Friday, December 23, 2011

Reverse Stock Splits: My Biggest Stock Loser for 2011

A Reverse Stock split is when a company takes back  the Original number of shares it offered and condenses it into a smaller number of shares available. They do this in order to raise the price of each share and can be a sign the company is in financial trouble.

This is what happened to a company I chose for 2011 and was for sure my biggest loser for 2011.

When I first saw the stock symbol COIN I was intrigued instantly, who could not help but like a company that had COIN for a symbol? This began my research into this small cap stock that was a fairly new company but had been in business for at least 3 years. I liked that part and it showed fairly sound management as well, or at least for an amateur investor it appeared so.

When I read what the company Converted Organics was about it resonated with my core values and I fell in love. I love picking a company that has value and integrity written all over it.

Then I watched through the entire year as I pretty much lost all but a penny or two as it dropped in share prices. Yes this could be a bad sign and in November when they announced the Reverse Stock Split, well that was not very good news at all! I should run like the blazes, I should drop them perhaps and pick something else. My ETF's are doing really well and if it was not for Converted Organics, I would of showed a small profit from my choices.

So I looked further into why they are doing so poorly and while they have spread  themselves really thin and maybe got a little over  their heads in debt, it was due to acquiring new assets and company growth. They have a seemingly good potential of rebounding ( if they do not fall off the stock market list completely that  is)

So in my end of the year portfolio review, I have decided to ride it out and give them a little while longer. At this point it would  cost me more in the trade fee to dump them than I have in my meager 20 shares of Converted Organics. I will also put more money into purchasing more shares but am limiting that to only $100 as I can live with losing a $100.  Hopefully they can bounce back in 2012 but if not, at least I have my other picks that balance my portfolio out. It is only a meager amount right now ending the year at only $50 due to us having to cash out much of our stocks to get another vehicle and deal with heating costs and such this year.

But hey everybody has to start somewhere right?