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Finally, Somebody Explains SCO's Stock |
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Friday, April 09 2004 @ 02:25 AM EDT
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Melanie Hollands of IT-Managers Journal has taken on the chore of explaining to financially clueless types like me why stocks like SCO's sometimes go up inexplicably. I know some of you have been wondering and so have I. Given the company's fundamentals and its downwardly spiraling legal position, who is buying the stock and why would they? Here [PJ: the link no longer resolves in 2010] is the first of what promises to be a series, so she has only just begun. This article looks at some of the legal, if sometimes irrational, reasons why a stock might go up when you'd think it would go down, including how news can affect a stock. Here's a taste from the article: Well, stocks don't always trade rationally and in a straight line with what the underlying fundamentals would suggest. Over the long term, I believe stocks move rationally, but there are short-term moves that do not seem rational. In the case of SCOX (and Enron, WorldCom, and many others), I believe the primary long-term direction continues to be down. But on the way down, there are short-term 'secondary' moves that are often counter-intuitive to the primary trend.
An important driver for a stock price is that the market tends to be reactive and trade emotionally. For example, it can trade on hope, fear, and greed: hope that 'the worst is over'; fear that the worst is not over; and greed (such as what was driving Yahoo and Amazon a few years ago) that a stock can go up indefinitely. I always imagined that Wall Street was made up of rational, Type A guys, who maybe had charts and graphs, like you'd see at a race track. I went to a race track years ago, though I don't personally believe in betting, and that's what I saw, lots of old guys with newspapers and charts and lists of what horse liked to run in mud and stats on the last five times the horse raced. There were plenty of dopes who bet on anything, like a horse named for their favorite movie star or something, and then jumped up and down screaming as their pick ran around the track and lost. And then there was the small group I overheard, where a very short guy was telling everyone that a certain horse had to win, because the jockey told him. And it did.
In my imagination, Wall Street was like that, but with suits and a PowerPoint veneer. Yes, the masses might be silly and buy stock on a whim, and we all know there's a group talking to the short guy with the sure thing, but I thought the pros were the guys with the charts and stats. However, now I understand that it's emotion-driven, particularly in the short term. Hope, fear and greed, eh? Maybe next time Ms. Hollands will address what the cold-blooded do to get a stock to do what they want it to do. If any of you have any urls or facts you think she might find useful, for example events or days when you thought the stock behaved particularly oddly, leave the info as a comment. Maybe she'll read it and find it useful for a future article. By the way, for those who are interested, Brian Skiba has left Deutche Bank. He's with a "boutique investment bank" now. Here's where he summers, according to his home page, so I guess he's been raking in the dough. I hope the second home McBride dreams of isn't as grand as that one or this legalbeagle stuff may never end. Just last month, Skiba said Red Hat's business was accelerating, reported in an article, "Investors Love Linux: Red Hat Stock Is Red Hot After Upbeat Earnings, Sales Report". As I recall, he rated SCO at $45 because he thought SCO would get to be a tollbooth on the Linux superhighway. Ha.
That leaves Dion Cornett of Decatur Jones, who rates SCO Underperform. So does MorningStar. Is anyone else covering SCO? Well, of course MSN loves SCO. They print that the "Analyst Consensus" is Strong Buy. What consensus? For that matter, what analysts? Just Mr. Skiba? Mr. Cornett rates it Underperform. Hmm. And speaking of money, Microsoft was nice enough to send some business SCO's way, too. That's another thing maybe Ms. Holland can explain. How can analysts be so contrary in their ratings? Cornett says this about one day's odd upsurge in stock price and why he thinks it might have happened, in the March 29 edition of Decatur Jones' "Open Source Wall Street": For the week, SCOX shares traded down to as low $7.57 Thursday before surging late in the day Friday to close at $8.82. The appreciation was unexpected given that the only SCOX specific news that day was an IDG story quoting the EV1 CEO of regretting his licensing agreement, a definite negative as SCOX attempts to sign up additional SCOSource licensees. We suspect the increase in share price may have been driven by short covering given the stock’s performance for the year or possibly some investors willing to hedge their Linux bets with a potential SCOX jury victory. As we have detailed in prior reports, we note that even an outright win by SCOX may only at most generate a one-time $200 million or $10 per share cash windfall for SCOX. This hypothetical $10 per share plus the value of operations is not much greater than the current share price given the rapidly declining value of the core business. Cornett speaks about the recent wave of MS anti-Linux ads in the April 5 edition of "Open Source Wall Street", and he says this: Finally, we have observed increased anti-Linux advertising by MSFT. The typical ad, such as the one found last week in the middle of an InformationWeek cover story on MSFT and Linux, claims that Linux is 10 times more expensive to run then Windows Server 2003. However, in making the comparison, Windows is running on an inexpensive Intel platform, costing a few thousand dollars at most, and Linux is evaluated for cost while running on a 4000 pound IBM mainframe. We believe such advertising, which was audited by the META group, is deceptive and is