When Sigmund Freud said people have a secret death wish, he was no doubt referring to Air Canada shareholders.

With the company teetering on the brink of liquidation and operating under creditor protection, there are still buy-and-hold investors merrily hanging on for dear life and praying for a miracle, even as Air Canada itself has cautioned shareholders that the stock may well become worthless.

This is one of the great mysteries of the stock market – why people stubbornly hold on to shares in companies that are in bankruptcy protection, often until the shares get delisted.

Remarkably, Air Canada (AC-TSX) was recently trading at $1.14, even after prospective saviour Victor Li walked away from a deal to buy out the financially strapped airline.

So, you ask, why don’t people just take what’s left and give the money to charity or buy a bus ticket across town to an Investing For Dummies Seminar – before the shares get delisted? Presumably, they know something we don’t.

Generally, an insolvent company’s shares are delisted and, once the creditors are paid, there rarely is a red cent left for the shareholders. Air Canada is no different.

This is even worse than losing your luggage.

Yet, many investors have difficulty selling a dog like Air Canada that traded as high as $21 four years ago. They look at selling a loser as an admission of a loss. What they forget is that the successful investor has discipline to swallow foolish pride and chalk up losses as part of the game.

In the past year, many analysts and fund managers have been dumbfounded with the bizarre trading pattern of Air Canada stock that has defied gravity, trading as high as $2.11.

On the other hand, the daytraders have had a field day with the shares and should thank Li, the Chinese billionaire whose mood swings while negotiating to buy the airline have created the kind of turbulence that attracts traders like flies to honey.

No doubt, some of those never-say-die, buy-and-hold investors were desperately increasing their positions on some of those sucker rallies.

But even experienced traders can get caught with worthless paper if they hold their shares overnight in this game of Russian roulette, with the shorts (betting on the stock to go down) and longs (betting on the stock to go up) engaging in a tug o’ war.

If you close out your position before the bell on a company that is on life support, you don’t have to drive yourself crazy worrying about a post-bell press release announcing delisting of the stock.

Many investors learned that lesson the hard way recently in trading the insolvent Canadian steel company, Slater Steel (SSI-TSX). Just hours before the after-market news that Slater was being delisted, the stock went on a curious rampage for a one-day double.

Every Slater Steel press release reinforced the point that stockholders were likely to wind up with worthless stock. Yet, getting gonged over the head with a sledgehammer sometimes doesn’t register with the Freudian investor harbouring a financial death wish.

* THE ELUSIVE 10-BAGGER: Many investors never experience a 10-bagger (a ten-fold return on their investment) in their lifetime, mainly because the urge to sell when the stock doubles or triples is too powerful.

BioCurex, an obscure U.S. biotech company on the over-the-counter bulletin board (OTCBB), recently scored a stunning 16-bagger in a miraculous five-day run.

Danny Deadlock, of the Alberta-based newsletter Microcap.com, one of the Edge’s Pro’s 3 Stars stock pickers, featured the stock on February 19 at 23 cents and marked it as sold on the website on April 5 at $2.40 for a 943-per-cent gain.

But if you bought it at the start of the run at 24 cents and caught the $3.90 peak five trading days later, you were up 1,625 per cent for a profit of $76,250 on a $5,000 investment.

The stock doubled before news broke of positive results with the company’s lung cancer testing technology and then the shares exploded from 54 cents to $2.55 in a single day.

* SAGE WORDS: “It’s very rare that a person ever catches these (10-baggers) so don’t feel bad if you missed it and if you sold too early . . . a cash gain is far better than a paper gain that’s never realized.”

– Danny Deadlock, Microcap.com



HOT STOCK: INTERNATIONAL FRONTIER RESOURCES
IFR-TSX $1.03
Up 38 cents (+58.6%) on 2,341,600 shares (for week ending April 8).
When IFR was featured in Pro’s 3 Stars as a pick of Microcap.com a year ago at 21 cents, the Calgary oil and gas junior could have held its annual meeting in a phone booth. Now, it’s the toast of the party as investors load up with shares, betting on positive results from a wildcat well in the Northwest Territories.



COLD STOCK: FORBES MEDI-TECH
FMI-TSX $4.26
Down $6.14 (-59.0%) on 5,582,500 shares (for week ending April 8).
Biotech shareholders simply refuse to sit on the fence. They either love or loathe the clinical results. Forbes’ results for its clinical trials on its cholesterol-lowering drug didn’t appear all bad, but if there was a silver lining for the Vancouver company, the market could only see storm clouds.