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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (4211)	10/16/1998 1:01:00 AM
From: TRIIBoy	Respond to of 18998

What about Paychex as a good short: Stock trades at over 40 times next year's earnings and the CEO is running as an independent for governor. Insiders are selling including the CEO. Check out this quote from a BT Alex Brown analyst: -- Recent sale of stock by the CEO reflects opportunities as Paychex was added to the S&P 500. Proceeds to be used to finance the CEO's Independent run for New York governor, which we assume will be unsuccessful. That's pretty funny...

To: RockyBalboa who wrote (4211)	10/16/1998 1:07:00 AM
From: drakes353	Read Replies (2) \| Respond to of 18998

Christian: You should check out this page, it has the performance numbers already calculated.... fool.com So even counting today a mechanical equally weighted piece by piece short across this collection netted a return approaching 30% when the market did not undergo that drop. How are you calculating that? I calculate the return of that list as -14.4% through today. Keep in mind to that until today the average stock was something like 50% off its July high. Those are not encouraging results. Tough to make a solid market to basket comparison though since you're dealing with multiple dates. A more apples to apples view would be to look at the performance of Daily Troubles from the same period and compare it to the performance of the Daily Doubles. Here are the numbers for the Daily Troubles.... fool.com (BTW, AOL subscribers can get their hands on a more download friendly, dump it on into Excel, sort it by date version of this table from the "Investment Ideas" area off of the Fool's Main Screen.) The average return of the Daily Troubles (those appearing July 7th thru today) was -30.3% If you exclude the stocks that closed below $5 (since many of us can't short stocks below $5) on the day they were mentioned the return improves (gets more negative, good for us shorties) to -34.5% Far and away the better shorts where the Troubles, not the Doubles. This result is in sync with what many studies of stock price behavior have found. Take a look at O'Shaughnessy What Works of Wall Street, O'Neill How to Buy Stocks if you get the chance. Happy shorting! drakes353

To: RockyBalboa who wrote (4211)	10/16/1998 4:16:00 AM
From: Graeme Smith	Respond to of 18998

Christian, Your strategy of shorting the daily doubles could be quite risky. Anything that has gone up quickly will go down more quickly in the down market we're having. Unfortunately they will also recover the fastest once the stock market does. I'm not saying that a lot of them are not probably overvalued stocks and worth further investigation. But from my own research stocks that have doubled will on average outperform the market in the next year (not by much once volatility is taken into consideration). The fact that they have dropped 30% compared to the overall market is just a sign of higher volatility, not worse performance. Graeme