tacit acknowledgement of Linux’s better price performance. He writes about the Sun-Microsoft deal too: Last week Sun Microsystems (SUNW: not rated) and Microsoft Corporation (MSFT: not rated) announced a settlement to pending litigation and signed a 10-year technology sharing agreement. We believe the sudden cooperation between long-time rivals was in part driven by the common threat of Open Source software. Yet, despite fears that the agreement could form a patent portfolio roadblock or shift momentum back toward SUNW and MSFT’s proprietary technology, we believe that the agreement will have minor impact on Open Source adoption; (1) the world’s most patented company, IBM Corporation (IBM: not rated) is positioned on the side of the Linux and the threat of retaliation may deter a patent war against Linux; (2) regulators are unlikely to allow SUNW and MSFT to share information, to the detriment of the industry, without sharing interfaces, API’s and other software internals broadly; (3) the IT community has proven the ability to defend against overly-broad patents as was the case with the Eolas patent; and (4) IT customers are unlikely to adopt solutions that result in stringent vendor lock-in as they increasingly express interest in 'choice'. Furthermore, the agreement does little to change the competitive landscape for Linux. MSFT is not planning on porting Windows over to SUNW’s proprietary SPARC microprocessor architecture, thus the SPARC OS options will remain only Solaris and Linux. Incidentally, we believe MSFT’s lack of interest in SPARC supports our previously expressed skepticism despite SUNW’s $4 billion commitment to developing the next version of SPARC called 'Rock'. In the x86 server market, SUNW certification of Windows provides little differentiation and 'Solaris on x86', is not working. Solaris on x86 is probably 9 to 12 months from practicality according to our industry checks as it does not support hyper-threading, or 64-bit microprocessors, and the performance is reportedly poor. Thus, Linux will remain a favorite choice for x86 boxes replacing UNIX systems. SUNW’s announced expected revenue shortfall is due in part to the success of Linux. Last week Hewlett Packard (HPQ: noted rated) executives boasted that early results of their newly announced Sun Eclipse program to migrate users from Solaris to Linux were 'encouraging'. Previously, IBM had offered a 60% discount to VAR’s selling Linux products many of which may overlap with Sun’s Solaris channel. Fortunately for SUNW, the company does have some positive Linux exposure. We continue to receive evidence of SUNW winning small Open Office-driven desktop deals such as a potential 600 unit deal last week. While SUNW’s Open Source revenue is negligible, the Linux desktop, along with possibly Open Source Java, may be areas where SUNW can preserve shareholder value. However, SUNW has hinted that they see Linux as a stepping stone from Windows to running Solaris on desktops suggesting that SUNW still does not understand the market dynamics negative given Open Source adoption. Amen, brother. There is a bit from Sun from Rick Ross, founder of Javalobby: Notably, Sun V.P. Rich Green, with whom I worked closely to prove to Judge Motz in the courtroom that Microsoft had gravely damaged Java and Java developers, is leaving Sun after 14 years there. Rich's resignation was the first significant news to emerge following last Friday's public relations event where Steve Ballmer and Scott McNealy smiled and laughed, shook hands and reminded us all that they have been great personal friends ever since growing up together. There's some doubt about the circumstances of Rich's departure. It was first reported in The Register, which said he was quitting Sun in 'disgust.' Sun's people got hold of the story and quickly re-spun it to be just 'coincidental timing.' I don't know which angle, if either, is closer to the truth. Rich has been a tireless champion of the Java values and vision most of us share in the developer community. In my opinion he was the best friend the developer community had inside Sun, so I am genuinely sad to see him leaving. It makes me respond to the news of the Sun/Microsoft settlement with fear and apprehension. None among us knows what Rich knows, but we can be sure he knows more about the entire matter than we do, and he has decided that now is the right time to be somewhere other than at Sun. Despite the best efforts of Sun's PR team to minimize the event, I cannot see Rich's exit as an unrelated or inconsequential occurrence. Sun's principal Java leader and champion has left the company on the heels of the Microsoft settlement announcement. On the surface, at least, it would appear to speak volumes.
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Authored by: PJ on Friday, April 09 2004 @ 03:35 AM EDT |
Please record my mistakes for posterity here, so I can find them easily. Thank
you.[ Reply to This | # ]
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- MOD article - Authored by: bruce_s on Friday, April 09 2004 @ 05:07 AM EDT
- Corrections, Then for Than - Authored by: math geezer on Friday, April 09 2004 @ 12:19 PM EDT
- Corrections Here Please - Authored by: speedy314 on Friday, April 09 2004 @ 02:18 PM EDT
- Corrections Here Please - Authored by: Anonymous on Friday, April 09 2004 @ 04:09 PM EDT
- target price of $2 for SCO - Authored by: Anonymous on Friday, April 09 2004 @ 04:34 PM EDT
- A great book to read about this - Authored by: Anonymous on Friday, April 09 2004 @ 05:25 PM EDT
- Corrections Here Please - MSFT Financial Pyramid - Authored by: Anonymous on Saturday, April 10 2004 @ 07:02 PM EDT
- "Deutche Bank" -> "Deutsche Bank" - Authored by: sth on Saturday, April 10 2004 @ 09:18 PM EDT
- Corrections Here Please - Authored by: Anonymous on Monday, April 12 2004 @ 04:54 AM EDT
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Authored by: crs17 on Friday, April 09 2004 @ 04:20 AM EDT |
Melanie is doing technical stock analysis, which is fine, up to a point.
