Friday, October 14, 2011

Lottery Ticket Strategy: New Gateway Post

This is my new Post on the Lottery Ticket strategy. The prior post was originally published in 2009. While I have updated that prior Post, it is hopelessly disorganized now. LOTTERY TICKET PURCHASES: LINKS IN ONE POST

(added to original post: I post a table showing the current holdings in this basket on the last Monday of each month, starting in November 2012)

When a security is purchased under this strategy, it will be viewed as high risk at the time of purchase. The main rule for this strategy is that the total exposure to the security has to be kept under $300, plus any prior net profits realized or distributions received from that security. That limit serves to turn this strategy into a low risk one for me. Risk is further reduced now by keeping the maximum exposure to all Lottery Ticket purchases to an amount less than my prior realized gains. I will keep a running total in this Post of my prior gains and current exposure.  

In the snapshots of realized gains and losses shown below, I have highlighted the gains from 10 securities that provided me with the highest realized gains. I have not included snapshots of a few realized gains and losses where the total was less than $30, since those offset one another. 

In this strategy, it is routine to select securities that have been smashed in price. A technician would probably advise an investor to avoid all of them at the time of my purchase. Their charts will look awful. The price will often reflect an opinion that the company may not even survive whatever crisis befalls it. I will often acknowledge that the known information does not justify any current optimism about the future. Yet, there is something of value that I find that at least gives the company upside potential from its depressed price at the time of purchase.  

Besides the price being pummeled, I am also looking, for the most part, for stocks where both the price to sales and price to book ratios are below 1. Sometimes I will look for names with a price less than $10, a relatively low debt burden, and at least one or two dollars per share in cash. I will use that type of screen for companies that may be able to survive long enough to right the ship.  Some of those basic screens are discussed in this 2009 Post: How to Find Stocks Masquerading as Lottery Tickets I will generally use the Premium Screener at Morningstar available to subscribers or the free one at Yahoo Finance. That later one allows me to enter cash per share as one of the search criteria. I will no longer consider a Chinese company appearing on one of this screens.  

For example, I entered the following three search terms at YF: cash per share greater than $2 per share, current price less than $10 and Price to Sales less than 1. This search came back with 247 names, which is too large of a list to scrutinize further for something interesting. I narrowed the field further by adding a search for price to book less than 1. I then entered zero debt. This gave me 25 names whose share price was currently less than $10, with both the P/S and P/B ratios less than 1, the cash per share being greater than $2 and the company had no debt, all according to YF. I will fiddle with that screen, sometimes adding numbers for P/E, PEG, return on equity and profit margin, while removing others. And I will change the values of the numbers. In the screen described above, I picked up another 25 names by increasing the permissible debt amount from zero to 25M.

When looking at the search results received from YF, I need to first use my cursor to expand the company name. I will recognize several names that will already be included in my Lottery Ticket monitor list which has about 200 stocks in it. I noticed a few new ones when I ran this latest search. I was, for example, unfamiliar with a company called Horsehead Holding (ZINC). I will first look at the profile. Profile Many companies will be dismissed at that stage. Then I will look at the balance sheet more closely as well as a five year chart.

From the chart I see that this stock topped out earlier in 2011 at around $17.4, in what looks like a double top. (Please note that I have no training in technical analyse). It has been downhill ever since, with a series of lower lows, and now trading well below its 200 SMA average. ZINC Interactive Chart  A technical analyst would probably say stay away, which would appear to be a rational response, but all of those negatives are the sin qua non for an LT selection.  When I looked at the balance sheet, I could see that the company had $129.47M in cash as of 6/30/11 and virtually no debt.  I checked the market cap and found that it was $351M.  I then confirmed the P/S and P/B ratios at Key Statistics. So far, this company is passing my tests for inclusion on the monitor list. I now want to form at least some general idea of the problem causing a dive in the share price.  Is it temporary or part of some kind of long term structural problem?  The consensus estimate from four analysts predicts 93 cents in earning for 2012 up from 58 cents in 2011.

