Hedge fund selling targets (oversold = bargain?)

[exgeo]

I have noticed a couple of stocks I hold Compass Resources (CMR) and Arc Petroleum (ARQ) both recently put out "ceasing to be a substantial shareholder" notices, which with a little Googling proved to be hedge funds.

Both of these companies IMHO have been sold down far below fundamental value. If the funds are getting margin calls, I guess they'd sell for any price they could get, so perhaps the companies which have been targets of the forced selling might be a good chance to pick up stocks at real bargain-basement levels. Anybody else got any other candidates or thoughts?

 

[56gsa]

sounds like an interesting plan ex-geo... i presume there's no way of knowing if they are selling because of margin calls - you'd hope they're not selling because of concerns re the stock

with all the selling there are also some big share parcels changing hands which is making some companies nervous regarding their exposure to a takeover - this was the reason for IRN's takeover of LST to ensure the LST's 25% stake in IRN did not fall into the wrong hangs (ie Xstrata)... so we could see more of these pre-emptive strikes, which would mean those companies with large investments in potential takeover targets could be targets themselves...

 

[exgeo]

True, you'd have to check that the company hasn't announced something that might have made the fund change their mind. Another one I found which looks a likely candidate is AAM A1 Minerals. Rand Merchant Bank recently sold out below 20c after taking a placement at 26c last November or so. As far as I can see, nothing's changed for AAM since then - other than the gold price is a lot higher of course.

 

[Buster]

G'Day ExGeo,

I have noticed a couple of stocks I hold Compass Resources (CMR) and Arc Petroleum (ARQ) both recently put out "ceasing to be a substantial shareholder" notices, which with a little Googling proved to be hedge funds.

I thought the 'hedge' funds were busily targeting selected stocks and shorting (selling) to put further downward pressure on the SP, hoping to catch out high leverege holders in order to create a spiral in price.. therefore making a handy profit as the SP drops.. Then they need to buy them to get out..

So, my (extremely limited) understanding would be that if the 'hedge' funds were getting out they would have either been beaten at thier own game (by the Bulls) if they were unable to manipulate the price, or they had achieved the objective.. in either case they would have to be buying if called in on margin.. wouldn't they??

Confused..

Regards,

Buster

 

[Trembling Hand]

Buster short is opposite to being long a stock. If you are a substantial owner of a stock you are LONG not short. If you are short you aren't going to show up in a ceasing to be a substantial shareholder notice. You can only be giving out one of those because you are or were long.

Hedge funds mostly trade to the long side. They don't spend all there efforts manipulating cool share prices down.

 

[Buster]

G'Day TH,

Buster short is opposite to being long a stock. If you are a substantial owner of a stock you are LONG not short. If you are short you aren't going to show up in a ceasing to be a substantial shareholder notice. You can only be giving out one of those because you are or were long.

Ha.. Yea, thanks TH.. I'm onto that.. hence the smiley..

Hedge funds mostly trade to the long side. They don't spend all there efforts manipulating cool share prices down.

However, I wasn't aware of that.. I thought the very definition of a hedge fund (in a bull market, such as we have seen over the recent past) was significantly short.. I did say 'limited understanding'..

Just seems that most hedge funds that have tanked over the last twelve months (and there have been many, and some quite large) have been caught out shorting when the bull continues to run.. and the increased chatter over the circuits recently about the hedge funds borrowing super stock for shorting..

Regards,

Buster