Free Lunch
Find December bargain stocks and track performance.
21 December 2008
This “Free Lunch” strategy is only a short-term strategy reserved for the nimblest traders. It has performed better after market corrections and when there are more new lows to choose from. We just experienced the fifth worst bear market since 1900 and we suspect that we have already begun a new bull market. There are a many viable and interesting candidates this year.
However, small caps tend to underperform at the beginning of new bull markets as smaller investors and speculative hedge funds that mostly trade them are still reeling from the damage of the recently ended bear market. This has us concerned that the January Effect for small caps to outperform big caps starting in mid-December may be more muted this year if it materializes at all. This could impact our annual Free Lunch Menu of bargain stocks as many of these beaten-down issues are of the smaller variety.
Investors tend to get rid of their losers near year-end for tax purposes, often hammering these stocks down to bargain levels. Over the years the Almanac has shown that NYSE stocks selling at their lows on December 15 will usually outperform the market by February 15 in the following year.
We have come to the conclusion that the most opportune time to compile our list is on the Friday before Christmas. This allows us to capitalize on the Santa Claus Rally and it also comes immediately after quadruple witching which further depresses already distressed equities. It also gives us the weekend to evaluate the issues in greater depth and weed out any glaringly problematic stocks.
Our basic parameters are that the stock set a 52-week low on Friday December 19. Preferred stocks, funds, splits, special high dividends and new issues are eliminated. In addition, we eliminated any stocks that looked questionable or thinly traded and all those not down more than 45% from their 52-week high or down more than 95%.
If you buy these stocks, sell them as soon as you have a significant gain. The stocks all behave differently and there is no automatic trigger point to sell at. Standard trading rules do not apply for these trades. You should be out of all of these stocks between the middle of January and the middle of February. Advice a la G.M Loeb, never forget why you bought a stock. Also, be careful not to chase these stocks if they have already run away.
DISCLOSURE NOTE: Officers of the Hirsch Organization do not currently own any of the shares mentioned. However, we may participate in the Free Lunch Strategy.
As a reminder, this will be our last email Alert for 2008. The next Alert will be the Santa Claus Rally Alert on January 5, 2009. But do check the blog for any interim comments and observations.
Happy New Year & we wish you all health & prosperity in 2009!
| 2008 FREE Lunch Menu of Bargain Stocks | |||||
