STOCK MARKET RULES

Price Doubling Is Easy at Low Prices

Many “boiler room” sales representatives have touted this doubtful idea
more than once. Yes, it can be easy for some low-priced stocks to double
in price. However, it can also be easy for high-priced stocks to double in
price. The point is that price doubling depends on factors other than the
current price level. For example, it depends on changes in efficiency,
restructuring, revenue growth, or earnings growth. The stocks might be
new companies or old companies that have recently had earnings problems,
companies that show signs of a turnaround.
Like Onyx Acceptance Corporation.
Onyx
On January 2, 2003, Onyx traded at $2.73. The stock price more than
doubled by June, and increased by the same amount by July. It finally
topped out at $11.73 by December (Figure 2-1). That kind of growth is
terrific for any priced stock, if it stabilizes and doesn’t drop back to previous
levels.
The big question for the investor is: “Do I get out now or hold on
to the stock?” There is no easy answer. No one wants to sell a stock too
soon and leave money on the table. At the same time, it can be terribly
aggravating to see a stock price double and fall back to previous low
levels. Volatility can be an additional frustration. Onyx has a beta factor
of 1.0, which means that it is about as volatile as the rest of the stock
market.