Andy:
This message is for everyone in this thread. Andy, let me thank you
for really making this thread very interesting and informative. I sold
my entire CUBE holdings on monday. I will tell you why, because I am
disturbed by what I see. I am not as trained in technical analysis
as many others in this forum, and I do not believe that someone needs
the most powerful computer and the most expensive software to get a
100% ROI on a stock.
1. Whenever a stock undergoes some technical damage, it takes a while
for it to recover (3-9 months). CUBE has undergone severe technical
damage from 72 to 38. The momentum players are leaving the stock and
will park the money elsewhere - INTC, MSFT, IOMG, USRX, etc. Remember,
when these players leave, they wait for momentum to come back before
they jump back in. That takes time.
2. So now you are thinking that isn't now the time for value players
and funds to jump back in. WRONG. In this competitive world, most
fund managers just care about performance, otherwise they will lose
investor dollars. Overall, they will stay away in general and add
positions to their existing winners. Remember, the institutions
chose the winning sectors of this year during last year. I looked
at top analyst sector choices for this year published last year in Dec,
and they are pretty much right on the money.
3. Most traders do not understand technology stocks well enough. It
is easy for them to assume that S3, OAKT, and CUBE are in the
exactly same business. Why do you think they considered CUBE to be
an internet play last year? What these traders understand however,
is that they have to make money or they will not survive. Where then
are the big buyers who understand CUBE? Like everybody else they
also do not like to lose money and they are waiting for the storm to
be over. Why did Seligman sell their stake? Paul Wick is a
knowledgeable guy? Makes you wonder?
4. If all the analysts are revising their estimates upward, why is the
stock going down (i did check First Call for this info)? Does the
market know something that we do not know? This part is confusing
because all the First Call analysts increased their estimates. Their
were no dissenters.
5. Once an upward trend is broken, manipulators come in and take
trading profits regularly. I have seen this regularly. Big block trades
within few days: trading profits. Big volumes followed by brokerage
downgrades the next day. This stuff smells dirty.
In summary, CUBE looks like a technical disaster, and it takes a while
to get out of it. The relative strength has fallen significantly from
94 to the low 80s. That is a looming NO NO for a momentum investor
not to invest. CUBE will likely trade now like a typical semi stock, and
the PE will have to get really low for technology funds to come back in,
probably at the low 30s. If CUBE can meet their projections, in the'
low 30s it is a fantastic bargain. If not, it belongs in the low to
middle 20s, which is commensurate with the rest of the semis. Please
do not underestimate the technical aspects, forget those fancy moving
curves, and other paraphernalia, and see what the market is saying.
Do not be also fooled by a technical rebound in this downturn.
Deepak Ghosh
P.S. By the way I am not sure there was considerable insider selling. I
think there was buying. Insiders probably own about 42% of the
outstanding shares (check IBD). |