Technical analysis is a form of statistical analysis. The underlying rational
for statistical analysis is the theory that large groups of people (traders in
this case) tend to act in predictable manners and that you can use statistical
methods to predict these behaviors.
I say this is fine up to a point,
because the key assumption is the one I mentioned early - that what you are
observing is the behavior of a large group of people. Individuals,
unlike large groups of people, act quirkily and statistics is a poor predictor
of an individual's behavior.
SCOX is a very thinly traded stock. The
average daily volume is 361,466 shares, or a little over $3.5 million at
today's inflated price. That's not a lot of money, so on any given day, someone
who wants to use a half million dollars or less can influence the price as they
want. Half a million dollars may sound like a lot of money to you or me, but it
isn't to traders. And it's not like they have to spend this half million, just
put it in play and maybe lose some of it.
So lightly-traded SCOX price can be
affected by individuals, and technical analysis fails under that condition.
As I and others have discussed here
and in the first anonymous response, the most likely culprit right now is
Baystar or Royal Bank of Canada (RBC), the holders of the Series A-1 Preferred
stock. In this case, the most recent rise was probably due to Baystar/RBC
wanting to insure that a clause in the Series A-1 offering would not allow SCOX
to convert the A-1 shares to Common shares (ie normal SCOX stock). This runup,
brought SCOX price above $10.50 just in the nick of time so that TSG could
not convert the Preferred into Common. Converting Preferred into Common would
cause Baystar/RBC to lose its place at the head of the line in any bankruptcy
proceedings and at things look now, Baystar/RBC see a bankruptcy proceeding as
the only chance they'll have to recover any of their investment. [ Reply to This | # ]
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- Finally, Somebody Explains SCO's Stock - Authored by: Gerhard on Friday, April 09 2004 @ 04:54 AM EDT
- umm... - Authored by: gdeinsta on Friday, April 09 2004 @ 05:35 AM EDT
- umm... - Authored by: Anonymous on Friday, April 09 2004 @ 05:40 AM EDT
- umm... - Authored by: Ruidh on Friday, April 09 2004 @ 06:52 AM EDT
- sale of IP assets?? - Authored by: Anonymous on Friday, April 09 2004 @ 07:45 AM EDT
- umm... - Authored by: Anonymous on Tuesday, April 13 2004 @ 01:47 AM EDT
- Finally, Somebody Explains SCO's Stock - Authored by: Steve Martin on Friday, April 09 2004 @ 07:33 AM EDT
- It's the Only Game in Town - Authored by: Ruidh on Friday, April 09 2004 @ 09:05 AM EDT
- Finally, Somebody Explains SCO's Stock - Authored by: darkonc on Friday, April 09 2004 @ 11:11 AM EDT
- Finally, Somebody Explains SCO's Stock - Authored by: gmp on Friday, April 09 2004 @ 11:22 AM EDT
- We know Linux. Many investors don't. - Authored by: Anonymous on Friday, April 09 2004 @ 11:55 AM EDT
- Technical analysis is voodoo. - Authored by: Anonymous on Friday, April 09 2004 @ 12:21 PM EDT
- Finally, Somebody Explains SCO's Stock - Authored by: Melanie Hollands on Friday, April 09 2004 @ 12:36 PM EDT
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Authored by: Anonymous on Friday, April 09 2004 @ 04:50 AM EDT |
While the article does a good job of explaining how stocks often work, it is
misleading to apply these same rules to SCOX.
Stock is goes up if someone
is buying it and it goes down if no one is buying it. Over the last several
months one person has been buying a ton of SCOX stock and that has driven the
price up.
It's easy to see that it's just one person buying the stock
because his buying patterns are predictable. He either buys stock at the
beginning or end of the day. For example, take a look at the activity today. He bought stock right at
the beginning of the day. Another example image I saved is from March 31. On that day he bought
stock at the end of the day. A lot of days he buys even more shares of stock,
up to 50,000 shares. If you watch the stock you'll see that this buyer has more
impact on SCOX price than any news articles.
Some people think that this
guy is SCO buying back their own stock, but I have heard the SCO is forbidden
from buying back there stock except from employees because of the BayStar
deal.
The real question is this guy buying SCOX stock and why?
[ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 04:56 AM EDT |
IBM should create the next generation language/platform from its experiece in
java and .net. Do what it did with eclipse.org and then release it as free
software and still be in control. IBM is to dependant on Sun with java.
What is hps opinion here. Are they not on ms side, it where they make most there
money?[ Reply to This | # ]
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- OT: HP - Authored by: Anonymous on Friday, April 09 2004 @ 05:34 AM EDT
- OT: HP - Authored by: artp on Friday, April 09 2004 @ 08:35 AM EDT
- OT: HP - Authored by: Anonymous on Friday, April 09 2004 @ 01:40 PM EDT
- OT: new java - Authored by: Anonymous on Friday, April 09 2004 @ 06:17 AM EDT
- OT: new java - Authored by: Anonymous on Friday, April 09 2004 @ 10:21 AM EDT
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Authored by: SmyTTor on Friday, April 09 2004 @ 06:40 AM EDT |
I thought a few baseball fans might be interested in Microsoft's new deal to
webcast Major League Baseball programming over the net. The article does not say
if Microsoft has the exclusive rights to webcasting, however it's probably a
safe assumption. Regardless, this is a perfect example of Microsoft's plan to
leverage Windows and exclude competition in something that reaches a bit further
away from the computer world.