| 88 Friday-Before-Christmas New Lows | |||||
| 52-Week | 52-Week | % Down | 12/19/2008 | ||
| Low | High | From High | Close | ||
| NYSE | |||||
| AAV | Advantage Energy | 3.88 | 13.53 | – 71.3% | 4.03 |
| AIB | Allied Irish Banks Plc | 4.55 | 47.72 | – 90.5% | 4.59 |
| BXC | Bluelinx Holdings | 1.09 | 7.54 | – 85.5% | 1.19 |
| CAP | CAI International | 2.90 | 20.44 | – 85.8% | 2.90 |
| CT | Capital Trust | 3.12 | 38.84 | – 92.0% | 3.95 |
| CSV | Carriage Services | 1.66 | 9.50 | – 82.5% | 1.86 |
| EPL | Energy Partners | 1.67 | 16.50 | – 89.9% | 1.74 |
| FBN | Furniture Brands Intl | 1.66 | 15.46 | – 89.3% | 1.66 |
| GGC | Georgia Gulf | 1.15 | 9.00 | – 87.2% | 1.15 |
| IRE | Gov & Co Bank of Ireland | 3.97 | 63.72 | – 93.8% | 4.07 |
| HNR | Harvest Nat Res Inc | 4.30 | 13.43 | – 68.0% | 4.50 |
| HIT | Hitachi | 41.27 | 77.33 | – 46.6% | 41.43 |
| ITP | Intertape Polymer | 0.67 | 3.59 | – 81.3% | 0.68 |
| KED | Kayne Anderson Energy | 7.04 | 25.62 | – 72.5% | 7.40 |
| MWE | Markwest Energy | 8.20 | 38.50 | – 78.7% | 8.83 |
| SNN | Smith & Nephew | 31.25 | 69.20 | – 54.8% | 31.56 |
| THC | Tenet Healthcare | 0.99 | 6.88 | – 85.6% | 1.07 |
| TNC | Tennant Co | 17.53 | 47.83 | – 63.3% | 17.82 |
| VQ | Venoco Inc. | 2.05 | 24.38 | – 91.6% | 2.46 |
| VM | Virgin Mobile | 0.60 | 9.42 | – 93.6% | 0.60 |
| WNS | WNS Holdings | 6.31 | 20.00 | – 68.5% | 6.31 |
| XRM | Xerium Technologies | 0.66 | 8.41 | – 92.2% | 0.70 |
| AMEX | |||||
| AZC | Augusta Resources | 0.47 | 6.95 | – 93.2% | 0.51 |
| CXM | Cardium Therapeutics | 0.40 | 3.19 | – 87.5% | 0.53 |
| CEP | Constellation Energy | 2.50 | 33.46 | – 92.5% | 2.52 |
| KRU | Crusader Energy | 1.07 | 7.57 | – 85.9% | 1.27 |
| DNE | Dune Energy | 0.12 | 2.30 | – 94.8% | 0.12 |
| ERS | Empire Resources | 1.22 | 5.80 | – 79.0% | 1.35 |
| GSX | Gasco Energy | 0.28 | 4.55 | – 93.8% | 0.28 |
| HKN | HKN Inc. | 3.03 | 13.60 | – 77.7% | 3.50 |
| ILE | Isolagen | 0.20 | 2.76 | – 92.8% | 0.22 |
| KOG | Kodiak Oil Gas | 0.34 | 5.50 | – 93.8% | 0.36 |
| RAE | Rae Systems | 0.50 | 2.89 | – 82.7% | 0.53 |
| XPL | Solitario Exploration | 1.38 | 6.10 | – 77.4% | 1.44 |
| NASDAQ | |||||
| CIDM | Access Integrated Tech | 0.39 | 4.50 | – 91.3% | 0.39 |
| ADLR | Adolor | 1.27 | 6.09 | – 79.1% | 1.61 |
| AFFM | Affirmative Insurance | 0.85 | 10.58 | – 92.0% | 0.90 |
| AFFY | Affymax Inc. | 8.75 | 23.38 | – 62.6% | 9.25 |
| ALOG | Analogic Corporation | 26.36 | 76.93 | – 65.7% | 27.77 |
| AREX | Approach Resources | 5.82 | 30.00 | – 80.6% | 5.87 |
| BLTI | Biolase Technology | 0.82 | 4.64 | – 82.3% | 0.98 |
| BBEP | Breitburn Energy | 5.25 | 30.36 | – 82.7% | 5.30 |
| CALL | Callwave | 0.53 | 3.15 | – 83.2% | 0.53 |
| CWST | Casella Waste System | 2.19 | 14.49 | – 84.9% | 2.40 |
| CNVR | Convera | 0.20 | 3.89 | – 94.9% | 0.26 |
| CREL | Corel Corporation | 2.87 | 11.49 | – 75.0% | 2.95 |
