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Sunday, September 8, 2013

In Search for Darvas Stocks - 3D Printing

One of main principles of  my System 9 is "Theme Investing". There has to be a main idea, some kind of common sense reason for investing/trading the stock of a company. Afterall, somebody has to pay more for this stock at a later date... Why that "greater fool" doesn't do it now? May be I am a greater fool?

Successful speculating in financial markets requires some kind of variant perception of prevailing and expected trends. Even more importantly - there are many ways to skin that cat. One of the most obvious to use is a set of conditions when there are discounted expectations for future prospects of company. Just recently I had this experience with Tesla.

Most people on blogs and message board where skeptical that Elon Musk's company can actually produce damn cars and in quality and quantity promised. Price performance was lousy, earnings releases was a nightmare (thanks to their moron CFO), I was stopped out several times - a very frustrating experience indeed. Eventually this discrepancy was corrected in a very violent manner, as stock exploded higher, fueled by short covering and exceptional publicity blitz, rendering me a mind-blowing profit of 400%. Secondary offering was bought with vigor, and while TSLA is 50% higher than my last sale price, I am happily out of stock, as I am convinced that pendulum just swing to another extreme.

Herein lies the genius of iBergamot, greatest value investor ever lived... He-He
Variant perception is just that. It doesn't have to be right, infact just like everything else its 50/50. When its wrong, when "Investing Theme" holds water (influenced by media, or news hype, or biased personal experience), or when conditions change, on maybe it was just stupid fucking idea... - only then comes the realization of imperfection of individual variant perception. For every "Tesla campaign" I have a "Rare Earth's campaign". Same premise that worked on TSLA between 2012 and 2013, failed miserably on LYSDY and MCP just a couple of years ago. And the craziest thing - I still think that Lynas should be a $100 stock, not Tesla. ...disturbing... Lynas LYSDY last $0.36 (yep, 36c); Tesla TSLA last $166.97...  Some genius...lol

Nicolas Darvas in 1950's used another "obvious" approach to variant perception of financial markets: investing in
"stocks which were tied up with the future and where I could expect that revolutionary new products would sharply improve the company's earnings"..."I was constantly searching for stocks that would climb into a stratosphere because of the vision of their future"..."I made up my mind to buy high and sell higher".... "While the fashion persists, the forward-looking investor gets in and stay in."   Nicolas Darvas, 1960
 These stocks typically will exhibit a strong price move, in an environment of complete media black-out. There is no news, nobody follows these stocks, nothing on blogs and Yahoo message board is dead. Yet there is a huge change afoot, and smart money are buying stock that will soon become "fashionable" investment, with massive following and Tee-Vee coverage. Then (maybe years later) smart money will exit and move on to next "Theme". Rinse and repeat. Darvas Stocks are hard to find, especially for me - I only have few hours a day, and I already run several strategies which take most of that time to manage. It doesn't mean I will stop trying.

3D Printing.

The word is: this is a Third Industrial Revolution. Umm...
I can buy 3D Printer for as little as 500$. What am I going to do with it to make money? Its a toy. Fine. I suppose somebody else can figure out how to turn profit from this new technology. There are big(er) industrial models with no prices quoted from DDD. Interestingly that graphene - a real world-changing break-thru technology can't get off the mat, while plastic toys of ugly colors are all the rage. Follow the money:

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