Another interesting bit of info, this
time for gaming fans. Microsoft recently was awarded a gaming console patent and
is reported to have many more patents pending. The patent covers the
following:
Method and apparatus for displaying information
regarding stored data in a gaming system
A gaming system includes
a hard disk drive for storing applications and other data. The hard disk drive
has multiple storage areas for storing different types of data. Each application
executed on the gaming system has an associated data storage area and is
prevented from using data storage areas associated with other applications. When
saving a game, the saved game data may include a descriptive name of the saved
game, a graphic representation of the state of the game when the game was saved,
a description of the game state when the game was saved, and a date and time
that the game was saved.
Being an avid gamer myself but not
much of a console fan, I asked a few of my friends about what they thought on
the subject, one a former game developer. They understood the buzz is that this
is for some new revolutionary console storage medium, however they couldn't help
but be a little concerned with the language used. The developer said unless this
is for a genuinely new physical design for storing data he doesn't see how it
can be a valid patent as vague as it is. He was concerned this could possibly
hamper some planned features in the new PlayStation and Game Cube designs that
have been recently announced.
MLB on
MSN
http://news.com.com/2100-1026_3-5187109.html?part=rss&tag=feed&s
ubj=news
XBOX
Patent
http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF
&d=PALL&p=1&u=/netahtml/srchnum.htm&r=1&f=G&l=50&s1=
6,716,102.WKU.&OS=PN/6,716,102&RS=PN/6,716,102+
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Authored by: SilverWave on Friday, April 09 2004 @ 07:11 AM EDT |
Thanks for this article, it gives a very helpful insight into what’s going on.
---
Oxymoron of the day is … “SCO's Ethics”
LOL!
I dare you to say it and not laugh!!!
[ Reply to This | # ]
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Authored by: akStan on Friday, April 09 2004 @ 07:12 AM EDT |
"If any of you have any urls or facts you think she might find useful, ...
leave the info as a comment. Maybe she'll read it and find it useful for a
future article."
There are some useful statements among the messages on the Yahoo! Message Board
for SCOX, linked from Groklaw's "SCO Financials".
Need we suggest she scan these?
Examples:
Writer stats_for_all compiled a list of those he knows or suspects of holding
substantial short stock positions. See message #121122 under the thread
"Short Players" at 11:37 am on the 7th.
Later, at 11:48 am, inspector_renault connects some dots to explain unusual
patterns. See message #121127 under the thread Re: Going to be a day of strange
trades.
---
Stan[ Reply to This | # ]
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Authored by: sphealey on Friday, April 09 2004 @ 07:33 AM EDT |
Most stock analysis assumes that over the long run the participants in the
market are acting to maximize their economic return. However, it seems fairly
clear that there are people trading this stock who expect to receive their
return on trading SCOX from some source other than the stock itself. Therefore,
they are acting over the long term in ways that are technically irrational.
That makes most standard analysis useless.
Even for short term behaviour, there is an assumption that there are a large
number of traders who are not in communication. Here it appears that there is a
small number of key traders, and they are in communication.
So, I am afraid we may never know exactly why SCOX has propped up in this $8 -
$12 range.
sPh[ Reply to This | # ]
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Authored by: krow on Friday, April 09 2004 @ 08:10 AM EDT |
Unless I am misreading this (and I may well be,) Capital Guardian was one of the
buyers in the recent run-up. Y! shows them at 1312000 shares, this filing puts them at 1485500 shares -- an addition
of 173500 shares. This moves them from 9.1% to 10.3%
ownership. Cheers, Craig
--- Corollary to Clarke's Third Law:
Any technology distinguishable from magic is insufficiently advanced. [ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 08:21 AM EDT |
1) I've been following RHAT & SCOX together:
http://finance.yahoo.com/q/bc?s=SCOX&t=1d&l=on&z=m&q=l&c=rha
t,^SPX
On many days, the RHAT and SCOX go their separate ways, and the news of the day
being a plausible driver. But there are a large handful of other days when
appears that the two will increase or decrease by the exact same amount at the
same time of day. I wonder if this has to do with fund managers out there
investing in "the sector", not having made any disconnect between the
merits of the two companies.
2) Perhpas there are bitter cynics hoping for a M$ buyout, too.[ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 08:40 AM EDT |
Basically, what she's alluding to is the difference between trading on
technicals and trading on fundamentals.
Technicals are things like the 200 and 50 day moving averages, 52-week high and
lows, short margin, volume, etc. They are the statistical analysis of the price
of the stock relative the rest of the market and have NOTHING TO DO with the
business.
Fundamentals are things like the profit-per-share, the dividend payment for the
last quarter, management strengths and weakness, market strength, market
position, etc. These are the hard business analysis of the actual business
value.
Long term trading follows the fundamentals. That's why IBM and Coke are worth
more than SCO. Short term trends follow the technicals, and do wierd things like
drive up failing businesses as short positions are enacted, margins are called,
and people by stocks that cross the 50-day moving average on the premise that
the tendancy is to move between the floor and ceiling.
