Why You Should Never Buy Crap Companies
It is pretty simple advice, right? Well just because something is simple doesn’t mean it is easy. It is advice I wish I had followed but has been another hard knock lesson to learn. In over the last 2 years, I have been profitable at the end of each year trading stocks.
This year may prove to be a down year. Why is that? Because the crap companies I bought in the past have turned out to be crap. One of them filed for bankruptcy and the other may be doing so in a month or so.
Aceto (ACET) Is Worse Than Garbage
The was a stock that fit my trade setup, my Bread-and-Butter-Trade. You can see from the picture above the pivot points I used. At the time I really didn’t care about financials, I only cared about the trade setup. I saw even if price went down under a dollar the worst the exit would be was at the pink line around $16.00
At the time I started buying ACET the price was around $5.00 so I was counting the big money I was fixing to make from this trade.
Last week they filed for bankruptcy. Awesome. There goes a stock in the trash bin. https://seekingalpha.com/article/4242435-aceto-files-bankruptcy-recovery-expected-equityholders
That’s what I get for thinking the fundamentals don’t matter. I sold what little equity I had left once I read this and moved on.
But unfortunately, there is a stock that has taken a lot more out of me.
Windstream (WIN) Is Just About Gone
The Windstream (WIN) trade was one I got in when they still were offering a dividend. Of course, right when I got in they cut their dividend. Then they did a reverse 1:5 stock split. Now, this was a company that was looking to be doing their best to go bankrupt as fast as possible.
You can see from the chart price had also broken out of the trend to the downside. The trade setup I was using is my bread-and-butter setup where the exit would be just below the blue box around $53.00.
But then they started showing signs of life, a turnaround. They started getting out of the rural internet access business and into 5G. They sold their Earthlink side of the business and actually reported earnings showing a turn-around was taking place. But there was one main issue hanging over their head.
Windstream vs Aurelius
A lawsuit against Aurelius, from everything I had read, they stood a good shot at winning. I did a video about this stock but said if they lose then they are more than likely going bankrupt. If they win then it could be a huge winner.
So a little more than a week ago you can guess what happened, they lost the court case: https://seekingalpha.com/news/3434500-aurelius-trial-win-windstream-chose-bet-company-lost
That article is actually pretty funny. Aurelius is basically rubbing salt in the wound of Windstream(WIN) and bragging about their victory in the smuggest way possible.
This one is going to leave a mark on my account. I can absorb the Aceto loss with no problem but with Windstream, I had about 3-4x more invested in it. This will probably be the first year out of 3 where I won’t be positive. Live and learn.
There is still one more crap stock I have CBL & Associates Properties (CBL). The only saving grace from them is I have been receiving a dividend but if they go under that will hurt a ton as well. They haven’t yet hinted at it but it could happen because it is a crap stock.
What to Do Moving Forward?
Never buy crap companies again. 2 years ago I thought my setups would work no matter the company. That is not true at all in the stock market. I now only buy companies that fit my growth stock scanner and fit my trade setups: https://evancarthey.com/how-to-scan-for-winning-stocks-an-insiders-view-to-my-process/
This won’t guarantee I’ll never buy a crap company again but it should filter 99% of them out. Moving forward since the new year that is what I have been doing and what I will continue to do.
Live and learn. I messed up buying crap companies and I am paying for it.
If this post benefits you and if you haven’t used Robinhood for trading stocks but are thinking to then please consider using my referral link when you do sign up: http://share.robinhood.com/evanc203.
This way each of us will receive a free share of a random stock if you sign up through my referral link.
My Robinhood Review: https://evancarthey.com/review-robinhood-trading-service-with-no-fees-part-1/
