Falling Knife: Sulphco (SUF)

As I noted in my Friday Hindsight Report , I owned Sulphco (SUF). Even though the Dow was down 213 points, my position in Sulphco was actually up for the day. The stock had been on a huge tear all year, putting a nasty squeeze on shortsellers. It showed up in one of our Telechart stock screens, and I put it on my watchlist. Friday, it was one of the few bright spots and I purchased a $1,000 position. On Sunday, Barrons slammed the company with a vicious article. In one paragraph, Bill Alpert writes:

"In one current complaint in a Manhattan state court, a hedge fund that invested in a prior Gunnerman venture calls him a fraud who never even finished college and who has promoted "a series of failed businesses" based on "bogus technology." In the U.S. District Court of Nevada, another disgruntled investment fund complains that Gunnerman swiped SulphCo's patented technologies from the same prior venture."

A stock that had closed the day over $19 a share, opened around $13 on Monday. I sold at $13.11 for a 32% loss, my worst trade ever. The stock continued to get pounded on Tuesday, trading down below $8/share.

Is there anything you can do to avoid these situations? Not if you trade momentum stocks. GE would never gap down 40%, but you could own it for 5 years, and never make a dime...Owning stocks is risky, no doubt about it. Luckily, I made all the money back and more on yesterday's and today's big moves in Google. Easy come, easy go.

And I now am trailing the Russell 2000 on the year. I've got some making up to do.

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