Now, there's nothing particularly wrong with trading on technicals. It's done
precisely because if you're really good at it, you can make money. You probably
won't make alot of money, but there is the small chance that you can make a
mint.
Trading on Fundamentals, on the other hand, is what gave us Warren Buffett.
The key thing to understand about stocks like SCO is that the people who buy
stocks for fundamentals are <b>ALREADY OUT OF THE MARKET ON THIS
ONE!</b> Unless they are shorting options, which is a possibility given
the total craptastic state of SCO's fundamentals.
So what's left are people who are not buying and selling SCO to invest in the
company, but are buying and selling SCO because they beieve they can beat the
market trend in the short term.
Now, I'd take issue with the idea that trading on technicals is irrational. It's
not. But it's not rational with respect to the company's fundamentals. It's
rational with respect to the performance of similar stocks in the market in
general.
Now all that said, go buy IBM :)[ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 08:47 AM EDT |
When a stock is falling, most people know it is a good idea to get out in the
short term unless you're looking long term. SCOs financials are such that any
"long term" investement might not exist. As such, there only
short-termers in it.
As a price falls, it hits one of these short-termer's threshhold for a buy. They
buy. Someone else is like: well, someone bought it, I'll buy it again, for AT
LEAST that price. Then you have a increase in price, others take notice and do
the same. (Momentum) Then it becomes an online auction. By the time it slows,
it's gone up 25% (from $8 to $10) Then its no longer a deal. So the price falls
back down.
One coworker of mine that knew nothing of the stock market made and errones
comment that "someone's getting rich [from stock]" when Enron or
MCI/WC crashed. I corrected him and added that stocks are not a balanced
equation. It's all speculative. It is gambling.
Gamblers learn the factors and how they effect their odds. Both gamblers and
traders put money down hoping on an unlikely outcome (generally the more
unlikely (risk), the bigger reward)to be dicided by other people at a later
date. The only difference is that a loss usually makes several stops in getting
there before the bottom falls out. But the same is true when it is spiking. You
have an opportunity to get on board. [ Reply to This | # ]
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- Reason: Momentum - Authored by: Anonymous on Friday, April 09 2004 @ 11:35 AM EDT
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Authored by: Nivuahc on Friday, April 09 2004 @ 09:30 AM EDT |
"Solaris on x86 is probably 9 to 12 months from practicality
according to our industry checks as it does not support hyper-threading, or
64-bit microprocessors, and the performance is reportedly poor. Thus, Linux will
remain a favorite choice for x86 boxes replacing UNIX
systems.
Wait a sec... isn't Solaris a derivitive of System
V?
If the only reason Linux is able to support hyper-threading and 64-bit
processing is because of the precious code that was supposedly nicked
from System V, why isn't Solaris there yet?
--- My Doctor says I have
A.D.D... He just doesn't understand. It's not like... Hey! Look at that chicken! [ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 10:38 AM EDT |
The current trading of SCO stock is most likely just amongst day traders at this
point, with long term investors bailing out. Day trading has little to do with
the fair market value of a stock, and instead has more to do with speculation
about what other traders are going to do with that stock in the immediate
future.
Long term investing is typically based on the idea of "fair market
value" -- that a company has a specific value at any given time, and over
time the stock price adjust itself to reflect that value. Buying long term
stocks, you're trying to pick stocks you think are currently undervalued, in
companies which you think are going to continue to grow (and thus keep inflating
their fair market value).
Some long term investments are higher risk than others. If SCO were to actually
win, their fair market value certainly could be that $45 stock price. If SCO
looses, but still is in business they would be worth considerably less, but
would still be worth something. If their stock price is below that
"something", it's worth buying.
Graphs of a stock's performance only tell part of the story. It tells you what
the stock has done in the past, but tells little about what it's likely to do in
the future. There are lots of other things which factor in. Has it been rising
because it was undervalued, but now has hit what it's worth? Did it go up too
high and overshoot it's value? Did the management just make a dumb decision
(like Gateway when they decided to open up brick & mortar stores, which
dramatically increased their operational costs)?
IANAL and IANAFW (Financial Wizard) but, I haven't lost the shirt off my back
[yet]. Maybe I'm just not trying hard enough. =)[ Reply to This | # ]
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Authored by: Jude on Friday, April 09 2004 @ 10:48 AM EDT |
I think there's a lot of psychology in speculative trading. A particular
investor might think SCO's latest press release is a complete crock, but might
buy anyway because he thinks other investors will be suckered by the B.S.
Of course, other investors might decide NOT to buy because they think a rise in
SCO stock is caused by second-guessers. If you continue the Nth-guessing to
arbitrary depth, the stock behaviour becomes impossible to analyze.
[ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 11:31 AM EDT |
A new source of 'proprietary is best' garbage from BusinessWire.
The usual
lack of comment from other sources as well I
notice. [ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 11:46 AM EDT |
The 5% rule only applies to those that did not previously own in excess of 5%.
Canopy can buy what they feel like as long as they comply with their SEC filing
as an owner holding more than 5%.[ Reply to This | # ]
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Authored by: Melanie Hollands on Friday, April 09 2004 @ 12:41 PM EDT |
I am stunned, simply stunned, by the number of readers who dont read clearly. I
have been reading some of the posts on here this morning, and I am stunned by
the number of readers who have closed minds and who are merely demonstrating
their complete and utter ignorance of the investment process.
