The poster child today is found here:
There is only one reason to use "managed" mutual funds - the alleged knowledge the managers have, and their work and insight, prevents you being long stocks like this when they blow up in this sort of spectacular fashion.
|Top Mutual Fund Holders|
So where's the value in these managed funds? The index funds hold it because it's part of an index, and that's what you have to do. But how about Legg Mason? What's their excuse going to be, assuming they didn't get out before this occurred (and they might have - we'll see soon enough as the new reports should be out soon.)
I would argue that active management, through its demonstrated inability to stay ahead of these things, is worthless.
Either do your own work, hold indices, or don't play at all.
Kodak is a company that lost every advantage they ever had. Once the king of the photography world when technology shredded their primary product lines they failed to respond in an effective and useful manner and give up opportunity after opportunity.
Betting on a turn-around is one thing, but if you're going to do it you have to keep close tab on what you're doing, so you don't get caught holding the bag -- especially in the sort of size that appears to be represented here.
Best of luck longs.
Disclosure: At sixty cents it's an interesting lottery play, and a bought a few tickets - they'll probably be held for less than a week simply looking for a dead-cat bounce. Should the company actually file bankruptcy the stock is expected to be worthless. The logic on this play, however, looks like this: They just drew down their credit line - if you do that knowing you intend to (or might intend to) file for bankruptcy, that is active fraud and executives could easily get nailed for it. Thus, I don't buy the "imminent bankruptcy" argument and when the street figures this out that 60+% drop is likely to largely be retraced. This does not mean they're a great company - just that at 60 cents it's worth a splash of my money on the roulette wheel. Since the buy a short while ago it's now up to 81 cents - at this sort of rate I may not hold the position beyond the end of the day!
Update: In @ $0.60, out at $0.80 on a stop. Like I said, quick hit.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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