Spotting those zombie stocks
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TESS VIGELAND: The movie “Zombieland” comes out this weekend. You should pay attention because it gives rules for hunting the living dead.
From the movie “Zombieland”: Welcome to Zombieland. Rule number three: Call me a goody two shoes, seat belts. It’s gonna be a bumpy ride.
And as with just about everything Hollywood — you can apply these lessons in your everyday life. Especially when it comes to investing. You know, of course, that huge companies like Washington Mutual and Lehman Brothers, they’re dead. But their shares still lurk around some trading floors. They’re called “zombie stocks.”
The SEC doesn’t force a company to stop trading until bankruptcy is done. And that can take months. Meantime, shares go up and down as if the company’s still alive.
Last fall John Laine put about $3,000 in zombie stocks. He called it his “lottery” portfolio, and a week ago, he cashed out.
John Laine: I sold it all for about $13,400 — 470 percent profit.
Be warned that most of the undead do not rise from their ashes. But Berkeley finance professor Terry Odean says some grave robbers can’t help but think these stocks are a great deal.
Terry Odean: A company that was once powerful and vibrant, there will be some investors who just can’t believe it’s dead.
Rest assured, and in peace, they are. And how do you tell a zombie company? Look for a “Q” after the stock symbol. And then, run for your lives!
Nellie McKay, singing “Zombie”: Do the Zombie, do the zombie whoa, yeah…
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