For what its worth, I am a fundamental analyst who uses fundamentals as my
primary analytical tool, but who also uses technical analysis as a secondary
analytical tool.
What does this mean? Why is it relevant?
Well, it means that I take positions based on fundamentals (not technicals) but
I use technicals to 1) TIME the entry of a position, 2) TIME the exit from a
position, 3) get an indication of the short-term direction and momentum in a
stock, and 4) help me as a guide regarding a) the size of, and b) how to place
(i.e., "scale into") a position.
But if I take a position it is fundamentals driving the decision
"invest" or "not invest". Technicals drive my decision
"invest now" or "invest later".
When I refer to technicals in my writing, the technicals are not intended to be
an indicator about what I believe to be true or false about a company's
fundamentals. I use technicals as a guide to TIME my positions and take a view
on what direciton I think the stock will move in over the SHORT-TERM.
However, over the LONG-TERM I believe that stocks move RATIONALLY in a way that
is consistent with the fundamentals and that technicals are not the best guide
for long-term posistions. For example, the technicals tell me SCOX can move UP
in the SHORT-TERM, but the fundamentals tell me this stock will go DOWN (and
more than likelY go to ZERO) in the LONG-TERM.
Why is this distinction important? Because if I am going to be short, for
example, then I want to be short at a higher level and not a lower level. If I
take the short at a lower level (in spite of technicals telling me there will
probably be a SHORT-TERM move UP) then as the stock goes UP my short position
gets "squeezed" - i.e., my short position is in the red. And If the
posisiton gets "squeezed" enough then I need to get out of the
position at at LOSS before "putting out" the short position again at
a
higher level. Whereas deferring to the "signals" from technical
analyst could (stress COULD) have prevented me from getting "squeezed"
and allow me to take the position at a more opportune time. And also allow me to
employ a better use of capital until the time that I think its better to be
short. But this is just one example.
As for technical analysis being "voo doo", I am not primarily a
technical anlyst and I reiterate that I DONT make investment decisions based on
techncials. I merely TIME my investment decisions with the use of technicals.
This is an important difference.
Cheers
Melanie[ Reply to This | # ]
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- Finally, Somebody Explains SCO's Stock - Authored by: Anonymous on Friday, April 09 2004 @ 01:06 PM EDT
- Finally, Somebody Explains SCO's Stock - Authored by: cmason on Friday, April 09 2004 @ 01:07 PM EDT
- Finally, Somebody Explains SCO's Stock - Authored by: Larry West on Friday, April 09 2004 @ 02:31 PM EDT
- Finally, Somebody Explains SCO's Stock - Authored by: Nivuahc on Friday, April 09 2004 @ 03:20 PM EDT
- Finally, Somebody Explains SCO's Stock - Authored by: Anonymous on Friday, April 09 2004 @ 03:36 PM EDT
- Is this really Melanie Hollands posting here? - Authored by: Anonymous on Friday, April 09 2004 @ 04:14 PM EDT
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Authored by: cmason on Friday, April 09 2004 @ 12:46 PM EDT |
Okay, here's the secret about analysts: None of them (barring illegal
insider
information) know any better than anyone else about whether a stock
will be
going up or down over the short, medium, or long term.
This is
easy to demonstrate. Take any analyst who has been in business for 5
to 10
years. Calculate how much annual return would have been generated
over that
period by buying and selling the stocks covered according to the
analysts' buy,
sell or hold recommendations. In over 95 percent of the cases,
they will make
less money than major market indices (i.e. the S&P 500), in
many cases
they will have a negative annual return. Some very small number
of analysts
might match the S&P, but statistically some have to purely by
luck.
Actually, it's even worse than that. The analysts' firms are often
doing
business with some of the companies they are covering. Despite the so
called "Chinese Wall" there is often presure to provide good converage,
whether deserved or not. This means that analysts' advice can be
worse than blind chance (remember the old story of the monkey
throwing darts at a newspaper and picking better stocks than the
professionals?)
So, why are analysts given jobs? Their jobs are to
basically publicize the firm
they work for and generate both retail and
corporate business. They are not
expected to actually be right about anything,
just sound good. [ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 01:11 PM EDT |
What you're overlooking is that (a) SCO has a relatively
small number of
investors (b) SCO is a member of a group
of investment-related companies and (c)
stock price is
driven by what is actually traded.
So a small group of
investors could trade stock at any price
they choose to maintain. Since some
people use stock as a
tax-loss strategy they could easily sell low and buy high
which allows the stock price to rise and drives up the asking
price. A fellow
investor, aware of this tax-loss move (maybe
by reading a pre-release of a press
release (charitably)),
could buy low, sell high and invest the profits in the
first investor's company. This has the effect of giving
the first, losing
investor his money back tax free. With
a coordinated group of companies
controlled by a few
investors they can drag in (and gain from) other
people's
money at the same time (especially if an "analyst" happens
to strongly
approve of the stock). The first company gets
the money back tax free and gains
windfall profits. These
get recorded as bonus awards for the management who
get
back their tax losses.