I am sufficiently interested now to do some deeper digging which will mean going to the SEC's Edgar site, enter "horsehead" and I see the company listed as the second entry. Click the appropriate "CIK" number and I arrive at its SEC filings: EDGAR Search Results for Horsehead Holding I will always look at the last earnings report first, and it reveals one problem. The company reported a loss of 8 cents per share in the last quarter:  Form 10-Q for the Q/E 6/2011. I then checked some historical data at Morningstar. I notice then that Fidelity Low Price stock owned over 5% of the shares, which was another interesting point. I noticed in the historical data a very erratic earnings history. The company earned $2.85 per share in 2007; $1.12 in 2008 and then lost 73 cents per share. That tells me that the company is highly cyclical and investors will likely place a low P/E on normalized earnings over both up and down cycles. This is a negative. I then noticed that the stock had risen 9.09% last Monday. I did this search last Monday night. I then picked a spot for a potential add by looking at the recent price data: ZINC Historical Prices 

So that is the routine in a nutshell. (see also: Duality of Long Term Risks/Stocks Under $5: Per Se Lottery Tickets

Still I saw enough interesting pieces of information to add this company to my LT monitor list and to select a possible price entry point. I am not ready to enter an order. 

This is a link to the discussions of those realized gains and losses whose snapshots appear below:
CBRE Group (formerly CB Richard Ellis)(CBG)
Bought Lottery Ticket in CBG at 2.39
SOLD 1/2 CBG at $9.73

Brooks Automation (BRKS)
Bought BRKS at 8.62 as LT
Sold LT BRKS at $10.2
Bought 40 BRKS at $7.23-LT Category
Sold 40 BRKS at $9.71

Capstone Turbine (CPST)
Bought 300 CPST at $.9852-LT Category
Sold: 300 CPST at $1.55

CIBER (CBR):
Buy of 50 Cyber
Sold Lottery Tickets: RMIX, CBR, NYT and Timberwest

Cinedigm Digital (CIDM)
Bought LT Basket: 100 CIDM at $1.55
Added 100 CIDM at $1.3
Sold: 200 CIDM at $3

CNO Financial (CNO)
Bought 35 CNO at $7.81-Lottery Ticket Basket Strategy
Sold 35 CNO at $9.98-LT Category

DataLink (DTLK)
Bought 35 DTLK at $7.49-LT Category
Sold  35 DTLK at $10.93

Delek (DK)
Bought 50 DK at 5.75
Sold LT DK at $7.31

Dell Computer (DELL)
Bought 30 Dell at $8.85
Sold 30 DELL at $10.82

Digirad (DRAD):
Bought Lottery Ticket 100 DRAD AT 1.24
Sold DRAD AT 2.14
Lottery Ticket Purchase: 100 DRAD at $1.9
Sold 100 DRAD at $2.36 -LT

Dole Foods
Bought 30 DOLE at $8.34-Lottery Ticket
Sold 30 DOLE at $10-LT Category

East West (EWBC): 
Buy of 50 EWBC at $5.7 as Lottery Ticket
Sold 50 EWBC at $19.04

Edgen Group (EDG):
BOUGHT 40 EDG at $7.28-LT Category
Sold :40 EDG at $11.88

EXAR
Bought 40 EXAR as LT at 6.23
Sold 40 of the LT EXAR at $8.08

EXIDE
Bought 70 XIDE as LT at $2.75
Sold 70 EXIDE at $3.71-LT Category

FERRO (FOE)
Lottery Ticket Purchase: 40 FOE at $6.32
Sold: 40 FOE at $9.61

FIAT (FIATY)
Bought 50 FIATY at $5.17-LT
Sold 50 FIATY at $ 8.45

First Industrial (FR):
LATE DAY TRADES: GCI, CBL, FR, SLG, NYT, NWSA

Forest City:
BOUGHT 50 SHARES OF FCEA AT 6.3-FOREST CITY COMMON
Sold FCE at $13.23

