Readers Respond: SNDY, SPNGE, The Value of Experience

SNDY.pk: A comment from Lenny regarding Solos Endoscopy, in response to my post on Friday:

Hi Vinny,

I had also been doing a little DD on SNDY but only found 15 million shares outstanding - where did you find approx 1 billion? That makes a huge difference!!

Lenny

VFC's Take: Good question, and the difference between those two numbers is huge.

My information for the share numbers regarding this stock was taken directly from the Pink Sheets website. The stats for Solos were surprisingly up-to-date, from what I could tell; the market cap was up to date to the day and the outstanding shares numbers were about a month old. The pink sheet numbers are not always that up to date.

Disclosure: No position SNDY.



SPNGE: A comment from Scott regarding SpongeTech:

I have to say, SPNG has me completely baffled. I really thought the 10-k was going be filed by Friday, and the sales numbers would be verified. D&T backing out is a red flag to be sure (even though we have no idea what their motive is to do so, PR issues, etc.) Now the company is running the risk of a serious PR backlash, and that could get them caught in a downward spiral with regard to sales and marketing. If they don't get the financials cleared up soon, this is not going to end well.

Scott

VFC's Take: All valid points and concerns, that is why it is tough to make a call on whether SPNGE is a buy, sell or hold upon the resumption of trading.

However, things would really have to go south for sales to suffer that dramatically, in my opinion. It's unlikely that Joe the car wash guy is going to change his mind about buying a car wash sponge because of something he heard about a 10-k.

If, however, for some reason the company is forced to take product off the market or is hampered in continuing production in any way, then that could be a problem; but I don't think that retail shoppers of cheap products are going to base a Sponge Bob purchase on the PR firm backing out.

That being said, the stock could suffer - as you say - if the press gets worse and if the updated financial report is not released in a timely manner.

At this point, it's still a wait-and-see game. I do expect to see at least a small drop when trading resumes - whether the updated reports are good or bad - because there will be investors just looking to run away from the turmoil and confusion; those investors are probably sitting on pins and needles right now while the stock is not trading.

Unless dire news hits, I'll probably add to my position on any drop. I'm not heavily vested in this one at all compared to my overall portfolio, but if things look decent enough with the updated finances, then I'll be glad to pick up a few more shares on the cheap while those with a weak stomach for volatility run for cover.

Disclosure: VFC is long SPNGE.



A couple of comments regarding investing experience; one from Alejandro, the other from Lenny:

Hi VFC
As always, your comments are very instructive, and I have told you many times how I´m learning a lot from your sharing. Sometimes when I read your comments about your past experiences (or inexperience) I understand that if I hadn´t found this blog I would have kept making the same mistakes and I would have run out of money very quickly.
I have some fun anecdotes (well no so fun, I lost a lot of money), one of them is regarding to the reverse split (that you have explained some comments below), I used to have some shares of AIG,at first when it did a reverse split I didn´t know what it means, so I saw the value of my shares many times higher, I remember being just celebrating because I multiplied the amount of shares that I had bought with the following reverse split value. Well, as you have said, after a reverse split the value usually drops, and it did, so finally my happiness end when I realized that the amount of shares were twenty times lower, and I had lost a lot of money because it had dropped a lot (no more champagne for me).

Well I just wanted to share my INEXPERIENCE, and tell you one more time how much I have learnt and how much I appreciate that you share your knowledge, it is priceless.
Even when you have told us many times that you don´t do this for money, and when personally I like very much the idea of charity, I still feel that I owe you, so I wonder if would help you at least with a penny if I click the adds that you have on the blog (Don´t get me wrong, I know that a penny is not enough and doesn´t represent what I think would be right, but I could do it every day, after all, in a week I would be "paying" you with the cost of a share of Biel, wich if you are patient, you will be seeing it increasing many times =P )...
Thanks for your time... in this oportunity I wrote just to say to all good luck and have a good weekend!

Ale

Hi Vinny,

Alejandro has touched on something for me as well .... I have been investing since the 1980's and been making the same mistakes! I also feel I owe you something (besides all the beers or champagne - if we ever get a chance to enjoy a few).

Have a great weekend,

Lenny

VFC's Take: I like both of these stories because we all know that there are those out there that are doing just the same thing. I especially appreciate the feedback because I look back to when I first started investing and I simply had nowhere to go to get a good, unbiased opinion on certain stocks and trading strategies.

There are a load of subscription sites out there, but there were none that catered to little guy and few that even entertained some of the stocks that I was looking at.

I learned fast that I couldn't trust the big pay sites because they too often never mentioned a nice speculative stock until it had already run up significantly. At that point they would either tell investors not to buy it (and I'd always wonder why they never told me to buy it before it went up 200%) or they's 'start coverage' on the stock and say that the run could continue (after the most significant gains had already been had).

I decided that if I was going to make any significant money in the market as a small investor, I'd have to find these stocks BEFORE a big run, not hear about it from a pay-site when it was already too late. And the big analysts? Forget about it; those guys recommend stocks to the retail investors when they are at or near their highs and won't call it a sell until it has already declined off those highs fairly significantly - after their 'big boy' friends have already had a chance to get out. Of course, that's just all my opinion, but based on what I've seen and followed. I remember getting into Sun Microsystems at two and a half bucks when the stock was being slaughtered by the analysts and stock screeners. When it reached five dollars or so it started getting some nice BUY ratings and that was the final straw for me. I told myself that I'm not here to be played like a puppet, I'm here to make a few extra bucks. Since I couldn't find a good small investor community at the time and I had no one around with the same investing style or interests as me (everyone liked the safe stuff that gained maybe 10-15% a year), I knew I had to learn by some good, old fashioned OJT - and I knew that mistakes would be made.

When I started this blog, I had a small group of people in mind; we were never all in one place at the same time to discuss our ideas, so I decided to just post the stocks that I was looking at here along with the reasons why I was looking at them. Now we've got quite a few good tips, trading strategies and experiences coming this way that we can all benefit from.

Like Lenny said, we still make the mistakes years later - we all do. This blog is like therapy for me, too, because it's kept me honest and reminded me to stick to the disciplined strategy of investing that I like to preach.

Anyway, I appreciate the experiences, the feedback and the insights. We all benefit from it.

Don't worry about what I get out of this, because like I said, I think I save myself money with my investments because I remind myself to take profits or not buy too much of a certain stock when I recommend the same things to readers. The feedback and the success stories are good enough payment for me, and I do get a penny or two from the Google AdSense text links which are pay-per-click and I also get a commission on any sales that may result from the picture ads that appear on the page, those are not pay-per-click.

And I'll stress for new readers, I receive no compensation from any company about which I write - if I'm positive on the stock it is because, after my own DD, I was confident enough in the stock to put my own money in it.

Keep the learning experiences coming, we can all use them!