UltraLong who? (One man's garbage is another man's treasure)
Maybe some of you have already heard about this one guy UltraLong who seems to know a little bit about this investing stuff.
Just kidding, of course.
I’m pretty sure all of you know who UltraLong is: a Top 10 CAPS player with 15000+ points and 86% accuracy.
Basically, one of the best players here on CAPS (for some THE Best), who now also has earned the privilege of having those three fancy capital letters (TMF) in front of his UL name.
And if you know anything about UltraLong, then I’m pretty sure you know very well that he doesn’t like fundamentally crappy companies/stocks (or “garbage stocks” as he likes to call them), which he can smell from miles away, long before regular folks here on CAPS ever heard of them. He just plain hates them, and he’s not afraid to say so (ever read any of his pitches?).
I, on the other hand, ever since I joined CAPS in June of 2009, have very clearly (and loudly) proclaimed my love for those same garbage companies (anyone remembers MEDIA IS HOT posts?).
(At one point, ChrisGraley, another 99+ CAPS-rating player, even called me Bizarro Buffett because of my nonconventional CAPS picks.)
Knowing this, it should then come as no surprise to anyone that Ultralong and I weren’t always “the best of friends” when debating these garbage stocks, and that 100% of the time our calls on the exact same stocks were going in completely opposite directions.
At one point Ultralong even featured my name in his Garbage Stocks Overload post just to show his “disgust” with some of my favorite picks. Here is what he said at that time:“…I'm going to use this blog to highlight some of the most prevalent garbage companies out there, and no DragonLZ I'm not using this blog to pick on you in any way, you clearly have a good grasp of technical analysis, but the majority of your favorite picks are absolute "garbage" on a fundamental scale..”.
Then, a few months later, in a comment to one of my posts, this is how he described my stock-picking method:
#13) On October 09, 2009 at 4:15 AM, TMFUltraLong (99.99) wrote:
Pretty much I'd peg your "stock screener" on nothing more than 1) find sub $5 stock with larger volume than normal
2) hope for a gap or breakout of trading range
3) rsi over 70....jump aboard
4) pray no one notices this has X (where X represents a relatively large number) times more debt than cash on hand so I can exit in 7 days after suckers have thrown their money into this company
5) laugh when company goes belly up with debt
Isn't that about it? =)
Well, today I decided to take a look at some of these sub $5 garbage stocks I and Ultralong disagreed about in our discussions in the past, just to see if some of them have gone belly up as Ultralong was predicting almost two years ago.
The following four stocks are the only ones that I remember discussing (exchanging comments) with him, but if there are any other ones he or anyone else can remember, please let me know:
Case# 1: GTN (Gray Television Inc.)
It all started with GTN, one of my favorite garbage stocks back in 2009. That was the very first time UL commented on one of my blogs:
#16) On September 25, 2009 at 5:21 AM, TMFUltraLong (99.99) wrote:
Hope you have a deep checkbook if you're backing stocks like GTN
#17) On September 25, 2009 at 9:31 AM, dragonLZ (99.36) wrote:
UL, unfortunately, I don't have a deep checkbook..., but I did go to a Chinese restaurant 2 days ago, and you know what my fortune cookie said? Don't be hasty, prosperity will knock on your door soon. :)
#27) On October 02, 2009 at 1:29 AM, TMFUltraLong (99.99) wrote:
DragonLZ,I'm glad you're making money but I can't let you keep trumpeting Gray (GTN) as such a wonderful company when its a heartbeat from insolvency. Its debt rating is basically junk, it has a mountain of debt to contend with, and its nowhere near cranking out a profit.These high volume days are highly misleading based on the way you present them. Who's to say that higher volume days don't lead to significant churning? I'd bet the majority of GTN's run was based on short covering and day-trader churning, not long-term buying. This has been gyrating so much that there is little long-term conviction buying here and there arent any indications to say otherwise. Who's to say that people are holding on at all? Perhaps daytraders have made their play here and moved on completely. I mean seriously, this is a 500% move from a company that somehow escaped bankruptcy. I just don't think you can use volume here and say "look, I was right and will continue to be right"... there is so much more to this company than such a short amount of daytrading data to go off of. Now am I planning to put any real money either way on GTN, heck no, but definitely put me in the heavy bear camp with this company.
