It Happens to every SMALL CAP and PENNY STOCK...*Dumping*
(EAG) ADSI: The West Coast Partners are engaging, as expected, in dumping some if not all of the Common Shares they got as payment for the 2009 Dividends based off of their Security Series A preferred shares of American Defense Systems.
It seems that a lot if not all SMALL CAPS and PENNY STOCKS have an institution or a big gun investor who has or later gains a large stake in a really tiny company that is on a growth path. But, then for whatever reasons unknown or whatever circumstances unknown they go about dumping their stake by the TENS of THOUSANDS...sending the share price straight down into oblivion....
Some of them use their money to build up a big stake in another small cap or Penny Stock.... And the madness just continues...
What does that mean for the every day investor? Well.. There are 2 responses for this type of scenario when it hits one of your companys.
(Well.. first of all.. if you don't know how to spot this just check the SEC Filings off of www.pinksheets.com)
1) Amateur Investor: PANIC!!! Sells off stake...
2) Profesional Smart Experienced Investor: ?? Cha Ching! Buys like crazy the stock at or near the point of which the stock price has been slammed down and the Institution / Investor is finally out of Common Stock Shares to dump.
Ultimately... Share Price activity can be utterly meaningless at times. Normally if you see a Stock Price dive 20+% in a single day.... You'll panic and think your company behind the shares you own has just hit a rough patch and is set to go BUST....
That isn't always the case.... Sometimes it is as simple as "DUMPING" of shares by an investor or institution who just wants to cash them in....perhaps just for the cash... perhaps for Charity.. Or whatever..... It doesn't matter WHY... It just matters that you are right there... ready to strike.. ready to BUY the shares of whatever stock unfairly is getting slammed.
American Defense Systems has earned nearly $40 MILLION worth of defense contracts in Q2 on top of the hundreds of thousands of dollars they earned in Q1. And I'm supposed to believe this is a 60 cent stock? That that is somehow FAIR VALUE? Nope! It sure isn't! But, it's that low cause of Last Week and This Week's DUMP-A-THON.
I have a few stocks that are also taking some nasty hits:
1) (FLIR) FLIR SYSTEMS Underperforming the S&P 500 now by almost 20%. The Share Price does not reflect the earnings growth at all... It reflects a huge decline in earnings.. But, there's no press release and no evidence what-so-ever that the company hit a rough patch this Quarter.
They have enough Backlog to make what's going on with the share price absolutely ridiculous!
FLIR is a *Strong buy* until it isn't.
2) (TCB) TCF Bank: I am guessing here the share price getting slammed cause of GM? Cause of Michigan Unemployment Fears? I really can't figure it out. Standard and Poors still has an $18 price target on this one.
When I get my paycheck I may split it between EAG and FLIR.