| COSI | Cosi Inc | 0.20 | 3.24 | – 93.8% | 0.22 |
| DXYN | Dixie Group | 1.57 | 9.55 | – 83.6% | 1.64 |
| HILL | Dot Hill Systems | 0.45 | 4.12 | – 89.1% | 0.46 |
| EROC | Eagle Rock Energy | 5.05 | 19.33 | – 73.9% | 5.14 |
| FTWR | Fibertower | 0.15 | 2.45 | – 93.9% | 0.16 |
| FSGI | First Security Group | 4.75 | 9.70 | – 51.0% | 4.75 |
| FLML | Flamel Technologies | 3.60 | 14.40 | – 75.0% | 3.68 |
| GEOY | Geoeye Inc. | 14.75 | 37.37 | – 60.5% | 15.02 |
| GOOD | Gladstone Commercial | 7.93 | 18.50 | – 57.1% | 8.13 |
| HYGS | Hydrogenics | 0.38 | 2.45 | – 84.5% | 0.38 |
| ISSC | Innovative Solutions | 3.31 | 12.61 | – 73.8% | 3.52 |
| KPPC | Kapstone Paper | 2.91 | 8.53 | – 65.9% | 2.99 |
| KSW | KSW Inc | 1.79 | 7.04 | – 74.6% | 2.67 |
| LUNA | Luna Innovations Inc | 2.00 | 9.90 | – 79.8% | 2.00 |
| MSCS | Msc.Software Corp | 5.75 | 14.03 | – 59.0% | 6.14 |
| NLST | Netlist | 0.24 | 2.33 | – 89.7% | 0.25 |
| NOVC | Novacea | 0.89 | 3.40 | – 73.8% | 1.06 |
| PHHM | Palm Harbor Homes | 3.70 | 13.15 | – 71.9% | 4.61 |
| PDFS | PDF Solutions | 1.37 | 9.94 | – 86.2% | 1.53 |
| PDLI | PDL Biopharma Inc. | 5.67 | 17.98 | – 68.5% | 6.75 |
| PARD | Poniard Pharmaceuticals | 1.66 | 6.39 | – 74.0% | 1.73 |
| QCCO | QC Holdings Inc. | 4.03 | 12.00 | – 66.4% | 4.04 |
| RLOG | Rand Logistics Inc. | 3.41 | 6.45 | – 47.1% | 3.41 |
| ROSG | Rosetta Genomics | 1.31 | 6.25 | – 79.0% | 1.39 |
| SPRO | Smartpros Ltd | 2.25 | 6.19 | – 63.7% | 2.39 |
| SUAI | Specialty Underwrite | 2.36 | 6.14 | – 61.6% | 2.42 |
| SIVB | SVB Financial Group | 24.56 | 69.90 | – 64.9% | 25.06 |
| TTWO | Take-Two Interactive | 8.15 | 27.95 | – 70.8% | 8.43 |
| VNDA | Vanda Pharmaceuticals | 0.48 | 7.90 | – 93.9% | 0.53 |
| VCGH | VCG Holding | 1.40 | 15.00 | – 90.7% | 1.42 |
| VRAZ | Veraz Networks | 0.37 | 5.38 | – 93.1% | 0.38 |
| ZIXI | Zix | 1.08 | 5.30 | – 79.6% | 1.11 |
| OTCBB | |||||
| ECTE | Echo Therapeutics | 0.23 | 2.15 | – 89.3% | 0.40 |
| ENLU | Enerlume Energy Mgmt | 0.24 | 2.74 | – 91.2% | 0.26 |
| EXOU | Exousia Advanced Mat | 0.25 | 1.01 | – 75.2% | 0.30 |
| IBIN | IBSG International | 0.42 | 2.30 | – 81.7% | 0.42 |
| LIVC | Live Current Media I | 0.35 | 3.48 | – 89.9% | 0.45 |
| NFEI | New Frontier Energy | 0.35 | 1.38 | – 74.6% | 0.36 |
| NIMU | Non-Invasive Monitor | 0.28 | 0.98 | – 71.4% | 0.34 |
| OLEPF | Oromin Explorations | 0.31 | 4.10 | – 92.3% | 0.31 |
| PPRG | Patient Portal Tech | 0.16 | 1.65 | – 90.3% | 0.29 |
| TAMO | Tamm Oil and Gas | 0.80 | 3.14 | – 74.5% | 0.95 |
STANDARD TRADING GUIDELINES - DO NOT APPLY!
YOU ARE ON YOUR OWN TO DETERMINE YOUR ENTRY & EXIT POINTS.WE WILL NOT BE UPDATING INDIVIDUAL FREE LUNCH STOCKS.
Please Trade Carefully. Bon Appetit!
Jeffrey A. Hirsch, Editor
J. Taylor Brown, Director of Research
The next issue will be available after the close on January 11, 2007.
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