Monday, December 05, 2005


Return of the garbage stocks

Up about $200 today. Well, I ran my stockscreener this weekend, and the results were very disappointing. Although I was able to add a few more stocks to my watch list, on the whole, I found very little that interested me. Indeed, it is hard to escape the conclusion that this is a very bad time to be a value investor. A few years ago, solid companies with great prospects trading at low levels of price to earnings and price to book were easy to find. Now such companies are virtually non-existent.

With a few exceptions, the only companies that are trading at a discount to their tangible book value are companies teetering on the verge of bankruptcy or whose prospects are otherwise extremely dim. Indeed, I am amazed by the sheer number of garbage stocks that have managed to rise from the trash heap to assume market capitalizations much higher than they deserve.

What to do? Well, I think a sensible strategy is to short some of these garbage stocks. And with that in mind, I would like to ask my readers to suggest some stocks that would make good short candidates. Please send me an email or better yet, leave a comment so that other readers of this blog can benefit from your opinion.


Big run up for no reason. It has had one profitable quarter out of 20. Slow bleeding away of cash in the bank. They are in one of the most comodotized areas of software: middleware. There is nothing proprietary that they sell that you can't find equivalent or better as open source. Nothing but insider selling for the last 5 years.

Another big runup for no apparent reason. The stock's fundamentals are just not worthy of this momentum.
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