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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: StockHawk who wrote (13286)1/27/2000 11:45:00 AM
From: StockHawk  Read Replies (1) of 54805
 
Stock Market Overreactions - SNDK

SNDK is up 25% today, based on a strong earnings report and a 2:1 stock split. This is a stock several of us have been following and I think it makes an interesting study. Largely due to an earthquake in Taiwan the stock took a dramatic fall late last year. Although reports indicated that the impact to SNDK would be minimal, it seemed that the market's reaction was: Production Problem - Negative Impact on Sales - Sell the Stock.

It seemed that people who sell first and ask questions later got out of the stock, or avoided it, while perhaps more thoughtful types stayed in, or considered getting in.

It certainly appeared, at least to me, that a rational analysis of the situation revealed that the earthquake was not a reason to sell the stock. And it seems odd that the market was rushing to sell at $40 and is now rushing to buy at $125.

The point (if there is any) is that I think this is one more case that vindicates the type of decision making advocated in the FM. The manual councils us to look at the reasons behind a sell off and to keep the faith if it seems that the company's prospects have not changed. While some might call that "fighting the tape" it is good to see that such a reasoned approach was vindicated. As a reader of the SNDK thread I can tell you that virtually all the long-time holders were looking past the headlines and reasoning that the earthquake's long term effects were, in fact, immaterial.

Oh yes, I know that SNDK is still in the shiney pebble category, but this episode is instructive none the less.

StockHawk
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