OK, let’s now see what happened with GTN.
On October 02, 2009, GTN was at $2.05 – it’s at $2.56 today. Return: +25%
Case# 2: NCT (Newcastle Investment Inc.)
#9) On October 09, 2009 at 12:54 AM, dragonLZ (99.38) wrote:
UL, I have 3 letters for you: NCT. When GTN gets to $3 in a matter of days, I promise I'll explain to you what that means... :)
#10) On October 09, 2009 at 1:16 AM, TMFUltraLong (99.99) wrote:
Newcastle? You really do like near-bankrupt companies, don't you?
#11) On October 09, 2009 at 1:34 AM, dragonLZ (99.38) wrote:
Yes on NCT (I'll explain what I meant by it when the time comes).
No, on the second question. I don't like any companies (not profitable ones and not near-bankrupt ones) , but I do like promising stocks...(there is a difference between a company and its stock).
OK, let’s now see what happened with NCT.
On October 09, 2009, NCT was at $3.03 – today at $6.45. Return: +113%
__________________________________________________________________________________ Case# 3: SRZ (Sunrise Senior Living Inc.)
Here are comments from my post ‘Did you catch SRZ’s 44% move?’:
#1) On October 11, 2009 at 2:16 AM, TMFUltraLong (99.99) wrote:
Yeah its on my short list along with like 3 dozen other tickers right now
#3) On October 11, 2009 at 5:50 PM, dragonLZ (99.38) wrote:
UltraLong, I took my daughter to McDonalds today, and you know what creature was featured on her Happy Meal box: DRAGONOID.
It said: DRAGONOID is the powerful leader of the Baukugan. Highly intelligent, he can radiate intense heat in battle.Just mentioning this as a friendly warning.
Shorting dragon's picks might not be the best idea. You might get severely burned (by intense heat)... :)
OK, let’s now see what happened with SRZ.
On October 11, 2009, SRZ was at $4.77 – today at $9.78. Return: +105%
Case# 4 ZLC (Zale Corp.)
#2) On March 28, 2010 at 1:43 AM, TMFUltraLong (99.99) wrote:
Ok, let's analyze the true disaster that is Zales Corp.
…Here's my problem with the above statements. One, Zales does not sell a luxury item. They sell a deep discount fashion items in most cases and they have done a very poor job of that for 3 years. Their inventory problems are the worst in the industry. They have consistently tried to restructure their debts unsuccessfully and most vendors will only deal with Zales on a Cash On Demand basis, an insult in the jewelry world. Zales has gone through FIVE CEO's in the past 8 years and their most recently departed CEO completely detached them from their roots by bringing in more non-industry upper management than trained diamanteers. Their margins have dropped through the floor, the debt is in serious question with a very high probability of default and 15% of stores looks like a starting target in terms of closings. They are losing customers like mad and their losses show this. Zales is one of the strongest bankruptcy candidates in the stock market if you ask me. I think you've got to be sadistic to buy into a company in the midst of a death spiral.
#11) On March 30, 2010 at 3:01 PM, TMFUltraLong (99.99) wrote:
#12) On March 30, 2010 at 3:45 PM, dragonLZ (99.38) wrote:
No UL, that's not the case here. ZLC's battleship is actually a super-secret stealthy submarine. Now it's just going to hide under water for a while...to trick the enemy.When it resurfaces again, the revenge is gonna be sweeeeet....
OK, let’s now see what happened with ZLC.
On March 30, 2010, ZLC was at $2.63 – toady at $5.70. Return: +117%
There you have it Fools. When it comes to this garbage game, the score does not lie:
, DragonLZ’s Garbage Stocks 4
Or in other words, if one invested the same amount of money in all four of these stocks at the time of UL’s and my discussions, that person would now sit on a roughly 100% gain for the whole portfolio (+25%, +113%, +105%, and +117%).
Not too bad for a stinky garbage portfolio, right? :)
So that would be it for this time, folks.
Good Luck to you all, and as always, don’t forget to have fun when investing.
DragonLZ (you can call me Garbage Buffett) :)
Disclaimer: Past garbage performance is not indication of future garbage performance. Talk to your financial advisor before you go garbage picking / dumpster diving.