michael - well let me expand on it as you ask for.In my...

michael - well let me expand on it as you ask for.

In my experience when you are on a turnaround play you can never know for sure if it will continue. By turnaround I mean the following...

1. The financial health of the company improving - TOX started to show some signs in this 3 reporting periods ago and has steadily improved this area in each report - even while still reporting declining losses. They raised capital, retired old debt, got rid of loss making businesses and the debt/equity dramatically improved.

2. The operating margins and earnings trend is up on the remaining businesses.

3. The current financial performance and outlook points to further growth.

Now what often happens is that the share price is slow to react in the initial stages - few are paying attention to the slight turnaround, most that notice are skeptical and rightly so - after all one good reporting period does not make a recovery, plenty of shareholders with large losses are trapped and any rally is greeted with plenty of sellers (and day traders just having a ride on it).

Then the penny drops - another set of numbers shows the turnaround continues, more start to believe and the price moves.

Another set of numbers and guess what? Yep - lots start to believe this is the next best thing to sliced bread and they are in this thing for the long haul - well some are - most get shaken out to bigger smarter players. Those that stay and see each retracement only be temporary and new highs soon after are now getting very excited - they are going to be millionaires.

So what happens then - well a broker might cover it or the company might give forecasts and of course this thing is so good that of course these great forecasts must be modest - so people start inventing their own forecast numbers - the company says outlook is for x dollars profit and these shareholders have thoughts of fantasy and pencil down that this must be conservative and set an expectation in their own brains that the real number will be 1.5 times x or 2 x.

Then out comes the number - and holy moses! - it is only 1.1 x !!!! - aaarrrrgggghhhhh!!

Now that is still more than the company predicted however the expectations of the dumb and greedy money was nearer to 2 x. The result?

SELL!!!!!!!!!!

The thinking? "It disappointed me and I have a good profit and I know it is going down - look at that chart - I CAN ALWAYS BUY BACK LATER".

I think that this just about sums up TOX the past week- some people put their own expectations on it outside reality and shook themselves out - mind you some didn't stay this long - had to crystalise that paper profit at much lower price levels and higher CGT rate levels.

So what happens next - well smart money knows there is no need to rush it as there might be more disappointed holders expecting nearer 20 cents so lets shake that tree.

Next comes reporting season in a few weeks - and for the FIRST time in 14 reporting periods (7 YEARS!!) and in its history TOX will show a profit!!!

Then guess what? Yep - a different set of eyes will see it - the numbers are there in black& white in the P&L and Balance sheet and a more conservative breed of fundamentalists will see this, crunch some numbers and determine key financial ratios, growth rates in key ratios, compare to peers etc...

The chart looks like a big risk to the dumb money - but smarter money will look at the results, look at the forecasts and use their experience to know where this might go based on forecasts and if the upside is an easy 20% in price gain - then BUY!

Expectaions can sometimes get too high - and when totally unfounded can shake a person out of a good long term recovery.

TOX might fail later - but nothing in those numbers the other day to cause some of the selling other than greedy expectations without basis in my opinion.
This happens on plenty of turnaround plays.