Has NVE Finally Been Exposed?
November 24, 2004
All year, I have followed a momentum, speculative, junk stock called NVEC. I have even tried trading it periodically with varying success. Through all the drama, all the hype, all the rumor, all the smoke and mirrors, I have often wondered what the real story is behind NVE Corp (NVEC). Well, the Motley Fool wrote the piece I have long awaited. Aptly titled "NVE's Nanotrap Only Snares Speculators" this expose tells a lurid tale of, well, smoke and mirrors, sprinkled with large heapings of greed, and pure unadulterated victimization of stockholders. The author of this article claims that NVEC has no real technology and has no real prospects. It is too bad that stocks like this ever get as high as they do because the simple fact that the stock had gone up so far and so fast gave the company's business legitimization in the eyes of many stockholders. It is the classic self-reinforcing principle that is a stock is going up so well, it must be legitimate. Looks like 2004 has been a year of reckoning on the way back to single-digit (and worse?) status. Here is a graphic of the brewing disaster (charts thanks to TC2000):
The only reason why this stock has probably not already returned to whence it came is that there are so many shorts piled into this one (including the notorious stock-killer Asensio!) that their occasional panics at "good news" keep igniting enough buying interest to make people think there is indeed a real story here. If you want to follow some of the drama up close, the ever-intrepid Kirk Report has made numerous notes over the past year or so. Asensio has also been pelting NVEC all year-long with skeptical and revealing reports. Note that while 2004 has disciplined NVEC by 50%, it has still had a monster gain from its humble beginnings in 2003. So, while there is far yet to fall, it could still be a while before the buyers of NVEC finally face up to what appears to be an empty, null, and void future. (Of course, I suspect most of the buyers of NVEC are little interested in whether the business is real but more interested in whether they can get the stock moving profitably. Momentum stocks like this are usually the playthings of traders and not part of an investor's recommended diet).
I typically do not use this space to talk about individual stocks, but I was quite motivated to add to this tale after ready the Motley Fool article. I am hoping that this can serve as a lesson for those of you who are quick to believe and even quicker to buy!
Be careful out there!