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Technology Stocks : Vitesse Semiconductor
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To: Heinz Sauer who wrote (214)9/29/1996 2:04:00 PM
From: Alex A. Goldstein   of 4710
 
Both the insider selling and lofty valuations are negative. While the short interest has grown substantially, though, it is quite small in terms of days to cover. So, from that perspective this looks like a good short candidate.

The big question is competition -- who is currently competing with them, and who will compete with them in the future. Consider, for example, Micron Technology: it is benefitting from a short-term increase in DRAM prices, but next year will be the same old story due to huge global capacity. What kind of supply/demand situation will exist for Vitesse's products one year from now? I haven't done any research yet, but insider selling is unlikely to precede a large, positive move in the supply/demand balance.

Perhaps their margins will remain static into next year -- that would be great from a business perspective, but it seems that the stock's present valuation has more lofty expectations built into it.

I'd appreciate any opinions on this.

-Alex
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