $9/share at $10 to $15 5/8/share on the sucker's rally. I bet they also were shorting from 15 5/8 down to 10.

Then on February 18th, Hambrectt & Quist (a big Vivus holder I may add) upgrades KMAG from a hold to a buy. Stock closes at 7 - up 1/2 for the day.

Now here we are almost a month later and the stock is trading in the $6 range.

So to summarize how the individual investor would have fared if they bought and held KMAG as an investment based on broker recommendation and based on the closing price on the day of the upgrade compared to the yesterday's closing price(6 9/16):

Buy on Goldman's December 14 recommendation @ $9 9/16 shows a loss of 32% on your money if still holding.

Buy on NB Montgomerey's December 22 recommendation @ $11 shows a loss of 40.3% on your money.

Buy on H&Q's February 18 recommendation @ $7.00 shows a loss of 6 1/4%.

The moral of the story is that quite often when a stock makes substantial upward moves on no news, it is because some of the major brokerages are buying millions of shares before their buy recommendations and they will be selling into the subsequent run up following their buy recommendation.

By the same token, if we see Vivus run now from $2 to $10 to $15 on no significant news its only because the brokerages have been accumulating before their buy recommendations. The time to sell is when the stock stops rising after the buy recommendation. In Vivus' case this may be as high as the eventual gap filling from $15 to $21/share.



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