Double Journey

My first stock purchase on this journey was going to be Activision, ATVI. I even made sure I was up early today to check out the stock and look for an In today. I liked the stock because I have found it impossible to find Guitar Hero 3 for the Wii. There were also rumors that Vivendi might buy it up. That meant that I wanted to get in and out of the stock in the next 3 weeks, right before Christmas. I thought the two above factors would mean good price action in the short term, with a good long term story of a growing gaming industry and a hot game franchise.  The stock has rebounded since hitting a dip in November, so it wasn’t too expensive and look ready to go up for a run.

Well, right before the bell Vivendi announced they were purchasing Activision. Stock Jumped 20% on the news. Since Vivendi has put a price on the stock now, it’s pointless to try and get in. Would have been nice to get a quick 20% return on my money. Oh well, on to the next stock.

So one of the things I was thinking about doing was to buy some shares of E*Trade. I actually own shares in my regular portfolio, and have been getting KILLED lately. The stock has probably lost about 80% of it’s value over the last year or so. So why the heck would I want to continue with the pain?

Friday, a Citibank analyst came out and declared that there was a chance that E*Trade would have to file for bankruptcy because it had several bad loans, many tied to the subprime mess. The stock instantly went down 60% from its already low price. Now, It’s not that I don’t believe they are in a mess, but I thought the selling was a bit overdone. This blogger seems to agree with me. I was contemplating taking another, short-term position in the company, and wait for a dead-cat bounce. For those that aren’t that involved with stocks, you should think of this phenomenon as something that happens when a stock gets pummeled in a very short time. It tends to “bounce” back as people cover their short position (they sold the stock without owning it, and have to buy back shares, hopefully at a much lower price, to pay it back). I wanted to get a few percentage points and then get out, and I would have sold if the stock dipped another 7% or the very next day, whichever came first.

But I’m not quite set up to do this yet. I’m holding off trading stocks for another week or two. If I had taken a position in E*trade at $3.70, which I was planning on doing, and held on to it until right now (which I would sell) I would have made a tidy profit of almost 50%. I would have taken a position of $5,000, so that would have given me $2500 toward my goal. Oh well, it could have easily gone the other way.