Frozen Food (FFEX)
Bought 100 FFEX at $1.4-Lottery Ticket
Sold: 100 FFEX at $2.07

Gastar Exploration (GST):
Bought 100 GST at $2.68
Sold 100 GST at $4.1

Gencorp: 
Bought 50 GY at $3.7 as Lottery Ticket
Sold LT GY at $6.4
RB Buys 50 GY at $4.65 as a LT
Sold 50 of the LT GY at $6.01

Glimcher Realty (GRT):
BOUGHT GRT at $1.61
Bought  50 GRT at 2.79
Sold 100 GRT at $9.5

Glimcher Realty Preferred (GRTPRF)
GRTPRF: Bought at $2.9
SOLD 30 GRTPRF at $25.42-LT

Grupo Financiero Galicia (GGAL)
BOUGHT 40 GGAL at $6.72-LT Category
Sold LT GGAL at $9.6

Gulfport Energy (GPOR)
Buy  of GPOR at $4.2
Sold GPOR at $7.09

Health Management Associates
Bought 50 HMA at $6.87-LT Category
Sold 50 HMA at $8.41-LT Category

Horsehead Holdings (ZINC)
Bought as Lottery Tickes: 30 ZINC at $7.9
Sold 30 of the LT ZINC at $11.59

Huntsman (HUN)
Bought 30 HUN @ 9.91
Sold LT HUN at $14.65

ING Hybrid (ISF)
BUY OF ISF AT 4.6
Sold 50 ISF at $14.65

Landec (LNDC): 
Bought 50 LNDC at $6.2-Lottery Ticket
Sold LT LNDC at $7.37

LeapFrog (LF)
Bought: 40 LF at $7.49
Sold  LF at $6.76-Loss

Lexington Property Preferred D (LXPPRD)
Buy 50 LXPPRD at $ 7
Sold LXPPRD at 23.46

LML Payment Systems (LMLP)
Bought 100 LMLP at $1.8-LT Category
Sold 100 LMLP at $3.4-Being Acquired by Digital River (LT Category)

LSI Logic (LSI):
Bought 40 LSI at $7.28-LT Category
Sold: LSI at $10.96-LT Basket

Marshall & Ilsley (MI)(acquired)
Bought 50 MI at 5.84-Speculative Lottery Ticket
Sold: 50 MI at 7.14

Melco (MPEL):
Bought 40 MPEL at $7.36
Sold MPEL at 11.46
Bought 30 MPEL AT $9.32 as LT
Sold 30 MPEL at $13.12

Mueller Water (MWA):
Bought 50 MWA as a Lottery Ticket at $3.62
Sold LT MWA at $5.61
Bought 50 Mueller Water (MWA) at $3.74
Bought 50 MWA @ 3.04
Sold 100 of the LT MWA at 4.25

Napco Security (NSSC)
Buy 100 NSSC at $1.02
Sold LT NSSC at $1.96
Bought 100 NSSC at $1.8
Added 70 NSSC as LT at 2.25
Sold 170 NSSC at 2.93
Bought 100 NSSC at 2.56 as LT
Sold 100 NSSC at $3.1-LT

National Dentex (later acquired):
Buy of 50 NADX at $1.27
SOLD NADX IN IRA at $4
Buy of 50 National Dentex at $4 (NADX)
Sold NADX at 8.12

New York Times (NYT):
LATE DAY TRADES: GCI, CBL, FR, SLG, NYT, NWSA
Sold Lottery Tickets: RMIX, CBR, NYT and Timberwest
Bought 30 NYT as LT @ 8.61
SOLD LT NYT at $10.45

Nokia (NOK)
Bought 50 NOK at $2.88-LT Category
Sold 50 NOK at $5.48

Novatel Wireless (NVTL)
BOUGHT 50 NVTL at $2.98-LT
Sold 50 NVTL at $4.04

O2Micro (OIIM)
Bought 50 OIIM at 5.12-Lottery Ticket
Sold LT OIIM at 6.5

Opnext (OPXT):
Bought 50 OPXT at $1.91
Sold LT Opnext at $3.1
Bought 100 OPXT at 1.89
Sold 100 OPXT at $2.47
Bought 100 OPXT @ 1.6
Sold 100 of the LT OPXT @ 3.15

