Thursday, May 3, 2012

Deceit and Timing (updated 11:55 am)

It's really no surprise that a nobody with no credibility who claims to run a hedge fund penned an anti-stock essay today. A guy named Nicholas Pardini claims to run Nomadic Capital Partners, and if you look at the hedge fund's site, it looks like something a high school student built. There is no resume, no history of anything, not even testimonials from satisfied clients.

Yet, Seeking Alpha ran this guy's weak essay. Pardini claimed to make all kinds of statistical assertions, yet they were based on things like "14 minutes of video at a Salt Lake City Best Buy." I am not joking. This guy's essay is now linked to Yahoo News and other media hubs. Will people trust him? Perhaps.

All I know is, ZAGG reports later today and Pardini insists that ZAGG is a fraud based on his evidence, even though it's got more holes than a block of old-fashioned Swiss cheese.

Could he be right? Of course. But not based on the evidence. No stock is perfect, no company is without flaw. And there are some companies that really lie like hell to get their stock higher. Lie, as in Gray Area deceit. Stuff that turns up much later, case in point, GMCR.

But for ZAGG and Pardini, this will be interesting to see how everything turns out. The fact that he waited until ZAGG's earnings report day to post the essay says a lot about his actual intentions.

So I have two choices: Sell before the earnings report regardless of white noise; or hold through the earnings report and "hope" it goes well. I don't like "hope" when it comes to stocks.

If I opt for choice #1, I take a moderate loss (ZAGG is at 12.55 in very light premarket trading) and re-enter after the earnings report. The more it sells off, the cheaper my re-entry point. But I think chances good that ZAGG retains this price (even after a 30% runup lately) based on either earnings or guidance. Having that partnership (or whatever you want to phrase it) with Apple's hottest products is a huge plus.

If I opt for choice #2 — holding through the report — it wouldn't be my preference. Sure, AAPL was worth holding (small position). But ZAGG or most other stocks? Nope.

Wouldn't surprise me to see ZAGG bounce off this early-morning decline. Where it goes, I won't even try to guess.

AAPL is up in premarket, now 588.68. So is GSVC (light volume), both up fractionally.

Update 4:17 am I'm taking an ass whooping on ZAGG and though I whine about that early-morning article — so well played by the manipulative writer — the reality is I could've gotten out. I could've exercised my usual price discipline and sold at 12.60 in the first few minutes after the opening bell. Instead I held and held and held. And ZAGG sold off in chunks, hardly a buyer in sight.

This had less to do with some morning attack by shorts and more to do with quick traders simply cashing in on a big move by ZAGG. That means those who bought at 13 like me are currently, simply, bagholders. I never planned on holding through the earnings report, and truth be told, holding this overnight to the day of earnings was not wise. Too close to the fire for better or worse.

But now, I just hold ZAGG. It's not a big position, but this huge drop has put a paper dent in my account. As the old saying goes, sell quickly or sell not at all. ZAGG has bounced off its intraday (barely 40 minutes of a day so far) low, which is 10.84. Now at 11.41.

I hesitated on FAZ last week in the low 20s, but finally got in this morning at 21.20. How far this goes, I wouldn't dare guess. The jobs report this morning was a disappointment, but as always, FAZ (and FAS) are never overnight holds. Should never be, that is.

GSVC hovering at 19.00. AAPL up fractionally.

Update 5:17 am Out of FAZ for a teeny loss. It ran to 21.45 not long after I got in, but slowly fell and the impact of the jobs report faded. Sold at 21.14.

Update 6:32 am Out of ZAGG for a substantial loss at 11.68. Got bought up quickly so it's not a lack of buyers. The bear attack this morning was well orchestrated and really out of left field after the news had been so calm in ZAGG this week. The only positive is that I didn't sell below 11 this morning, which would've roughly doubled this loss. This trade doesn't quite negate my AAPL trade of last week, but it eats up a huge part of that profit.

If the earnings report today is positive, I'll look to play ZAGG again but with a much, much tighter time frame. Almost like FAZ or FAS, almost strictly a day trade.

Still holding GSVC even as it tanks to 18.35. Bigger picture, it's had a decent runup recently, and the Facebook IPO road show is around the corner. Wish I could perfectly time these wild swings so that I would've sold above 19 yesterday for a quick 8% gain. But I'm waiting to wait it out some for this incubator.

FAZ keeps trading in a 21.25-21.40 range. For awhile it looked like the US indices were trading down after Europe closed shop, but things have balanced out. I had been guessing that the US would ramp up after the Euro markets closed.

Overall thin volume, which is a major reason why odd, dastardly things happen. Had I put stop orders in to sell ZAGG (above 12.60 at the opening bell) and GSVC (in the high 18s), I would've been able to get some early-morning shut eye. It's like I have to force myself to put those stop loss sell orders in because otherwise, emotion gets the edge on discipline for me.

So I have a stop loss order on GSVC so I at least break even if it tumbles a lot more.

Update 10:32 am LNKD exploded on earnings today ($0.15 vs. $0.09). A lot of commotion around a company that isn't very profitable, but they beat and raised guidance. Also bought a small video presentation company called SlideShare for cash and stock. LNKD currently close to its high at 121.88. I tried getting shares on the news, but it took forever. Made me think that if I finally got a few shares, selling them would be even worse, so I cancelled.

ZAGG got down to 11.12 after hours. Now at 11.32 on thin volume. Makes me somewhat glad I sold earlier. The conference call hasn't started, but someone on Twitter claims ZAGG beat estimates ($0.16 vs. $0.14).

Trying to nickel and dime trades, scalping, with crazy spreads is not exactly fun. Somewhere, the folks who bought AAPL at 95 and left that alone have probably lived a more satisfying life. Gotten more sleep, enjoyed a little.

Update 11:55 am Conference call for ZAGG all positive, low key. Maybe the skeptics are right, but it doesn't appear that way right now. ZAGG was halted after hours, but new prints showed trading above 12.00. I'm probably going back in.

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