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Technology Stocks : Vitesse Semiconductor
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To: OldAIMGuy who wrote (3092)11/9/1999 9:08:00 PM
From: Robert G. Harrell  Read Replies (2) of 4710
 
Hi Tom,
I was wondering if your system uses valuation to trigger sells. I've been in and out of VTSS since the Smart Money article 3(?) years ago but I keep getting scared out by the valuation. A few weeks ago I doubled my position in both VTSS and PMCS because of my strong belief in the demand for their products, their strong relative strengths and because one or both have been in my mechanical strategies for months. Then I had an eye opening experience. I was replacing the utilities stocks in a portfolio I had created for my father with growth stocks since he passed away in Aug. and my brother and I both need an aggressive portfolio. When I got down to picking the last 2 entries, I made a chart of likely candidates and comparable stocks with their valuations (P/S and P/E) and growth rates. I was shocked by the high price to sales ratios (approx. 23) of VTSS and PMCS relative to almost all the other stocks. AMCC at 27.6 was the only one I looked at that was higher. By comparison ATML was 2.8, TXN was 7.4 and XLNX 15.1. The real killer was when I checked IBD and found neither stock was under accumulation , in fact VTSS was rated D. I put tight stops under both of them and got taken out the next day. Consequently, I've left some money on the table.

Your system seems to just adjust the number of shares you hold but, as far as I recall, has never taken you completely out. Does it ever get you completely out of a stock?

Best regards,
Bob

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