OHFDEX One Year Later

One year ago, in “From Overripe to Vulnerable?” I introduced something I called the OHFdex or listing of Overripe High Fliers, along with 14 CandleGlance charts from StockCharts.com for the highest fliers.

Needless to say, the picture one year later is an ugly one.

Not only were these stocks overripe and vulnerable a year ago, but they were ripe for decimation. CROCS (CROX) is down over 97% in a year, Las Vegas Sands (LVS) is down 90%, and both DryShips (DRYS) and VMware (VMW) are down more than 80%. All told, 11 of the 14 former high fliers are down 50% or more. The mean decline was 67.7% and the median decline was 69.3%. The best performer among the group was Baidu (BIDU), the Chinese search engine company, which has lost 36% while the Chinese markets have fallen 57%.

I have also included one year charts (once again courtesy of StockCharts.com) for all 14 members of the OHFdex below, with a 20 day SMA in blue and a 50 day SMA in red:

[source: StockCharts]

Sifting among the rubble of today’s meltdown, it looks as if it is about time to create a new list of oversold stocks that can prosper over the course of the next year.

BIDU: Hogs (Eventually) Get Slaughtered

As I write this, BIDU is trading at about 301, meaning that if you got in near the August 16 low, you may be sitting on a 140 point profit.

I was indeed fortunate enough to grab some BIDU on August 16^th, though nowhere close to the day’s low of 161. Over the course of the past few weeks I have been taking profits, with less than 10% of my initial position remaining after selling some earlier this morning.

As I was selling some shares, it occurred to me that it might be time to update my watch list of “Overripe High Fliers.” This is a list of ten momentum stocks that I keep a close eye on and expect to provide some clues about speculative activity. These stocks should be strong when the market is rallying and move sharply down when the market turns down. The list currently consists of AAPL, BCSI, BIDU, CROX, DRYS, FSLR, GRMN, LVS, RIMM and VMW.

In keeping with Amazon’s “people who bought X also…” approach, optionsXpress has a tool that tells you what people who traded BIDU were also trading. The results, in the graphic below, could easily be an updated list of those “Overripe High Fliers.” Consider that when BIDU finally makes a sharp turn south (and I expect a -20 day soon), the rest of the stocks on this list will probably be dumped with the same bath water. Contrarians, aim your guns at these targets.

…and don’t count on the nearly vertical rise in BIDU to continue much longer. As a general rule, the steeper the rise, the more spectacular the fall back to earth.