Pervasive Software (PVSW)
Bought 50 PVSW at 4.72-Lottery Ticket
Sold LT PVSW at 5.68

PLX Technology (PLXT)
Bought 70 PLXT at $3.37-a LT
Sold 70 PLXT at $6.66

Power One (PWER)
Bought 50 PWER at $4.66-LT Category
Sold 50 of the LT PWER at $6.03

Qlogic (QLGC)
Bought 30 QLGC at $8.83
Sold 30 QLGC at $11.7

RadioShack (RSH) 
Bought 40 RSH at $6.89-LT CATEGORY
Sold RSH at $1.79-Loss

RCM Technologies (RCMT) 
Buy of 50 RCMT at $2.15 as Lottery Ticket
SOLD RCMT at $3.53

RRsat Global Communications (RRST)
Bought 50 RRST at $3.95-LT Category
Sold 50 RRST at $7.78

RTI Biologics (RTIX)
Bought: 50 RTIX as LT @ 2.57
Sold LT RTIX at $4.2

RushHydro (RSHYY)
Bought: 150 RSHYY at $1.536
Sold as an LT 150 RSHYY at $1.94

Select Medical (SEM)
Bought 35 SEM at $8.37-Lottery Ticket Basket Strategy
Sold LT SEM at $10

Silicon Image (SIMG):
Bought 50 SIMG as Lottery Ticket AT 2.19
Sold SIMG AT 3.37
Bought as Lottery Tickets: 50 SIMG at $4.33
Sold 50 SIMG at $5.41

Sims Metal Management (SMS)
Bought 30 SMS at $9.26
Sold 30 SMA at $10.81

Sinclair Broadcasting: 
Buy of SBGI
Sold SBGI in IRA

SL Green Preferred C (SLGPRC):
Buy of 30 SLGPRC at $11.89 (allowed to go over $300 due to prior profit)
Sold 30 SLGPRC at 25.01 

Sucampo Pharmaceuticals (SCMP):
Buy of SUCAMPO
SOLD LOTTERY TICKET IN SCMP

Sunopta (STKL):
Buy of Sunopta at 1.65: Highly Speculative
Sold LT Sunopta at $4.06
Bought 50 STKL at 5.25
Sold 50 STKL at 6.64-LT Category
Lottery Ticket Buys: 50 STKL at $5.85
Sold: 50 STKL at $9

SuperValu (SVU)
Bought 40 SVU as LT at $6.98
Sold 40 SVU at $5.94-LT Basket

Susquehanna (SUSQ):
Bought 50 SUSQ AS LOTTERY TICKET-PART OF LB'S SHOTGUN APPROACH TO REGIONAL BANK STOCKS
Sold 50 SUSQ @ 7.5

Symmetricom (SYMM)
Bought 50 SYMM at $5.55-LT Category
Sold 50 SYMM-LT

Synergy Resources (SYRG)
Bought 70 SYRG at $3.32-LT Category
Sold 70 SYRG at $4.14-LT Category

Taseko Mines (TGB): 
Sold SEA and TGB

Teragenics (TGX):
Buy of 100 TGX at $1.28-Speculative Lottery Ticket
Sold 100 TGX at $1.63
Bought 100 TGX at 1.24 as LT
Sold 100 of the LT TGX at $1.83

Terex (TEX)
Bought 30 of TEX at $12.68-LT
Sold LT TEX at $19.11
Bought TEX at $14.43-LT Category
SOLD LT TEX at $23.27

Tetra Technologies (TTI)
Bought 50 TTI at $5.98
Sold 50 TTI at $9.97

TheStreet (symbol changed TST)
Lottery Ticket Purchase: 100 TheStreet.com
Sold 100 TSCM at 3.02
Bought 100 TSCM at 2.86
Sold LT TST @ 3.42
Bought 100 TST at $1.8
Sold 100 TST at $2.27

