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Jawad, on your AP physics test I'm guessing you had a question or two about
the principles of the conservation of momentum and inertia. SMTK is a good
example of those principles as they apply to stocks.
A quick glance of the daily chart shows this stock is making a very distinct
pattern of lower highs and lower lows. Furthermore, the volume on down days
(on average) is significantly higher than the volume on up days. These are
probably the two most basic signs that a stock is in a downtrend, and will
probably continue in that direction.
I have no idea why you thought this stock was going to 10, but let's assume
for a second it was a reasonable target. If that was the case, why try to
cherry-pick the exact bottom and buy at 1 1/4? You're much better off
letting other people be the pioneers at such a low price (letting them
absorb the arrows). If you had drawn a trendline connecting the three most
recent highs on the daily chart, you would've seen that this most basic of
trend indicators would've had you wait until the stock hit 3 1/2 to 4 before
buying. If you had turned out to be right about your target, you still
would've more than doubled your money.
If you're still certain that bottom fishing is for you, then at least
consider selling half of your position once the stock price has doubled from
your entry price (which on this trade you had the opportunity to do). This
way, the worst you're going to do on the trade is break even, excluding
costs. You can let the other half run forever.
On a more fundamental note, small cap stocks that soar as high as this one
did, and then do nothing but fall are almost certainly destined for
extinction these days once they drop below about $3. I say this because
large companies like AT&T are sitting on literally billions in cash, and are
always looking for acquisitions. If SMTK really had a great product or
service, but had fallen on some hard times, AT&T would have bought them out
long before the price dropped below $3 (and not risk that one of their
competitors would beat them to it). There are obviously exceptions to this
rule, but they're becoming more and more rare...
Hope this helps.
Bruce
-----Original Message-----
From: jawad <jawad777@xxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Wednesday, January 20, 1999 2:34 PM
Subject: STKS: SMTK + At&T-_HELP Please
>First of all, hi everybody. If you are wondering how i am out of
>school so early, it is because i just took my AP government and AP
>physics tests, so i got out of school early. As some of you may know
>i bought SMTK @ 1 1/4 about 1 week ago. At one point i had made about
>a 150% return, and then the market took it back. It is now down to
>about a 50% return. Now, the trading of that stock has been halted.
>The news report i have are here, please take a look at them. Please
>tell me what they mean. Will i lose all my money or will i make upto
>6.97 per share? I think it is the latter; however, i have heard
>different. I had perviously stated i thought the stock was going up
>to 10; i think i may be pretty close. Unless of course this means i
>will lose all my money. Please give my your opinion about this matter.
>Thanks
>Jawad
>Here is the news.
>01/19 17:05 SmarTalk Signs Definitive Sale
> Agreement with AT&T <T.N><SMTK.O>
>
> SmarTalk Signs Definitive Sale Agreement with AT&T
>
> DUBLIN, Ohio and NEW YORK, Jan. 19 /PRNewswire/ --
>SmarTalk TeleServices, Inc. (Nasdaq: SMTK) announced today that it has
>signed a definitive agreement to sell substantially all of its assets
>to AT&T (NYSE: T)for up to $192.5 million in cash, subject to downward
>adjustment at closing. Separately today, SmarTalk has commenced a
>Chapter 11 reorganization
>case in the United States Bankruptcy Court, District of Delaware.
>
> AT&T said SmarTalk's assets will enable it to expand its prepaid card
>retail distribution capability.
>The boards of directors of both AT&T and SmarTalk have approved the
>transaction. The companies expect the transaction to close in the
>first quarter of 1999, prior to the conclusion of the bankruptcy
>proceedings. The transaction is subject to bankruptcy court and
>regulatory approval and certain other conditions.
>
>At signing, AT&T has made debtor-in-possession financing immediately
>available to SmarTalk.
>
>SmarTalk's Chief Executive Officer Erich Spangenberg said, "The Board
>determined that this transaction provides the best means for insuring
>uninterrupted prepaid calling card service to its customers, retailers
>and distributors and maximizes the value of its corporate assets."
>
>SmarTalk was advised on the transaction by Salomon Smith Barney,
>Credit Suisse First Boston and Hennigan, Mercer & Bennett. AT&T was
>advised by TD Securities, a subsidiary of Toronto Dominion Bank, and
>Wachtell, Lipton,
> Rosen & Katz.
>
>SmarTalk is a leading provider of prepaid calling cards and prepaid
>wireless services. Based in Dublin, OH, SmarTalk maintains
>distribution agreements with the U.S. Postal Service and leading mass
>merchandisers, consumer electronics retailers, supermarkets, hotels,
>home office superstores and convenience stores throughout North
>America and the U.K.
>
>AT&T is the world's premier communications and information services
>company, serving more than 90 million customers, including consumers,
>businesses and government. The company has annual revenues of more
>than $52 billion and 119,000 employees. It runs the world's largest,
>most sophisticated communications network and is the leading provider
>of long-
>distance and wireless services. AT&T operates in more than 200
>countries and territories around the world. SOURCE AT&T Corp.
>
> -0- 01/19/99
>
>
>
>
>01/20 10:54 Nasdaq Changes Status of Trading Halt
> in Smartalk Teleservices
> And <SMTK.O>
>
> Nasdaq Changes Status of Trading Halt in Smartalk
>Teleservices
>
> And Requests Additional Information from Company
>
> WASHINGTON, Jan. 20 /PRNewswire/ -- The Nasdaq Stock
>Market(SM)
> announced today that the trading halt status in
>Smartalk Teleservices
> ("SMTK") was changed to "additional information
>requested" from the
> company. Trading in Smartalk Teleservices ("SMTK")
>had been halted on
> January 19, 1999 at 4:14 p.m. for News Pending at a
>last sale price of 1
> 29/32. Trading will remain halted until Smartalk
>Teleservices ("SMTK") has
> fully satisfied Nasdaq's request for additional
>information.
>
> Since its debut as the world's first electronic
>stock market, The Nasdaq
> Stock Market has been at the forefront of
>innovation, using technology to
> bring millions of investors together with the
>world's leading companies. It is
> among the world's best regulated stock markets,
>employing the industry's
> most sophisticated surveillance systems and
>regulatory specialists to ensure
> investor protection and a fair and competitive
>trading environment.
>
>
>
>
>
>
>_________________________________________________________
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>Get your free @yahoo.com address at http://mail.yahoo.com
>
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