This morning I started liquidating all of my 3Com positions (stock and calls) as well as all my other tech positions (relatively small amounts of IBM, QCOM, etc.). I have agonized over this decision for the last couple of days; it was one of the most difficult investment decision I have made. Before giving my reasons for doing this, I want to warn the thread that usually I am way too early with my investment moves and either have to wait long for my positions to produce reasonable profits, or leave too much on the table when I exit. For example, early this year I got into QCOM at a price of $60 (split-adjusted) and sold it in the low $100s bought again 15 points higher and finally sold most of it around $190 to get into 3Com -- QCOM today is around $500.
So, with this preamble, here are my reasons for selling my techs in general and 3Com in particular in rough order of importance:
1. I believe that there is a dangerous bubble in a relatively small number of high tech and internet stocks. Although 3Com is by no means a member of this bubble, it is no longer the screaming bargain it was earlier this year. When the high tech bubble bursts, it will probably affect all techs, including those that are not part of the bubble. Moreover, it will kill the high tech IPO market for sometime, thus diminishing a large incentive for owning 3Com -- the Palm. I think that there is a high probability that the bubble will burst before the Palm distribution late in 2000, and a measurable probability that it will burst before the Palm IPO late in February.
2. 3Com's earnings for 2Q and particularly their CC warning about the 3Q disturbed me greatly. I have tried to whistle past the grave yard in the last couple of days, but can no longer pretend that everything is OK. The major disappointment is, of course, the networking disaster. But Palm disappointed me somewhat too: Palm revenues were great, but Palm profits were nothing to write home about. I know markets nowadays care nothing about profits, but I do. I know about the potential for Palm OS and palm.net; I've been preaching about them here. But when a bubble bursts, potential is swiftly discounted and what counts is actual earnings.
3. I think there are some very good opportunities in the non-tech part of the market and even in (gasp!) bonds. I have started moving my money into these areas and intend to complete the move over the next couple of months. I will be lurking in SI for any tech opportunities, of course.
4. I made out very well with 3Com calls and stock. I am a believer in the well worn admonition about hogs getting slaughtered.
Again, be warned that those that followed my exit moves in the past have eventually regretted it. Almost always, I tend to leave too much on the table. There is a good possibility that 3Com will double or even triple from here, just like Qualcomm did after I sold it. But my gut tells me that I must get out.
Kyros |
