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Interesting 30-day tape. Makes me wonder if there's good news around the corner that is starting to leak out. I doubled down my long position at 2.45, but my BE is still a ways away at 6.74. I think we'll see that before the year is out. Risk/reward seems to favor the longs here. The bad news was baked in under $3. Still could see a melt-down event like EPA killing the mine, but I'm comfortable with what I have on the line here.
Understood. It's semantics, then.
You described what some refer to as a "mental stop loss". You don't enter it on your account, just keep track of where the stock is trading and if it goes below your threshold, you sell. Could be triggered on intra-day movement or on closing price; I've used both.
I agree that the stop-loss order you enter into your brokerage account is never advisable. It's an invitation for the market makers to manipulate prices and nab your shares at an artificially low price. Best to play it close to the vest.
Good luck to you.
Who uses stop losses?
Umm... you?
You said you bought at $2.40, and then said "Risk is, where I bought, new lows at 2.25. I risked .15c."
I took that to mean that if NAK drops to a new low at $2.25, you would sell your shares. That's a stop loss. Pardon if I misunderstood your meaning.
If you're investing new money today, your maximum risk is $2.50 (worst case). True, you can mitigate the risk by using a stop-loss. But stop-losses don't always work with a news-driven stock like NAK. Geez, it dropped more than 30% yesterday on just the hint that the EPA may kill the mine. Suppose the stock closes at $2.50 today. After hours, the EPA issues an actual edict prohibiting mining in Bristol Bay. NAK could open for trading tomorrow under $1, and may never reach your stop price of $2.25 ever again. Anyone who owns this stock is risking a lot more than 15 cents a share. I agree that you shouldn't bet the farm on such a risky stock, that's why I have committed just one percent of my portfolio here. Risk mitigation through position sizing is 100% effective: bet small and you can stomach the loss even if the stock goes to zero.
As for upside potential, I'm not putting any time frame on my $100 projection. I agree that NAK won't get that high any time soon -- maybe not for many years. They may issue more shares along the way to fund the project, which of course dilutes the existing shareholders. But we're talking about a mineral/metals deposit worth an estimated $200-$500 billion. If these guys can't manage to wring $100 worth of shareholder equity out of $2,000 per share in assets, we're all betting on the wrong horse.
What do you all think is a reasonable price target in the next 10 years, assuming the permit is approved? I'm curious.
The problem with call options is that they expire.
To profit from owning calls, you must guess correctly about three things:
1. The direction of a stock's move.
2. The magnitude of the move.
3. The timing of the move.
Given the regulatory hurdles the Pebble Project is facing and the long-term nature of the permitting process, I'd say #3 would take nothing short of a crystal ball at this point.
The good news is, the shares are so cheap here that they're practically a call option themselves, and they never expire. Risk/reward strongly favors the longs here. Either the mine gets built or it doesn't. If it doesn't, the stock may go to zero and you lose $2.50. But if the mine does get built, you have an asset worth at least $200 billion. With 95 million outstanding shares, that's an enterprise value north of $2,000 per share. I don't know how much of that will trickle down to shareholder equity, but it's got be at least three figures. Are you willing to risk losing $2.50 for a potential gain of $100? Sounds like a good bet to me. I have 2,000 shares, and I'm considering doubling down at these prices.
"Alaska superior court confirms Pebble exploration permits"
Well, here is some good news for NAK longs (at last!). Surely this contributed to the 29% surge in stock price over the last two days.
http://www.marketwatch.com/story/alaska-superior-court-confirms-pebble-exploration-permits-2011-10-04-124700?siteid=bigcharts&dist=bigcharts
"Curious..if CCME is such a total scam...why is there still investors purchasing shares... "
There are no investors purchasing shares... only gamblers.
I'm holding the shares to see what pans out. At 31 cents, CCME for me is nothing but a call option with no expiration date.
Hey, looks like the MACD is setting up for a bullish crossover!
(Just kidding.)
You found this on YMB? Well that explains the bad smell over there today. A couple million short-sellers just s*** themselves.
