a vitesse lesson

This is one of the products of a company named Vitesse Semiconductor Corporation. They're a leading designer and manufacturer of innovative silicon solutions used in the networking, communications and storage industries worldwide. Vitesse is headquartered in Camarillo, California, and is publicly traded on NASDAQ under the symbol "VTSS". Vitesse completed an initial public offering in 1991 and has been a very volatile investment for much of the time since then.

This is a chart I printed out at the end of trading today. It shows todays trading, yesterday's non-trading, and the trading on Monday.

The non-trading part of my statement should get some attention. That's the gap in the chart to the left. It doesn't happen very often but occasionally when news occurs that really affects the value of a company, Wall Street will halt trading of that stock until the dust settles a bit. That's usually an hour or so. In this case they shut down trading for over a day. Very unusual. Also unusual is the trading volume. VTSS typically trades 6 million shares a day. On Wednesday over 60 million shares changed hands. A ten fold increase in volume. That sort of spike usually means disaster--and as you can see on that chart above, the price of VTSS closed on Monday around $3.10 and opened again on Wednesday at $2.30, a drop of 80 cents --not so bad you might think-- but in percentage terms that's nearly a 25% drop. That's a huge change in value and you can be sure there'll be shareholder lawsuits flying.

The reason I bring this all up is just to illustrate how it looks when a stock gets bad news. Seeing this sort of 3 day chart should emphasize how chancey--and fun--the stock market is. If you're willing to speculate, stocks like this can be a roller coaster of fun--as you can see in the chart below--but that fun comes with a price. You can lose a lot of money if you buy in at a high point and are forced out at a low point.

Personality wise, I'm more focused on speculating than investing and this is the kind of stock that really begs to be speculated on. Just hold on tight--this baby takes the financial curves fast and scary. :-)

In case you want disclaimers, I don't own this stock at present though it's possible I'll buy a K or so if the volatility looks to be going the way I want.

UPDATE: I didn't buy. VTSS opened up hot this AM (Thursday). It's up 10% right now and the volume is huge. In two hours of trading the stock has already had 16 million shares change hands--twice a normal full day's volume. It might still be a good investment--I don't know--but as a speculative focus, the shine is off the apple. :-(


Michael Manning said…
Utenzi: Since I write about the airline industry (talk about volatile stocks) I could kick myself for not listening to a friend in South Beach who said "Buy AMR while they're at $4.00 then sell"!
Cyndy said…
Hummm...I write all day for the legal world...as a paralegal in a law firm. Isn't it interesting all the different ways we keep the world going round and round?
Michele sent me.
All I can say my dear Utenzi is OY VEY! The Stock Market can make your hair turn gray overnight, I swear! (lol)
I am here from Michele's tonight my dear Dave...and I just finished reading your last email..How about that for synergy..(?) Is that the right word? Well, whatever it is, I like it!
srp said…
It seems that I remember a long, long time ago, a certain Yahoo stock was around $2 a share. Who knew? And back in 1999 Apple wasn't doing too well, down to $11 a share.... wish I had some of that now.

Here from Michele.

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