Case Study – Broken Trends…First Marblehead (FMD)

Posted by Howard
on December 6th, 2007

First Marblehead (FMD, Wallstrip) has become a trainwreck. It did not take long. Take a look at the last few months .

A better symbol than FMD may just be WMD as this stock has been a weapon of mass wealth destruction of late.

I was stupid enough to pick this as a Wallstrip worthy stock back in February. I was smart enough (lucky) to stay away from it and blog the same at the time . In March I actually blogged about it as a short candidate . In April, after the FIRST 50 percent decline, I revisited it . Thank goodness I passed. Others have not been so lucky.

Few things here…If you buy broken, busted stocks like First Marblehead, you better know the freaking story because even if you THINK you know it, YOU DON’T. I have been poking at Starbucks thinking I understand the broken possibilities. It has poked me back with losses.

As I wrote back in March…

One third of all stocks do the BIG ROUND TRIP to ZERO and that is why I don’t buy falling knives anymore. The few that go to zero that you and your conviction are buying all the way down will leave you broken.

Trends end. Stocks that make all-time highs can be at all-time lows shortly thereafter. Remember that when you are feeling cocky and your stock looks invincible. They are not!

Except Apple of course :) .

The stock market is not a game and not easy.

Disclosure – Long Apple

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.