Traderfan
Thank you for your views here. I'm of two minds about your post.... On the one side, i always like to take profits when a stock has run up to near its fair valuation. Certainly when it appears to have exceeded its fair valuation.
Yet in this case JADA was artificially depressed for a long time by the "big seller" (ostensibly CHFI, which appeared to have started a big selloff in May 09, and then the more recent methodical daily selling from Feb 1 to Mar 19). This relentless selling created that "coiled up spring" effect for JADA which only two weeks ago was finally released, and one can obviously see the HUGE buying pressure that had built up continuing to move this stock up with great strength in a "reversion to mean" trading effect.
And, most encouraging, at $1.01, JADA still only carries a trailing P/E of around 5 (based on expected full-year earnings of around .18 to .20), and forward P/E of only about 3.3 based on a conservative EPS of .30 for 2010 (less than Q3's EPS annualized for 2010). I.e., it still has further to run in this "reversion to mean."
I guess one's position in JADA comes down to whether one is more of an investor or a trader. An investor sees the prospect of JADA becoming vertically integrated within 6-24 monnths (the 6 months could come from acquisitions, something the co. has suggested at its website), and becoming an $8 to $10 stock within a few years. But aside from that longer term prospect, even just for the medium term one can ask, "Where will this stock most likely be after Q1, Q2 or Q3 earnings (mid-May, mid-Aug, mid-Nov)?"
Since JADA's sales (outside of that earthquake event in Summer 08) appear highly correlated with the state of China's domestic economy, and given all the reports out of China saying that jade sales are rebounding vigorously, many of us are betting on a shareprice for JADA of $1.50 to $2.50 by these points in time later in 2010.
I may take some shares off the table this coming week, especially if it runs up another 30 to 40 cents before earnings, but i'm leaving most in for at least a $2 to $2.50 target later this year.... I averaged in so low that this stock could "correct" at some point by 20 or 30% and i'd still be very well off.
It's always an issue whether to take most of one's profits off the table, or let them run. I've had some great successes with deciding one way or another, and i've also had some real flubs-- like finding CREE at $14 in Dec 08, more than doubling my investment, but then selling out entirely at $32 pps when its trailing P/E hit 110 and forward P/E was over 45-- i thought, "surely, CREE is now over-valued and vulnerable to a selloff on any weak earnings." Well, CREE never did have any weak quarters and now trades for over $70.
If a popular stock like CREE could defy gravity for so long, surely JADA, which is now a "popular stock" among a lot of buyers, can simply keep going until it comes up to a ttm P/E of, say, 7 or 8.
And yes, i know the old line, "Bulls make money, bears make money, pigs get slaughtered."
