Stocks That Have Always Gone Down

Ian U
 When investing, for every fairy tale stock like an Amazon(AMZN) or Nvidia(NVDA), there’s an equally disastrous stock like MoSys(MOSY) or Gevo (GEVO). To avoid getting into stocks like these, it’s important to look at their failures and analyze them to avoid getting into the next potential train wreck of a stock

   When investing, for every fairy tale stock like an Amazon(AMZN) or Nvidia(NVDA), there’s an equally disastrous stock like MoSys(MOSY) or Gevo (GEVO). To avoid getting into stocks like these, it’s important to look at their failures and analyze them to avoid getting into the next potential train wreck of a stock. 

Help! My stock went up 50%?!?!

henry

What should you do if a stock you are holding goes up 50% in one day?  Yesterday night at 5:30 I found myself contemplating this happy question on ARTX (Aerotech, Corporation), which had gone up 50% on news of a large order from the U.S. Department of Defense.  So, I did what I usually do when confronted with such questions — I used Equities Lab to get an answer.  

How to ask the question?  I chose the most naive query possible:  “Find me all stocks that have gone up at least 40% in just one day”, and then backtested it, rebalancing weekly on Mondays? 

That doesn’t look good!  Maybe I have micro cap stocks (even smaller than ARTX’s 80 million) mucking up the result.  Or perhaps penny stocks are causing the problem…  Either way, I realized I was going to have to investigate further — a possiblity at a 200% gain (.5 to 1.5 in 2010) did not make up for the loss of everything thereafter.  And given that my rebalance period was only a week, such losses seemed to come promptly.  So I put in rules to rule out closing price below 2 dollars, and market cap less than 40 million, and got ….

Decidedly not an improvement!  It was 5:40pm now — if I didn’t come to a decision soon, I would not be able to unload my ARTX even in the after hours market.  But could crossing $5 dollars have made the difference?  And what about before 2010?  Lets see what I saw next….

 

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