Timberwest: (acquired)
Buys 50 TMWEF at $3.24
Sold Lottery Tickets: RMIX, CBR, NYT and Timberwest

UCBH (bankrupt):
Sold UCBH at a Loss

Umpqua (UMPQ):
Bought 30 UMPQ as LT at $11.53
SOLD 30 UMPQ at $13.33

U.S. Concrete (bankrupt):
Sold Lottery Tickets: RMIX, CBR, NYT and Timberwest

Virginia Commerce Bancorp (VCBI)
Bought 40 VCBI as LT at 5.56
Sold 40 VCBI at 7.64

Webster Financial: 
Buy of 50 WBS at $4.58: Lottery Ticket
Sold 50 WBS at 22.49

Wilmington Trust (later acquired)
BOUGHT 30 WL=Lottery Ticket
Sold 100 Wilmington Trust (WL) at $14.13 (70 not part of LT)

Velti (VELT)
Bought 30 VELT at $7.7-LT Category
Sold Total Loss After Commissions: Update for the Lottery Ticket Basket

Vimicro International (VIMC):
Lottery Ticket Purchase 100 of VIMC at $1.97
Sold 100 VIMC at $3.53

Xinyuan Real Estate (XIN)
Bought 50 XIN at $2.57-LT
Added 50 to LT XIN at $2.36
Sold 100 XIN at $5.82

Yamana Gold (AUY)
Bought Yamana Gold at $8.98 as a Lottery Ticket
Sold Some AUY

ZAGG
Bought 50 ZAGG

The RB rules the roost in this strategy. With the $300 limit on most trades, it can not do any meaningful damage to Headknocker's wallet. And, the Nitwit has produced some green.  The headings with the dark bold green color are the 12 largest realized gains under this strategy from 2009 to date.   

2009:



2009 GPOR 50 Shares +$128.24

2009 AUY 30 Shares $51.23

 2009 CBG ROTH IRA 50 SHARES +$ 350.98

2009 DK 50 SHARES +$117.52

2009 DRAD 100 SHARES +$73.25

2009 FCE/A 50 SHARES +$327.48/Allowed to Exceed $300 due to Profit on Bond

2009 GIVN 40 SHARES +$66.78

2009 ISF REGULAR IRA 50 SHARES +468.48

2009 KEY REGULAR IRA +$86.98 (2 TRANSACTIONS)

2009 LNC 30 SHARES +116.03

2009 LXPPRD 50 SHARES +$98.99

2009 NADX ROTH IRA 50 SHARES + $129.49

2009 NSSC 100 SHARES +$77.99

 2009 NXG ROTH IRA 100 SHARES +$110.99

2009 NYT 25 SHARES +$32.77

2009 OPXT +$43.49

2009 SBGI REGULAR IRA 100 SHARES +$83.99

2009 SCMP 50 SHARES +$109.05

2009 SIMG 50 SHARES +$42.55
2009 STKL 100 SHARES +224.04

2009 UCBH -$53.9

2009 WSTL 500 SHARES +$94.39

2010:


2010 ACET 50 SHARES +64.79

2010 ACTI +$79.68

2010 ARIA +$36.34
2010 BRKS +$65.5

2010 CBG 50 SHARES + $ 469.49

2010 CIBER -63.46

2010 DSPG +55.04

2010 EWBC 50 SHARES +$651.03

2010 FR 40 SHARES +$64.06

2010 FRPRK 30 SHARES REGULAR IRA +$239.34

2010 GY 50 SHARES +$119.09

2010 LNDC 50 SHARES +$42.54

2010 LXPPRD ROTH IRA 50 SHARES +$807.03

2010 MI 50 SHARES +$49.04

2010 MWA 50 SHARES +$83.54

2010 NADX 50 SHARES +$189.54

2010 OIIM 50 SHARES $53.04

2010 OPXT 100 SHARES +$40.44

2010 RMIX 100 SHARES -103.23

2010 SLGPRC REGULAR IRA 30 SHARES +377.63

2010 SUSQ 50 SHARES +$66.54

2010 TASEKO ROTH IRA +$141.1

2010 TIMBERWEST ROTH IRA 50 SHARES +$ 39.4

2010 THESTREET 100 SHARES +$98.46
2010 VIMC 100 SHARES +$140.25

2010 WILMINGTON TRUST 30 SHARES ONLY +114.09/LATER TAKEN OUT OF LT WITH PURCHASE OF MORE SHARES AND THEN ALL SHARES SOLD AS SHOWN ABOVE 
2011

2011 ACET $81.59

2011 BBND 50 SHARES -80.96
               
2011 FRD 50 SHARES +194.54

2011 GRT +759.17

2011 MPEL 40 SHARES +$148.09

2011 MWA +62.14

2011 NSSC +$136.76

2011 OPXT 100 SHARES +138.29

2011 PVSW 50 SHARES +32.04
2011 RTIX 50 SHARES +$65.62

2011 THESTREET +$40.1

2011 WEBSTER FINANCIAL 50 SHARES +$879.52

2012


2012 VCBI 40 Shares +$67.29
2012 Terex 30 Shares +$176.98
2012 Horsehead Holding (ZINC) 30 Shares  +$94.79
2012 GenCorp (GY) 50 Shares +$52.09
2012 MPEL 30 Shares +$98.09
2012 GRTPRF 30 Shares +$708.86
2012 TGX 100 Shares +$42.49
2012 NSSC 100 Shares +$38.16
2012 PLXT 70 Shares +214.38
2012 EXAR 40 Shares +$57.89
2012 HUN 30 Shares +$126.29
2012 DRAD 100 Shares +$30.61
2012 SEM 35 Shares +41.14
2012 UMPQ 30 Shares +$38.09
2012 XIDE 70 Shares +$51.29
2012 DOLE 30 Shares +$33.89
2012 PWER 50 Shares +$52.59

2012 SYMM 50 SHARES +$39.58
2012 CNO 35 Shares +$60.04
2012 HMA $61.1
2012 STKL 50 Shares +$56.1
2012 LMLP +$148.17
2012 SYRG +41.51
2012 NYT 30 Shares +$39.29
2012 TEX 30 Shares +$249.43

2013


2013 DELL 30 Shares +$43.37
2013 BRKS 40 Shares +$83.29
2013 TTI 50 Shares +$140.89
2013 SMS 30 Shares +$30.59
2013 RRST 50 Shares +$175.59
2013 XIN 100 Shares +$310.13
                                                                     
2013 SVU 40 Shares -$57.51
2013 BNCN 40 Shares +$101.33
                                         
2013 BYD 30 Shares +$71.09
2013 SIMG 50 Shares +$38.09

2013 DTLK 35 Shares +$104.49
2013 NVTL 50 Shares +$37.09
2013 FFEX 100 Shares +$51.27
2013 TST 100 Shares +$38.59
2013 FIATY 50 Shares +$148.49
2013 QLGC 30 Shares +$70.19
2013 NOK 50 Shares +$114.09
2013 EDG 40 Shares +$168.09
2013 FOE 40 Shares +$115.69
2013 GGAL 40 Shares +$99.29
2013 Velti 30 Shares -$236.95
2013 GST 100 Shares +$126.09
2013 LSI 40 Shares +$131.29
2013 BZH 10 Shares +$77.59
2014:

2014 STKL 50 Shares +$141.6
2014 CPST 300 Shares +$153.51
2014 CIDM 200 Shares +$283.13
2014 RSH 40 Shares -$219.91
2014 LF 40 Shares -$45.11
2014 RSHYY 150 Shares +$44.09
2014 ZAGG 50 Shares +$72.59


TOTAL REALIZED GAIN AS OF 9/3/14= $14,140.68 


TOTAL EXPOSURE AS OF 2/21/2014 TO THIS STRATEGY= $5,457.84 IN 29 NAMES.  

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