The Dedly Blog

What's Up With ERS?

More like... What's not up with ERS.

A little background: Three years ago this month, my wife and I opened up an account with Scottrade for a little bit of speculative investing. We started with $1000 and now we're up to $2400. One of the successful picks for that portfolio was Empire Resources, Inc. (symbol: ERS), a New Jersey based distributor of semi-finished aluminum products. Nothing complex, just basic shapes. We both wish that I'd never sold them.

I was playing around with the Stock Screener on the Scottrade website, looking for stocks under $10 that paid dividends. I didn't know if such stocks existed, but they did. ERS was there in the mid to low $4's with a dividend of 4 cents/share. I couldn't find any guidance on the stock but the balance sheet looked good. There was a history of growth there too. I ran it by Tammy and she agreed that we should buy it. So on March 1st, 2005, I bought 40 shares at $4.46/share.

Sure enough, we got our dividend in April at 4 cents and let it sit. But in May, the stock started to rise above $5. Institutional investors took notice and the daily volume traded jumped ten fold. By the end of the month, the stock hovered near $8. Trying not to be too greedy, I sorta followed Louis Rukeyser's advice ("Sell half when the stock doubles. Sell it all when it triples.") and sold half on June 20th at $11.79/share.

The stock price mellowed after that. Although the dividend rose to 5 cents, the stock plateaued and then fell down to the $6 range. I figured, "Well, I'm glad that we took profits when we did." Little did I know what was to come.

By mid-November, the stock was back to $8 and rising. In early January of this year it hit $12. A whopping 21 cent dividend was announced so I held on untl it was paid out. A few days later, I sold our remaining ERS stock at $16.25/share. I still couldn't find any guidance on the stock so I figured that was enough piggishness for now.

But it turns out I should've stayed with ERS.

In February, the stock started making forays into the twenties. From mid-March on it was there to stay. Well, I should say that $20 was the new floor. The stock has been riding a rocket since then. The stock closed at $45.20 today! A tenfold increase in less than 14 months! Volume is also way up: 850,000, a twenty fold increase from when I bought it.

But I've got good company for bailing. Even Cramer advised a caller to sell it on 3/31 when the stock was at $27.60. Perhaps Barry Ritholtz could tell this Apprenticed Investor what signs he missed. It sure would've been nice to have turned that $178.40 investment into $1784, but I'll be happy with what I got out of it. =)

And if anyone wants to explain to me what happened so I can figure out what I got right, I'd really appreciate it.

posted by DED at 3:12 PM

 jnubel said...

I came on your board today looking for the NYR ship has sunk blog, but it seems like you stumbled in the wonderful world of metals my friend. Actually it seems like you were on the forefront of the rally. In general, commodities were up 30-40% last year and off to the races again in 2006. I'm sure you are aware of the price of gold and silver these days... why not aluminum! I've actually positioned some of my portfolio towards another relatively non-mainstream metal: uranium.

4/25/2006 3:28 PM

 DED said...

The "NYR ship has sunk blog" will come up soon enough.

Yeah, I've noticed that commodities have been skyrocketing, but I didn't think that Aluminum was sexy enough. I don't think Alcoa has done nearly as well but I haven't checked. The oil stocks that I've followed haven't enjoyed the kind of price surge that ERS has and we all know what the price of oil has done the past year.

I recently got into Yamana Gold (AUY). They mine the stuff in South America and have new mines coming on line each year for the next couple of years. Although gold's at quarter century highs, my gut tells me that the gold rally isn't over.

Uranium is a bit scary. If it took off for benign purposes, like making energy, I wouldn't mind. But I fear that it will take off for malevolent reasons.

4/27/2006 12:57 AM