*Could you ever see VARL being valued at anywhere from 50-80% of stocks like SDLI (500+ PE) or RFMD (180+ PE) or JDSU (?) etc.? (I understand that there may be little comparison of VARL to these behemoths but I can dream).*
We live in very interesting times.
In the last twelve months I have actually accorded a "psychology premium" to many of my holdings. For example, I owned JDSU from ~$13 to the $100's, but then sold. I was willing to sell for fundamental reasons at ~$120, but due to the elation of this "new economy" mumbo jumbo (more on that below), I allowed it to run some more until I felt it was far into the fools theory of investing (betting that someone would buy from me at a higher price rather than on fundamentals). The fact of the matter is that JDSU will have to grow uninterrupted for 15 years or so at a rate of better than 75% . . . I am not saying that it will not do so, but good grief, their is a lot of risk in the stock's price if it even stumbles a little bit. Anyway, I found a solution to my problems by purchasing Furukawa Electric (FUWAF, 5801 in Japan) . . . that gives me JDSU shares at a better than 60% discount that the folks in the US pay for it . . . funny isn't it? I bet I get a lot of questions on that one :-) . . . the basics are that 5801 has an optics business of its own plus a huge holding in JDSU (they are the "Fitel" of the old JDS Fitel) and some other very interesting businesses. The discount tonight is 62.56% for the whole company – this implies a 167.09% upside to a sum of the parts (128.88% upside if all the companies debt was paid off). I have a bit of a track record in finding companies where the discount actually goes away, so you folks should really take a look at Furukawa Electric.
So why did I just say all this? . . . well it takes some type of event to get stocks like Furukawa Electric for the market to realize its value, and those events are generally referred to as catalysts. These events are now what we are seeing with the broad market. Saying that we have a “new economy” implies some imbedded value to a company's worth . . . and the market is bidding these companies up for that reason (not a good reason). While we used to have real tangible events like earnings and contracts run up a stock, now we have thin air (hot air from the talking heads). That is what we are now allowing into our own catalyst modeling . . . but not for long. We have sold most stocks where this thin air has driven them so high it is just plain dumb fools theory. See Mr. Soros's book “The Alchemy of Finance” for more on this (he calls it a form of bias – but never in the form I mention above, seriously it has never been this weird of a market for bias or catalysts).
To answer your question on VARL and its valuation, I believe that an announcement for a deal with NOK could really run the stock, even if the $ amount is not stated. WHY? You got it, NOK is seen as a new economy stock, so VARL by association could become one too. Pretty stupid, but that's the temperament of the markets right now.
So, I think we could run to $70 on this sort of insanity, but unless there are fundamental reasons to back up the price at those levels, I wold be looking for an exit strategy. Geeze, did I just say that!?
Have a nice weekend folks – do me a favor and review the tech in your portfolios . . . if you do not understand it get out of it. |
