With all my moaning over Amazon.com (I shorted it), more than a few of you have become concerned for my solvency. Actually, I place such relatively small bets that no one of them, however ill-conceived, is likely to sink me. (Conversely, no one of them will make me rich, either.)
Still, I was not having a lot of fun watching my shorts climb to the sky. And just when things seemed bleakest, with Amazon at $145 a share, my ship a ship nearly four years out to sea finally came in.
The company is called DEP (symbol: DEPCC), and it makes brightly colored hair gook. When first I heard of it, DEP had fallen from $15 a share to $6, the result of a disastrous acquisition it had been too eager to make. (With eagerness comes sloppiness they had not scrutinized it adequately.) But management had been at this game for decades, had most of its own family fortune tied up in the stock, and with time, I figured, might work their way back out of the mess. (They might also collect $40 million from a lawsuit they had filed against the seller of the disastrous acquisition but as it turned out, they did not.)
So I bought 500 shares at $5¼.
And then a bit more at $4½ and a good chunk at $3 well, for one thing, the company was about to file for bankruptcy protection, which tends to depress a stock and a lot more at 2-and-change and a boatload last year at 1-3/8. (By then, it had emerged from bankruptcy.) And still people bought brightly-colored hair gook.
At 1-3/8, the entire company, divided into about 7 million shares, was being valued at barely $10 million, yet it had sales of around $120 million. Imagine if it could one day struggle back to the $1-a-share in earnings it had had before that disastrous acquisition! It would take a while, because it had $50 million or so in debt, much of it taken on to make the acquisition. But I was in no rush.
A few weeks ago, it was announced DEP would be bought by a large German company at $5.25 a share. The stock now trades at just a few pennies under $5.25; the German company hopes to have it all wrapped up in a few weeks.
I raise all this partly to brag, gloat, and just generally dance a jig on the dining room table finally! But also to suggest that there remains a place for the boring school of backwoods stock picking. I recognize that hair gook pales in significance beside high-tech innovation. The rapidly evolving future of the human species will have little to do with hair care products. But high-tech stocks hardly lack for enthusiasm; relatively few languish unconsidered or on the bargain block. When was the last time you read a research report on a boring $100 million hair gook company?
I raise all this also because I was fascinated to read, in the last few months, some of the small-investor dialog concerning DEP on Yahoo. Tomorrow I will offer you a sample of those messages and show you what I mean. Thursday I will suggest another totally obscure, ridiculous (and highly speculative) stock that could conceivably follow the same script as DEP (but that, given my luck, doubtless will not).
Quote of the Day
That I'm their competition.~Famed hedge fund manager Michael Steinhardt, when asked the most important thing an investor could learn from him.
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