Avici Systems (AVCI)

Company. Avici Systems builds carrier-class routers for integrated IP networks. "Avici developed a routing solution that supports carrier's near-term and long-term bandwidth and service requirements. The TSR® , SSR™ , and QSR™ were purpose built with carrier requirements in mind, delivering unmatched scalability and reliability while lowering the total cost of building and operating a network. Together, the QSR, SSR and the TSR enable carriers to seamlessly grow from five Gigabits to over five Terabits of capacity, as their demand increases." (company website)

The story so far. In an earlier article, I recounted how I first bought Avici when it was a hot IPO at the height of the internet bubble in the stock market. Making bad matters worse, I bought even more shares after the price began to plummet. Eventually the company did a 4:1 reverse split. On a split-adjusted basis, I had paid $165 and $50 per share!

Even worse, I continued to hold the shares, convinced — purely through wishful thinking, not rational analysis — that they would go back up again. Wrong!

Then earlier this year I noticed that the price of AVCI stock was inching upward. Aha! I will recoup my losses, said I smugly to myself.

Buy. I bought 500 additional shares of AVCI in mid-June when the price had peaked, pulled back, and was poised to climb again (or so I thought). And it appeared I was right: AVCI climbed all the way to $7.32 at the end of July.

Unfortunately, I allowed myself to believe, once again, that the price would continue to rise beyond what was reasonable. Predictably, AVCI took a tumble, all the way back to $5.30. Ouch! Even when it went back up to $7.50 in late September, just before the swoon, I held on. Ouch! again.

Sell. When AVCI started to take giant steps upward this week I determined not to make the same mistake again. Seeing that it was comfortably over $7, I placed an order to sell half my shares at $7.05. When that executed and the price continued to rise, I placed a second order to sell the remaining shares at $7.20.

For this lot purchased in June, my profits are 15%. For all the shares taken together, my profits are $7%. Thus, from lemons I have made lemonade.