Trading Micron (MU) - Bought MU on a dip after Barron's story

Monday, February 14^th, 2005

My trade for the day was Micron (MU). Bought 500 shares on a dip at $11.54, stock closed the day at $11.81, for a paper profit of $135. At $5 per trade through Brownco, I could have sold at the close, netted $125, and called it a 2% profit. After all, 2% profit a day, about 250 trading day a year, an easy 500% gain, ingnoring compounding. By trading exclusively in my SEP, there's no need to preserve records and track capital gains and losses, so why not trade every day? The only challenge is to pick stocks that will go up 2% a day, and of course, that's impossible.

MU has fascinated me for years, in part because of the high institutional interest in the stock, over 80% for as long as I can remember. It could simply be that MU is the only red, white and blue pure play in the memory chip market, making it a required component for various mutual funds with high-tech exposure. It's certainly not the track record. MU is near a 10 year low, after peaking at almost $100 at the height of the bubble. I remember buying 100 shares of MU at $33 and selling it a $43, and later buying it back a $33 and sell it a $38. Next time I bought it was around $17, and I had to sell at a loss.

Barron's Online came out with a story on February 10th titled "Micron Offers Big Potential." The authors use assumed peak and trough values to assign MU a potential upside of 225%, with a potential downside of 32%. Did that story lead to the huge run-up in MU stock on the 11^th, up 6% midday, and closing up 3%? Without knowing exactly what time of day on Thursday the story was released, it's a tough call, but a similar story praising GTW (Gateway) on Monday afternoon while the market was open (posted at 1:37 PM) had no discernable effect on the price of that stock, although First Albany Capital raised the stock from a neutral to a buy.

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