Avici Systems (AVCI)

I'm going to break my own rule by including one stock that is still in my portfolio.

Company. Avici makes high-speed internet infrastructure equipment for telecom companies and internet service providers.

Buy. My stake in Avici dates back to the internet bubble and IPO frenzy of the waning days of the last century. When AVCI hit the market in July, 2000, it immediately shot up to $654 (adjusted for a reverse stock split in 2002).

By December, AVCI had come back down from the stratosphere, and I made my first purchase at the split-adjusted price of $165. Three months later, the stock had fallen still more, and I sent more money on this fool's errand with my second purchase at the split-adjusted price of $50. After all, "It will come back," I said to myself, "stocks always come back." Right!!

The good news is that I was buying only with cash and the number of shares was very small. Thank goodness I hadn't learned about buying on margin yet! I would have lost my shirt.

Trend line — What's that? At that time, as an investor, I had a surplus of enthusiasm and optimism and a severe deficit of common sense and investing know-how. I told myself that I was doing dollar-cost averaging, driving down the average cost of my shares. "That way," I said self-delusionally, "it won't have to come back up as much for me to break even."

I continued to nurse a faint hope that a turnaround was just around the corner, until the value of my few shares had fallen so low that the proceeds of selling them would have been chump change. The final indignity came on 12-Nov-2002 when the company declared a reverse stock split of 1 share for every 4 in order to avoid being delisted from the Nasdaq. By this time I had so few shares left and they were worth so little, that selling them would not even have covered the transaction fee.

During the last few months I began to notice that the flat-line graph had started to form a few bumps and the in early June was now over $6.00 from its all-time low of $2.28 in October, 2002. Hmmm.

"I will redeem myself," I said boldly. "I'll buy more shares; if they go up just 8% I'll break even." Could be a big mistake, but this time the signs are far more positive than before. At least the stock is trending up instead of down!

Sell. To be continued...