I agree with Michael Anderson. If insiders want to take the company private, they must offer a fair price based on their knowledge of the company's real worth. If they try to screw the shareholders out of their shares for pennies on the dollar, they would almost certainly get hit with major lawsuits and end up losing their shirts in court.
My OptionsXpress account still has the halt price, but Schwab zeroed out the value a couple weeks ago. It's a cash account, so no margin implications.
No More China Stocks for Me, Thanks.
Since the CCME halt, I have stopped out of all the following positions:
YONG
DEER
NEP
PUDA
All very similar profiles: Bloggers who admit to being short the stock publish fraud allegations, stock takes a sharp dive, maybe gets halted -- you know the drill.
Whether the fraud allegations prove true is inconsequential for the moment, as perception is reality, and the damage is done. Can one really afford to wait around to find out? I maintain two disciplines to preserve capital: stop-losses and limiting position sizes. Thankfully, these disciplines limited my total losses on these five positions to 5% of my portfolio. That's assuming CCME opens at $1.80 or better.
Like it or not, China is the short's playground at the moment. I for one will not be investing further in this sector for a long time to come, if ever. If you can't trust the company's management, board, or auditors, you're not investing -- you're gambling. There may be some good companies in the sector, but good luck trying to find them without stepping on any land mines.
Here's hoping we get some better news on CCME in the next couple months, and a chance for a not-too-painful exit.
Options cannot be traded during the halt, but they can indeed be exercised. I became a long during the halt when the March puts I sold were exercised.
I have no guess as to the opening price. There are too many variables and unknowns at this point. Will they file a 10k? Will they submit to a forensic audit? Will they remain listed on the Nasdaq? What are the nature and extent of the accounting irregularities? Until these questions are answered, it would be nothing but a WAG to try to put a price on this stock.
However, the fact that the halt will continue is good news for the longs, IMO. It gives the company some time to answer some of these questions and get its filings in order.
No Delisting Next Week
Andrew,
Thanks for posting this FAQ on the Nasdaq hearings process. Based on the following excerpts, can we rightly conclude that the April 12 de-listing is no longer possible?
"A request for a hearing will stay the delisting pending a decision by the Hearing Panel."
"If a request for a hearing is made within seven days, no delisting action will be taken until the company has had its hearing and the Hearing Panel has issued a written decision."
"Hearings are typically scheduled 30 to 45 days from the company's request."
Based on these facts, the imminent de-listing appears to be off the table:
1. CCME did request a hearing within the 7-day window.
2. Nasdaq will not de-list until the hearing takes place and a decision is rendered.
3. It typically takes at least 30 days from the date of the request to start the hearings.
Conclusion: CCME will remain listed, and therefore halted, for at least another month.
Perhaps you have heard of Peter Lynch? He invested in a company called ACLN Limited that was a fraud, and the first company delisted from the NYSE in about 30 years. Here's the link:
http://money.cnn.com/2003/01/23/funds/lynch/index.htm
Quoted from about 2/3 down the article:
"But many of us feel we were sold a bill of goods in the past five years, hustled by analysts, banks, CEOs and others who basically cashed out while we bought in. I ask Lynch if he can possibly understand that frustration -- if the master himself had ever found that he was stuck with (sorry, Aggie) a dog of an investment.
'I had a New York Stock Exchange company just this past year that literally went to zero and was delisted. It had no debt, a very good balance sheet, a 20-year record. Everything looked fine -- it had $100 million in cash on its books -- then, all of a sudden, bam!' (Only one company fits that profile: Belgium-based ACLN Limited, a shipper and seller of used cars from Europe to Africa whose stock climbed as high as $50 in 2001, then collapsed after that $100 million in cash could not be found, ACLN's chairman disappeared and the SEC filed fraud charges against the company and top executives.)
'Despite my due diligence, I don't think I learned much from that experience,' Lynch says. 'I mean, you just have to say to yourself that maybe once in a long while you're going to have these things where in the end the company lied. I think in my lifetime of analyzing two or three companies a day for 30 years, sometimes more, I've been seriously lied to maybe 10 times.' "
So there you have it -- meets all your criteria:
1. A famous (some would say legendary) investor, on par with Buffet.
2. Bought a company that was delisted following public accusation of fraud.