It's only a sucker game if you're not part
of the
investment group. So ask who is buying, who is selling,
what is their
tax position, what bonus money have they
gotten, who invested in their company,
and how are they
related to the other buyers.
You could get in on the
game if you show up with a big
pile of money (oh, wait, invest thru a bank or
two so
there is no trace that it is "your money". Bankers
appear to be honest
and would never invest in companies
that were clearly going to lose their
money).
You can't know this. The SEC won't figure it out because
they
have to investigate many companies at once to see
the big picture. It's the Yale
skull-and-bones kind of
stuff. Only a select few need to know and they
won't
ever tell. Even if you investigate all of the companies
in the group and
see the pattern you still have to prove
it. Since the proof requires knowing the
intent of the
players you still lose. And foreign banks from far-away
countries
like Canada can't be investigated.
Even better is that most of the actions are
not illegal.
If the first investor knows the game and gets his signals
from the
press releases he has done nothing illegal (since
the information is public
knowledge). All he has to do is
act "irrationally" by deciding to buy on bad
news and
drive up the stock price. And he covers his actions by
claiming the
"the leading analyst" recommends a strong
buy no matter how bad the news.
If you see companies with large stock price gains when
bad news is
announced, you see the company is part of
a tight clique of companies, you see
"a leading analyst"
making irrational recommendations then you can suspect
(but
never prove) this strategy is used.
Follow the money.
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Authored by: codswallop on Friday, April 09 2004 @ 01:19 PM EDT |
Only 14% of the SCO stock is in the hands of individual investors, the rest is
either owned by Canopy or institutions, with one institution having the lion's
share of the institutional holdings (Royce). That 14% is around 2,000,000
shares. The last reported short interest was over 2,7000,000 shares.
Not only is SCO thinly traded, but the effective float of 2,000,000 is small.
Average volume is around 270,000 shares, but lately the trend has been either
light days under 200,000 or heavy days 350,000 or more. On light days the trend
haas been to drift down. This, I think, represents the sentiments of the
individual investors. The heavy days would then be due to institutional
investors, day traders and short sellers.
There seems to be a bit of a shortage of stock to borrow (you have to borrow
stock to get the stock to sell short). Any recall of the loaned stock either
because the owner wants to sell or for other reasons forces the short seller to
repay the loan in stock (not money). To do this, the short seller has to buy
stock. The same thing happens if the stock rises above the point at which it was
shorted far enough to trigger a margin call.
Another aspect of short positions is that the underlying sales are neutral as
far as the stock price goes. Every sale of the lent stock forces a buy by the
borrower. If this process neutralizes a significant amount of the downward
pressure of the sales, the upward pressure of the non-short buys has no
compensation, and the stock goes up.
Is this happening? We don't know. The Yahoo board doesn't show many complaints
about people having their loans recalled.
As for daytraders, they are momentum/technical investors. They look at recent
stock price trends and try to ride them. When they're involved, you tend to see
a lot of volume in the last 2 hours of trading, because they don't like to hold
positions overnight.
Short selling will tend to force a stock down. It's extra down demand, since the
stock was never bought by the seller. If there's no corresponding buy interest,
down it goes.
The consensus seems to be that the institutions and/or SCO (through the buyback)
are forcing the price up. The total excess volume over the recent average for
the days of the big surge is only 600,000 shares. It doesn't take a lot to move
a stock that nobody wants to buy and no individual owns any of to sell. If the
institutions want it to go up, it will.
Of course, this is only true in the short term. As with a government currency
intervention, eventually they run out of ammunition. The motive for their buying
is probably to prevent a crash in the stock price so steep, that people would
lose any remaining confidence in the stock. The institutions (Royce in
particular) have positions too large to liquidate fast and probably aren't fully
hedged. It would probably take Royce weeks to sell without driving the price
down. I suspect he wants to lighten up a lot before the next fund report comes
out. I think the closing date is June 30, so it would be by then. It's called
window dressing - getting rid of any stocks you don't want to be seen owning in
your reports.
There's a site that shows what the orders and sales are for the bigger players,
and it shows them consistently selling at every peak. They're getting out. The
buying seems to be smaller players. This could be the shorts being forced to
cover when the institution sells the stock it lent.
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Authored by: Anonymous on Friday, April 09 2004 @ 01:23 PM EDT |
As a former fairly active daytrader ($500M sales in '01,
lots of
small trades) I have figured out exactly what makes
a stock go up: Buying
:) not news, technical indicators or
fundamentals, sentiment or anything
else. That's facetious
but what I am getting at is, I believe the
mysterious
factor no one can identify is often ONE BIG trader
(remmember LTC?) that will move the market, whether a stock
or the
whole market (yes I believe one big trader that can
push a major index
around). For example, when SCOX pops,
I
wouldn't be surprised if
it's just one big player unloading
a short (ie buying stock to cover). So
the stock would be
moving for no other reason than this one guy
(institution
etc) deciding it was time to get a big trade done. (For
whatever reason, eg profit or loss target reached). It
becomes
obvious when you watch a market move around all day
long, when there
couldn't possibly be any fundamental or
news reason for the moves. Given
that experience (and I'm
sure it's even more obvious to a floor trader), I
find
most of the rationalizations made to explain stock
movements
very amusing. [ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 01:25 PM EDT |
http://linuxtoday.com/security/2004040901626OSDVPB
Apparently the author of this piece worries about foreign contributions to
software having 'national security' connotations.
