1. Thomas J. Costagliola October 3, 2009 8:19 pm

   Yehuda,

   This is another excellent find. The company has a great balance sheet with enough cash to do interesting things.

   Yet, the stock is in a downtrend and I suspect will stay in a downtrend for a while. The short interest in the stock jumped to 1,743,668 in July from 349,520 in June. Until the short interest returns to the earlier lower levels, I suspect that the price will continue to decline.

   With decimalization, high frequency trading and the elimination of the largely useless up-tick rule, I believe that short interests - big money interests rule. Market-makers, who are short, I believe, move prices downward until they can make a good profit from their short position and they move the price upwards when they are long after a big sell off that has left them with a net long position.

   I shall wait to build a position in this stock until the charts for this stock look better to me. I shall be looking for among other things:
   a big sell off and bounce on extreme volume,
   a positively sloped nine day moving average and
   a buy signal from the MACD.

   These events in all likelihood will precede the delayed report that the short interest has dropped back to its earlier low levels. See http://www.nasdaq.com/aspxcontent/shortinterests.aspx?symbol=IPAS&selected=IPAS for IPAS short interest.

   Many years ago, I bought stock in a telecom, which was selling for 80% of its cash on hand, had a clean balance sheet and had a good and steady positive net cash flow from its operating businesses. I ignored the charts that indicated that the price was declining. After I bought my position, the stock price continued downward until the market cap represented only 60% of the cash on hand. It took almost a year for the stock price to recover and then rise. It got to 140% of the cash on hand then stalled at which point I exited my position with a long-term gain. I’d have done better entering later and ending up with a short-term gain.

   These days I assume that no one aims for long term capital gains in the stock market. Gone for me at least is the time of holding a stock position for ten years.

   I look forward to buying IPAS in the future.

   Best wishes,
   Thomas

2. Yehuda Fruchter October 5, 2009 2:53 pm

   Thanks Thomas, as always I appreciate your comments and your analysis of the technicals, since I do not look at such factors when purchasing.

   After I purchase a stock, I fully expect it to decline from my purchase price at the start. My biggest investment winners have always started off as losers. The reason being that I am generally very early in spotting fundamental changes. However, from experience I’ve seen that being early is much better (and more profitable) than being late. You just need to have some patience.

   Nevertheless, if everything continues to check out, I will continue buying as the stock goes down in price. When stock prices go down, assuming the fundamentals have not changed, your risk/reward also improves, and so you should buy more. Of course, the popular books on investment strategy will have you sell stocks as prices go down (i.e. the proverbial “cut your losses” mantra), which is why most people lose money in the stock market.

   Recently, VG was a classic example of the need to have no fear and average down when the fundamentals check out (one needs to constantly reassess the fundamentals, of course). The stock went down nearly 20% after I recommended it. And yet I continued to buy it as it went down and 30 days later it was up 200%+. Goes to show you that you near-term price movements in stocks are not necessarily a good indicator of future valuations.

   More importantly, I have learned over the years, that it is simply impossible to predict when an undervalued stock will suddenly attract the attention of funds/traders and shoot up in value. It can happen at any time, and generally the move takes most people by surprise. Therefore, I try not to time purchases of stocks that seem to have low risk and high reward. If the risk/reward seems right, I buy a little and see what happens. Sometimes the price rises quite quickly, while at others it may take months or even as long as two years, during which time I’ll average down, if the opportunity presents itself. If in the end, the investment provides a high enough return (50% to 100%+), the timing factor becomes negligible.

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