Email : info@otcjournal.com
URL : http://www.otcjournal.com
To
OTC Journal Members:
After nine straight weeks of appreciation,
the markets finally gave some ground this week. The DOW was down 2.9%
and the NASDAQ dropped 5.6%, both taking
a long overdue breather. We wouldn't be surprised to see choppy action
for the remainder of the year, setting up for the next move north in January.
Numbers on the economy are mixed- some looking good and others weak. The
media and Wall Street tend to focus on the minutia of every economic statistic,
but common sense would suggest the economy has to stop getting worse and
go sideways for a little while before every economist agrees the recession
is over. By the time they tell you it's OK to invest the market will be
25% higher.
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Time To Go Hunting
for a Ten Bagger |
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Peter Lynch, considered by many to
be the greatest mutual fund manager of all time, is pictured here. As the
manager of the Fidelity Magellan Fund from 1997 to 1990, Peter Lynch managed
the best performing mutual fund on the planet each of these years. That's
like winning the SuperBowl for thirteen straight seasons.
His infamous book entitled "One
Up on Wall Street" is still one of the best books ever written for
individual investors. This book would make an excellent gift for anyone
interested in the stock market. After nearly three years of a bear market,
Lynch's observations now make more sense than ever. If you you've read
it before, now would be a good time to read it again.
Throughout the book he constantly
refers to his endless search for the elusive "Ten Bagger". He is referring
to stocks on which he made ten times his money, and he points out that
many of the ten baggers he owned took about five years to appreciate to
their full potential.
In fact, the very first stock he
owned was a five bagger in two years. In 1963 he purchased Flying Tigers
for $7 per share. He heard they were in the air freight business, and that
air freight was a growing industry.
As it turned out, the company ended
up making a fortune ferrying people and freight in out of the escalating
Viet Nam war. Two years after the initial purchase he was selling the stock
at $32.50 to finance his college education.
Today's investors have one advantage
Peter Lynch did not have. We have the opportunity to invest in beaten down
companies at the end of the worst bear market since 1929.
As such there are probably a number
of stocks trading far below any reasonable value of where they should,
and hence there could be some 10 baggers out there which might only take
two years to pay off.
Sometime between now and the Christmas
holiday we hope to end the year by introducing you to a potential 10 bagger.
Research is beginning on a stock trading at 1/350th of its previous high.
The company appears to be doing better than it ever has, and should benefit
immensely from the $375 billion National Defense Authorization Act signed
into law by President Bush this past Monday. Stand by for developments.
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Take
Two Interactive (NASDAQ: TTWO) In the News |
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Take-Two Interactive (NASDAQ:
TTWO), the subject of a Trading Alert we issued in our October
30th edition, made a new all time high on November 22nd. The stock
has pulled back in sympathy with the NASDAQ recently, but rebounded this
week when the NASDAQ was down. This rise against the tide suggests the
stock could do well when the NASDAQ corrective phase ends, possible challenging
our $38 price target in the next leg up.
The company has gotten some positive
publicity recently. In the December 2nd edition of Forbes there
was a feature article on video game stocks. Click
Here to read the article. It covers the ongoing SEC investigation into
the company's accounting practices which the market seems willing to overlook.
Their next earnings conference call
is scheduled for Tuesday, December 17th. They will cover results for their
fiscal quarter which ended in October, which is also the end of their fiscal
year. Look for an upside surprise as sales of Vice City continue
to exceed expectations.
If the stock trades up substantially
in advance of the call it might be a good idea to lock in your profits,
and go back in after the inevitable post numbers drop in price even if
they are good.
If the stock trades down in advance
of the call it might be a good idea to add to or establish a position.
One of our editors owns the March
30 Call options in his own personal account.
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eResearch
Technologies (NASDAQ: ERES)- Good Company/BadTiming |
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This past week's trading alert on
eResearch
Technologies (NASDAQ: ERES) did not work out as planned. Featured in
our December
2nd edition, the stock did spike up on Tuesday morning, but dropped
like a lead balloon after the first hour.
Despite announcements of a letter
to shareholders on significant business improvements, a new contract with
ten of the fifteen largest pharmaceutical companies, and a announcement
of a 10% increase in earnings estimates, the stock did not trade as expected
during the week. Evidently, this stock is not ready to make new highs.
We suggested a stop loss at $14,
and it dropped below that level Thursday. If you weren't stopped out, the
stock has rebounded above $14, putting you back in safe territory. It seems
to have quieted down, and could take another run at higher levels. However,
we still like $14 as a stop loss.
This stock is very volatile, and
seems to make 1/2 point to 2 point swings every day. If you can get on
the right side of this one, it could be an excellent stock to trade. The
company is making tremendous fundamental progress, so this is one to watch
despite our poor timing on the trading alert. Accumulate on dips for a
long term hold or a trade into upside surges.
Charts Provided Courtesy
Of TradePortal.com
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