Of course, no PROPRIETARY SOFTWARE companies hire foreign workers, or off-shore
any development work, do they?[ Reply to This | # ]
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Authored by: Slimbo on Friday, April 09 2004 @ 01:26 PM EDT |
Linda Musthaler had this
refreshing article printed in Network World about SCO's business plan. Thought
you all might enjoy seeing more people seeing SCO for what they
are.
Also I was flipping through some other trade papers and came
across and article about MS's delay with Lognhorn. It stated that part of the
delay is a radicle change in the user interface, comparable on scale to the
diferences between Win98 and XP. Combining that with an Eweek article about Sun
considering opening the 3D Looking Glass Environment, I think I figured out what
what else MS got for their money. Would not surprise me to see it incorporated
into Longhorn.
Just my little gears churning,
Randy[ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 02:19 PM EDT |
it's the institutionals. End of Story, PERIOD, case closed.
The price goes up because a buyer is willing to pay more. Every buyer has
different reasons. Technical, fundamental, fear, greed, flush with money and
want to gamble, whatever ... .
After EVERY major move up in this stock we found out some institutional had
taken a position.
ICP, Renaissance, Royce and the new one listed above by Krow.
It seems that SCOG is a better salesman with the Wall Street analyst/money
manager types than with clued in Linux users. The Wall streeters seem
positively gullible nitwits in comparison.
Maybe that's why Darl thought ScoSource would make money.
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Authored by: Anonymous on Friday, April 09 2004 @ 02:31 PM EDT |
Okay, I've been told that it's not meaningful in terms of manipulating the share
prices, but what's up with some of the bid/ask prices? I mean, people asking
for $3000/share (or something equally insane) and bidding about $0.02/share? Of
course, these were after-hours listings, so no one apparently took them up on
that.
I just want to know why people are screwing around like that, though?
I also saw comments from someone about the real action being in the derivatives
or something (P-series something? I've totally forgotten, sorry!). They said
they'd been through a pump & dump before, and they felt that they recognized
some of the same warning signs in SCOX.[ Reply to This | # ]
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Authored by: lachoneus on Friday, April 09 2004 @ 02:55 PM EDT |
I tried looking up “sco” in the dictionary, but it wasn’t in there. Here’s what
I found instead (in alphabetical order, of course):
scoff
scold
scolex (the head of a tapeworm)
scoliosis (crooked spine)
scolytid (wood eating insect)
scorch
scoria (that which is thrown off, refuse, dross)
scorn
scorpion
scortatory (vulgar, indecent)
scote (to stop or block)
scoundrel
scourge
scowl
I don’t know if these words all have a common root, but if so, it would appear
that the letters “sco” connote something that is negative or crooked.
Perhaps if we wait 50 years, “sco” will be included in the dictionary. Maybe the
entries will look like this:
sco (n) 1. a blunder of immeasurable proportions. 2. the complete failure of a
business venture involving calculated risk. 3. a business strategy based on
litigation instead of production and innovation. 4. organized corporate
extortion.
sco (v) 1. to obfuscate or delay. 2. to propagandize
If nothing else, it appears that TSG at least knows how to pick a name![ Reply to This | # ]
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Authored by: Anonymous on Friday, April 09 2004 @ 07:35 PM EDT |
MSN's may view their "strong buy" consensus as perfectly justified,
given that they know SCOX will have a continued stream of revenue and
investments ... from MSFT.
Huh?!?[ Reply to This | # ]
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Authored by: shayne on Saturday, April 10 2004 @ 10:37 PM EDT |
The comment about IBM having a huge patent portfolio (does it ever!) and being
able to retaliate against ms or sun if it tries to whack linux on patents is
reasuring. I've been biting my nails over ms's patents for a while, but the
point that IBM can whack microsoft on patents in revenge does kinda ease me a
little.
Mutual assured destruction IT style.? Guess it worked in the cold war.
Thank god for the bomb huh?
*Disclaimer: Not endorsing nukes. There a cancer on society
---
--
“Two things fill me with wonder, the starry sky above and the moral law within.”
- Immanual Kant.[ Reply to This | # ]
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Authored by: Anonymous on Sunday, April 11 2004 @ 09:08 PM EDT |
Here is an old favourite about the Asian currency crisis.
http://www.pbs.org/wsw/news/fortunearticle_19971229_01.html
Not specifically about the current SCO situation, but it's a very accessible
article on financial market irrationality. (or perhaps bounded rationality.) I'm
posting it mostly to help further deflate your "wall Street...rational,
Type A guys" illusions. [ Reply to This | # ]
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Authored by: Anonymous on Sunday, April 11 2004 @ 09:43 PM EDT |
. . . SCO also recently filed with the SEC to buy back up to 1.5 million shares,
fyi. That might have something to do with the reversal on the stock slide. Or
not.
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Authored by: Anonymous on Monday, April 12 2004 @ 08:38 AM EDT |
The Viant group, which Brian Skiba joined, or at least some of its other
principals, has a somewhat questionable background. Some of the details were
posted on Yahoo. if I can find the article, I'll post the link.[ Reply to This | # ]
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