(Energy stock trading story updated for Nabors Industries' catalysts)
NEW YORK ( TheStreet) -- There's a cynical stock market adage that explains recent trading in shares of Transocean (RIG - Get Report), Weatherford International (WFT - Get Report), Nabors Industries (NBR - Get Report) and Chesapeake Energy (CHK - Get Report): Bad companies make for good trades.It's a bit of trading knowledge that can help investors identify stocks where even if the long-term outlook is promising, short-term management mistakes offer trading opportunities. A stock goes down because it messed up so much, and that presents an opportunity to ride it back up. Often, though -- and this is key -- it's riding that stock back up before it goes back down again because management messes up yet again. Positive headlines are magnified, but so are the negative ones. Take Weatherford, which a year ago announced that it might have to restate years of financial statements because it messed up its tax status. Weatherford sank so low by the time the market bottomed out last October that it's up 25% since -- though its shares are down 30% in the past year.
|It's a law of the markets: 'bad' companies often make the best trades.|
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts