Greed, Fear, and Greater Fools

COIN - Converted Organics (Nasdaq) - (Closing Price - $16.59) 

I have referred to “greater fools” and the term “hope a dope” a couple of times and the company Converted Organics (COIN) is a perfect example of what I was talking about.

I came across Converted Organics on a day trading stock blog a few weeks ago and I have been following the stock out of curiosity. The stock price of Converted Organics has risen from around two dollars to the current price of $16.59 in the past half year. I am not sure what initially caused the stock price to surge but the stock price has continued to go up on sheer speculation.

Essentially people are buying the stock and hoping other fools will continue to buy the stock and send the share price up. The only thing Converted Organics has going for it is the company has an extremely low float (number of tradable shares). That is the major reason speculators have been able to manipulate the share price up. (more…)

Covad Communications: Risk Free Return Update

DVW - Covad Communications (Amex) - (Closing Price - $0.9376) 

A few months ago I wrote a post about a relatively risk free 14% return you could get in Covad Communications. Covad Communications is being acquired by Platinum Equity in an all cash deal at $1.02 a share and the stock price of Covad Communications was only $0.88 at the time.

The deal is getting closer to completion and the stock price of Covad Communications is still trading at an 8% discount to the acquisition price (Covad ended the day at 0.9376). There wasn’t much risk when I originally posted about the deal and there is even less risk now. The acquisition has cleared an antitrust hurdle and stockholders have approved the deal. (more…)

Home Solutions of America: Where Is the SEC?

The management of Home Solutions of America has been misleading investors for their own self interest for the last couple of years while the Securities and Exchange Commission has been negligent in its duty to protect investors.

I first took notice of Home Solutions of America when the company’s stock price made a run from around a dollar to five dollars in 2005. The stock price benefited when a few hurricanes hit the Gulf Coast that year (Home Solutions of America provides restoration and construction services).

The stock price stalled for a couple of quarters but then jumped all the way up to fourteen dollars on improved earnings and announcements of new contracts. The peak of this rise coincided with a press release stating a subsidiary of Home Solutions of America had been awarded a contract by American Renaissance Homes to be the exclusive provider of delivery and installation services for modular housing in New Orleans and surrounding areas. However, it was found out by Stocklemon.com that American Renaissance Homes was established and funded by Home Solutions of America only five days before the press release was issued. Also, insiders sold a huge amount of shares right after the press release was issued. (more…)

Is There Any Money in Internet Search Stocks?

One of the first stocks I owned was Ask Jeeves (bought out by IACI - formerly ASKJ) which I bought after the tech bubble collapsed. It was trading at a little over a dollar and the company was quickly growing revenues and earnings. I sold the stock too early but I still made over ten times my money in that stock, a ten bagger in Lynch speak.

Ever since then I have followed the internet search sector to see if another small player could follow a similar path as Ask Jeeves. I’ve followed the second tier search companies for a couple of years and frankly I don’t think there is any money to be made investing in these companies (from a fundamental perspective).

The smaller companies like Looksmart (LOOK), Copernic (CNIC - formerly Mamma.com MAMA), Miva (MIVA - formerly Findwhat.com FWHT), and Local.com (LOCM) are nowhere close to making a consistent profit. If you have ever used their websites you know why. They simply don’t deliver relevant search results. (more…)

Stocks Worthy of More Research

Here are a couple of stocks that have been submitted to me that are worthy of more research.

The first is Shengdatech (SDTH). Shengdatech has good fundamentals and the stock price is currently showing some momentum.

The second is Envoy Capital Group (ECGI). Envoy Capital Group has bought back a ton of shares in the last year and the company is trading at a discount to book value.

I am not recommending that you buy shares of these companies. However, they are worth a look.

Disclaimer: I have no position in SDTH or ECGI.

Want a Risk Free 14% Return?

DVW - Covad Communications (Amex) - (Closing Price - 0.88) 

Every investor would like to make risk free investments, but risk and return have a direct relationship. Investments with the least risk usually have the least amount of return and vice versa.

However, right now you can get a fourteen percent return without much risk.

Covad Communications (DVW) announced on October 28 that it is being acquired by Platinum Equity for $1.02 a share. However, since the announcement Covad shares have traded as low as $0.77 and they are currently trading at $0.88.

If you buy at today’s closing price you are looking at a 14% return when the acquisition closes. (more…)

Is LJ International a Good Buy?

JADE - LJ International (Nasdaq) (Closing Price - $2.18) 

I recommended shorting LJ International earlier this year for a 17% gain. I recommended to cover too soon but my short recommendation was ultimately a smart recommendation. JADE’s stock price rose as high as $13.15 earlier this year but it has now dropped all the way to $2.18 (at today’s closing price).

So what happened to LJ International and is the company worth a buy at the current price?

The problems started for LJ International when they didn’t report their fourth quarter earnings report for 2006 (they were supposed to report near the end of March). In a show of complete disregard for the investors in their company they didn’t even issue a press release stating why they didn’t report earnings. For some reason this didn’t deter investors in the company and the share price of JADE kept going up. (more…)

CECE Q4 2006 Earnings

CECE - Ceco Environmental (Nasdaq) (Closing Price on Friday 3/30/07 - $12.49)

I recommended buying Ceco Environmental a couple of months ago for a 31% gain in a little over two weeks. I gave my sell recommendation a little too soon but I have still been following the stock and I would recommend staying away from the company until they show an increase in earnings.

Ceco Environmental recently reported Q4 06 results on March 22. They posted earnings of 0.09 per diluted share on revenue of 41.5 million. Revenue improved but the lack of earnings growth was a huge problem. In Q2 06 Ceco Environmental had earnings of 0.12 per diluted share on revenues of 31.7 million. This quarter they had almost ten million more in revenue but had three cents less in earnings. The lack of earnings growth and the huge run-up in the share price was a bad combination and the stock price has taken quite a beating in the last week. (more…)

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CHINA - CDC Corp

26 Feb 07 | Stock Opinions

CHINA - CDC Corp (Nasdaq) (Closing Price - $10.31)

There are quite a few analysts that are currently touting CDC Corp. (CHINA) and the stock has been on quite a run recently. However, after doing some research I have found there is not much to like about China.com (especially its valuation).

CDC Corp. provides software, mobile applications, and online games. The company has growth potential and has shown some improvement over the past year, but in my opinion the company is way overvalued. (more…)

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