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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Jim Cash who wrote (47864)	4/6/2002 3:11:37 PM
From: Sam Raven	Respond to of 99280

I didn't exactly read it that way though either. Taking the universe of stock below 10 gives those 30 cents away an easier chance of going above 10 for a period, but that doesn't necessarily mean that when you look at it in 6 months and it is at 7, that it will ever see 10. Maybe like comparing a motion picture to snap shots? Like I said, I'm trying to find the research and how it was conducted. Many databases screen for stocks over 12, (IBD for example), they must have some analytical reason for doing so but I haven't been able to locate the data. Sam

To: Jim Cash who wrote (47864)	4/6/2002 3:34:24 PM
From: TREND1	Read Replies (3) \| Respond to of 99280

Jim It is interesting how many people said the same thing as you. But historically some thing happens to a stock once it trades single digits. But hey ! To have a 3.4% probability that this stock will "one of the few" Please post to me when it again closes above 10 Larry Dudash PS: I think the article said that 12 months form now it will still be below 10. You are going to make me look it up on my old computer(g)

To: Jim Cash who wrote (47864)	4/6/2002 3:43:41 PM
From: TREND1	Respond to of 99280

Great article from today's New York Times: April 8, 2001 Market Watch: In Stock Prices, What a Difference a Digit Makes By GRETCHEN MORGENSON Bottom fishers beware. When stock prices sink to single digits, the odds are that they are sunk for good. That is the conclusion of a study by Thomas W. Watts, Internet infrastructure analyst at Merrill Lynch. Going back to 1985, Mr. Watts studied the trading of 1,900 publicly held companies spanning the technology sector. He found that of those companies whose stocks had fallen to single digits, only 3.4 percent rebounded to $15 or higher within the next year. Most of those that didn't bounce back in the first year never did. Mr. Watts said he got the idea for the study from individual investors who repeatedly told him that their former stock market darlings, down as much as 90 percent from their highs, looked cheap. Indeed, many investors have been doubling up on their stock positions, hoping to bring down their average costs of ownership. "And there seems to be an irresistible lure to buying a $3 stock," Mr. Watts noted. "If it goes up $1, that's a great return." But the rebound that many of these investors are expecting will probably never come. As Mr. Watts pointed out, there are several reasons for this. First, many professional money managers, like those in charge of mutual fund portfolios, are barred by their firms' bylaws from buying stocks under $10. That keeps a powerful group of buyers out of these shares. And for many companies with low-priced stocks, the mere fact that their market value is low makes it difficult to tap the stock market for money. That is because investment bankers find it much easier to raise money for a company whose stock has rocketed in the recent past. But the sad fact is that many of these companies have so little cash on hand to run their businesses that if the markets are closed to them, they can very easily fail.

To: Jim Cash who wrote (47864)	4/6/2002 4:00:51 PM
From: TREND1	Read Replies (3) \| Respond to of 99280

Great article from today's New York Times: April 8, 2001 Market Watch: In Stock Prices, What a Difference a Digit Makes By GRETCHEN MORGENSON Bottom fishers beware. When stock prices sink to single digits, the odds are that they are sunk for good. That is the conclusion of a study by Thomas W. Watts, Internet infrastructure analyst at Merrill Lynch. Going back to 1985, Mr. Watts studied the trading of 1,900 publicly held companies spanning the technology sector. He found that of those companies whose stocks had fallen to single digits, only 3.4 percent rebounded to $15 or higher within the next year. Most of those that didn't bounce back in the first year never did. Mr. Watts said he got the idea for the study from individual investors who repeatedly told him that their former stock market darlings, down as much as 90 percent from their highs, looked cheap. Indeed, many investors have been doubling up on their stock positions, hoping to bring down their average costs of ownership. "And there seems to be an irresistible lure to buying a $3 stock," Mr. Watts noted. "If it goes up $1, that's a great return." But the rebound that many of these investors are expecting will probably never come. As Mr. Watts pointed out, there are several reasons for this. First, many professional money managers, like those in charge of mutual fund portfolios, are barred by their firms' bylaws from buying stocks under $10. That keeps a powerful group of buyers out of these shares. And for many companies with low-priced stocks, the mere fact that their market value is low makes it difficult to tap the stock market for money. That is because investment bankers find it much easier to raise money for a company whose stock has rocketed in the recent past. But the sad fact is that many of these companies have so little cash on hand to run their businesses that if the markets are closed to them, they can very easily fail. part 2 Many investors may be secretly hoping that their low-priced companies will be taken over by other concerns. But Mr. Watts pointed out that so-called strategic buyers were more likely to wait until a troubled company went into bankruptcy. At that point, the buyer could get the company's assets at even lower prices. He said there was a chance, because technology stocks have been hit so hard in the last year, that the average rebound rate could rise in coming months. But he does not expect it to increase significantly. So far this year, the recovery rate is grim indeed. Of the 437 companies that became one-digit wonders in 2000, only five have come back in 2001. That is 1.1 percent. Mr. Watts said this may be a result of too many untested companies being brought to market during the mania. "By electing to invest in companies at much earlier venture stages, public investors have started to experience failure rates closer to those of the venture capital community," he said. Companies face the best odds of rebounding during periods just after major downturns in the overall market, Mr. Watts said, and there is no question that the market has fallen sharply in recent months. After the 1990 recession, for example, 9 percent of low-priced stocks recovered substantially; following the Russian debt crisis in the autumn of 1998, 5.4 percent of such shares rebounded. But Mr. Watts added that the 1999 surge in the Nasdaq, when 11.3 percent of low- priced stocks recovered, has distorted the historical data. Excluding that explosion, which carried many weak companies along with the strong, the average recovery rate for the entire 15-year period would have been 2.9 percent, not 3.4 percent. In the stock market's magical mania days, investors mistook high-priced stocks for good values. Now that these stocks have crashed, some are making the same mistake. Forewarned is forearmed.