Hi Guys,
I saw the DSL discussion. Quickly, my thoughts are that DSL will be around even though they've done a horrible job of rolling it out and the incumbents havent helped the COVDs, NPNTs, etc. If these companies don't run out of cash they should be able to make it. I think P.Allen has a stake in NPNT. COVD should have neough moeny to make it through the year. I havent looed at RTHM in a while (lost a tiny bit of money on that one, but bailed out WAY before the DSL mayhem broke out...)
As far as residential, hotels, and multi-unit type stuff, TUT Systems (TUTS) is the big player here I believe in the MTU (Multi Tenant Units) space. I think they have almost zero debt, $8 a share in cash, and $12 "hard" book (taking out intangibles etc). They are supposed to earn over $1 next year (dont hold me to that).
I would probably play the equipment side of things and go with TUTS, TSTN, TLGD, CMTN of the world since the pure COVD,NPNT, etc are subject more to having to deal with the Bells who have been roadblocks at times (case in point the VZ strike).
How would I play things? You could sell some puts, buy the underlying common and reduce some more exposure by selling a covered call on the position. With the way these things have been destroyed, you would think that we are going back to 28.8
For example, you could buy 1,000 TUTS at $8.25
Sell 10 MAY01 $12.5 CALL for 1 13/16 (apprx) receive $1812
Sell 10 AUG01 $7.5 PUT for $2.875 (apprx) - receive $2875
If the stock in May gets called away from you, you make about 90% on your investment. (Your original cost on TUTS would go down to $6.43 b/c of the call) and if by August TUTS is over 7.5 the stock wont get put to you. So all in all you make almost $9000. (scale appropriately for less shares etc)
Now on the worst case side, come May when that option expires, if you are still left with the stock you can lower your cost once again by selling a call. Also, lets say in August, TUTS gets "put" to you, you will have to come up with 7,500 BUT remember, your real cost on the TUTS shares was 7500 - 2875 or $4625 = 4.625 a share for TUTS, and now you have 2000 of TUTS, to which you could sell calls on the part just put to you and get your cost conceivably below $3 or $2....
I know the above may seem complicated but if you don't understand options than it's probably better to skip the above anyway. TUTS for example along with some of the other equipment providers I named will not and should not "go bust in 2001", have recapitalization isses or have to come to the market again for more money, shares since they are either already profitable, and have hardly any debt, and cash on the books. Many are projected to be profitable in 2001 but this could change.
This is just my opinion. You can do this with other beaten up stocks in telcom and probably do well if you give yourself a good time horizon. (I have implemented the above strategy with TERN this week)
Hope the above makes "some" sense.
Happy Investing in 2001. |
