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Profit
Alert: Broadcast International |
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Though
it wasn't the focal point of an official research alert, our positive
coverage of Broadcast International (OTCBB:
BCST) still means we intend to follow the stock going forward.
With that in mind, we also feel compelled to mention the recent
run-up may be an ideal profit-taking opportunity for anyone who took on
a position.
Broadcast International
shares have rallied from $3.00 (when
we first saw it on the 8th) to yesterday's closing price of $4.10,
to today's current price of $4.00. That's about a 33% rally over a span
of eight trading days. While we generally don't specify targets
or
suggest exits on unofficial ideas, we believe the unique circumstances
of this chart could merit equally unique trade management.
As for why one
might consider making such a quick exit, our first and foremost answer
is history. This (roughly) $1.40 move between late October and now
is about the same size as the surge we saw throughout September. Though
the disclaimer 'past performance does not guarantee future results'
has basically become a cliché, most investors still tend
to assume the opposite. In a similar vein, we'd still rather take a cue
from historical results.
The other immediate
concern....volume. It had been reasonably well-paced - until Tuesday.
That huge volume spike may end up being a pivot point for the stock, somewhat
confirmed by a bar shape called a 'gravestone' doji. That just means, despite
the high of $4.40, the open and close were actually near the low. The day
started somewhat weakly, and ended even weaker.
Therefore -
and
depending on what your timeframe was - an exit here (partial or full)
may make sense for you. But, who's to say you could never buy it back
later?
That said, only
you know your financial situation well enough to make the final decision.
If you saw bigger things down the road for Broadcast International, we
see nothing inherently wrong with the company either. The question is really
one of timeframes.
If you want
verification that sometimes the best thing to do is just take profits -
even
if only as a matter of discipline - look no further than GlobalScape
(AMEX: GSB).
We presented
this stock to you back on May
25th when it was still trading as a bulletin board stock with the ticker
'GSCP'...and a price of $2.79. Once shares reached $6.15 in early trading
on
October 17th, we encouraged you to go ahead and lock in at least a partial
gain.
If you pay attention
to our entry ideas like GSCP in the blog, then we sure hope you pay
attention to the exits. Why? In GlobalScape's case, it would have meant
you avoided riding out the pullback to yesterday's close of $4.42. While
we were early on our exit by a day, better early than late. And yes, you'd
still be 'up', but any unrealized gain is likely to be half of what it
would have been in mid-October, thanks to the recent demise.
On a side note,
GlobalScape's chart is worth studying for future reference.
This stock may
have hinted a soft patch was coming when it stalled on the 18th of October.
Between then and November 14th, GSCP simply traded in a range, with support
being defined at $6.31. A full-blown exit pattern could have been interpreted
when $6.31 was breached on the 15th.
In other words,
hindsight is 20/20, but it's not as if we're completely blind when it
comes to foresight. To that end, locking something down on BCST doesn't
seem to be such a bad idea after all.
There are two
'take-aways' here...(1) read the blog,
and (2) take what the market gives you, because it doesn't give you very
much very often, nor for very long.
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Little
Adjustments, Big Differences |
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Back in the
August
10th edition, we took a predictive look at some sectors as well
as all the major style/market cap categories. We added a layer of
detail to both sets of analysis on August
28th, but we'd like revisit the cap/style discussion today.
Our basic take
was this....we expected small-cap-growth and large-cap-growth to keep leading.
And, we assumed small-cap-value would drag the bottom, with mid-cap-value
not too far behind in the next-to-last position. The nearby table pretty
much says it all.
Though it's
a bit dubious, we were basically right - small and large cap growth
did well, while small and mid-cap value did poorly. Mid-cap growth snuck
in as a leader, and large-cap value snuck in as a loser...the two groups
we really didn't make a call on.
At first glance
it may not seem like a big deal, but do a little math with us here. The
'average' return for these six groups since August 10th was a loss of 4.8%.
Had you removed small and mid-cap value from the portfolio like we suggested,
your
average return would have been a loss of only 2.4%. Yes, a loss is
a loss, but in this instance a minor action would have cut your loss in
HALF. That IS a big deal, especially when you extrapolate
this three-month period into a full year...or decade.
Point being,
it can pay to be aware of what's hot and what's not, even if you only own
individual equities. The premise applies to sectors as well as styles,
and short periods as well as long periods.
Regarding our
updated outlook, we still like large-cap-growth, and are still shying away
from small-cap-value. As always, there are exceptions.
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Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
