Diminished expectations can lead to powerful stock price moves when good news unexpectedly arrives. When lots of short-sellers have a position in such a security, you can really see some fireworks.
This is exactly what happened today with Energy Conversion Devices
Last quarter, ECD reported a net loss of $9.10 per share, well in excess of the share price at the time. It would have been extremely difficult for this company to report a worse earnings number today.
ECD still reported a loss for its fourth fiscal quarter, but there were some unexpectedly positive aspects to the report. Revenue came in ahead of expectations, the company generated some cash from operations, and it looks like ECD might even report a profitable quarter sometime next year. I told you diminished expectations are a powerful thing.
I know at least one bargain hunter who began sniffing around these shares earlier this year. He was a bit early, but he had the right idea: The time to think about investing in a high-flying stock is after that stock has taken a nosedive. He and other recent ECD investors may even make some money here. As for me, it's not clear that this company has a truly competitive offering, and I'll be fishing elsewhere. As always, though, I'd be keen to hear your thoughts on the prospects for this solar player.