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Kickstart70 (87.77)

Finding the "Companies with issues"

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March 03, 2009 – Comments (9) | RELATED TICKERS: NCX , KV-A

The two picks that I recently made that did amazingly well were KV-A and NCX. NCX made me giddy with delight when I cashed out at 300%, though I'm only risking/trading a small pittance compared to most people here. KV-A has caused me no end of aggravation as I put it on my "I really want to buy this but can't!" list and watched as it doubled in value over a short period.

Why are a chemical and a pharmaceutical stock the "same"?

Well, the both had major issues to overcome. NCX was in desperate need of financing in a short timeframe and KV-A really needed buy-in from the Feds that their drugs could be re-manufactured to be the right and safe dosages.

Immediately after NCX secured financing (and got bought out, to boot), the value of the stock tripled. KV-A basically managed an agreement-in-principle with the goverment and the stock doubled (so far).

So, what I want to do is find some way of identifying these angst-ridden, troubled, stocks and then take a common-sense approach to the issues they are saddled with. Ideally, when they are sitting at record lows but not seriously at obvious risk of bankruptcy.

Any thoughts at a methodology to identify them?

9 Comments – Post Your Own

#1) On March 03, 2009 at 10:09 PM, nuf2bdangrus (< 20) wrote:

If anyone knew, they would be rich.  Congrads.

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#2) On March 03, 2009 at 10:22 PM, EggplantWizard (99.85) wrote:

I don't have a screen for "issues", but here are a few suggestions for further research of companies that are in varying degrees of distress( these are not buy suggestions)

TCK, AIB, PDS,  CHK, MTW, almost any dry-bulk shipper( I own SBLK, ESEA and NM ) except DSX(which I also own, but they don't seem overly troubled), OSK, TEX, DOW, HUN, IR.

(I own a piece of all of those but OSK, HUN and TEX).

Many of these stocks are at an obvious risk of bankruptcy. Some are not, but I believe most have significant upside.

I speculate with about 25% of my portfolio, expecting to lose 100% on about 50-60% of trades, lose a bit or gain a bit on another 20%, and make huge multiples on the remaining 20%. It remains to be seen how well this strategy will work out, but I don't have all of my eggs in the basket (although people would generally argue that 25% is high, I'm very comfortable with the level of risk).

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#3) On March 03, 2009 at 11:39 PM, Kickstart70 (87.77) wrote:

Thanks EggplantWizard. That's about the way I'm looking at this as well. I do currently own HUN, though I almost would consider that low-risk as they really are doing quite well now that the initial settlement has happened. Based on that, I suspect the damages suits will be quickly settled or easily won.

Admittedly, I took 1/3rd of my (far too small) investments and began trading with it, and I speculate with about 25% of that.

I'll take a look at your list and see what I can pick out. I'm hoping ORBC, FES, and TTM have some major growth soon to allow me to speculate a little more :)

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#4) On March 04, 2009 at 12:09 AM, Seano67 (< 20) wrote:

You could always take a look at Pacer International. An obvious risk, but what I consider to be a solid enough company tied into two industries in obvious distress, automobiles and railroads.

I've been watching it for awhile. It's down in the $2 range right now. Wow. Tempting, but right now it kind of exceeds my tolerance for risk. I've been getting killed enough by high-risk banks as is. 

I'd be curious to hear what ya think about Pacer though, if you ever have the time and inclination to check into it. 

Cheers!

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#5) On March 04, 2009 at 12:28 AM, Kickstart70 (87.77) wrote:

Please remember I'm no expert, but here is my *very* quick take on PACR.

- Market cap/Current assets: 0.35 (not bad...this is my first check on whether this is a bargain)

- Negative Q4 profit (there are plenty of other bargains out there that have been beat down badly yet still are in positive territory)

- Last month has massive volume for sell-off (depends on one judgement call: did the risk-averse oversell? If so, it will bounce back up. However, since the sell-off is over about 3 weeks, it's not the jumpy scared investor selling off, it's the thoughtful ones)

...

As stated before, I'm no expert and I'm no Technical Analyst (not that I dislike their thoughts). Using what little common sense I have, I would say that PACR is not coming back for quite a while.

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#6) On March 04, 2009 at 2:30 AM, Kickstart70 (87.77) wrote:

Just to make it clear, before the snark starts...my above quick blurb about PACR is NOT what I would call any sort of real evaluation. I just did enough for me to decide that I wouldn't bother investigating any further.

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#7) On March 04, 2009 at 7:12 AM, isusan (< 20) wrote:

MorningStar offers a stock screener tool.  You could use it to pull up their list of "biggest losers", and read into the situations of each.  Good luck!

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#8) On March 04, 2009 at 12:32 PM, Kickstart70 (87.77) wrote:

Looks like you've had a good run today so far EggplantWizard! All except the unbelievable HUN, which defies all logic. Any idea what's going on with that?

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#9) On March 04, 2009 at 12:52 PM, EggplantWizard (99.85) wrote:

Kickstart70:  My positions are up, sure, but I'm still well below my cost basis on most of them (or roughly at my cost basis on the dryshipping companies).

 

Regarding HUN, not everyone is as confident as you are with regard to the lawsuits, I'm expecting a wave of pessimism, and will think about jumping in myself around 2, barring additional negative news.

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