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I am happy you started this thread on BORL. I too don't feel comfortable about a stock when everybody is bullish on it. I ususally consider this as a selling indicator (among others, of course)
Having said that, let me tell you a bit about my experience with this stock. It started in 1992 as the stock fell under 20 for the first time ever. The fall was due to the company announcing a major restructuring plan. The stock had already been down some four or five points prior to that as Sherlund, of Goldman Sacks who is, in the opinion of many by far the most knowlegable about Borland and other software companies, had predicted the upcoming announcement. I bought the stock at 18 and sold it whithin two months at 21. It went even higher but later it fell back down. From then on I started trading BORL both ways. Buying on the dips then selling as well as selling short as it goes up about 15%. It worked fine as the stock was very volatile then. Others, who were posting on the Prodigy forums were doing the same with options. I never lost a transaction on this stock. This goes to show that I never fall in love with any stock. Just a year ago, I sold BORL at 14 and sold it short. I covered at 7
and went long. I never shorted BORL again since then. That last short was a bit of a nightmare. The stock went back up to 14 at least two times, rebounding from the 10-11 range each time. I traded BORL two times since then but always on the long side. For one think, the stock was no longer as volatile as it was back in 92. The other, and fundamentally different reason is that the hanging law suit with Lotus had been resolved. Let us just make a little calculation. Most everybody estimated that the law suit could cost Borland over 100 million $. This is over $3 a share. That much was always factored into the price. Book value, including about $4 the company obtained in cash from Novell was estimated around $10. In addition, BORL was posting a loss of over $1 per share. Now that the law suit is history, the $7 absolute low for BORL is equivalent to $10 provided the finencial position has not suffered since then. On the contrary, I would think that the
performance shown since last year has slightly improved the company's bottom line. So, that is why I would think it suicidal to short BORL at this level. The risk highly outweighs the remotely possible reward. Besides, if one should consider himself smart to short BORL here, where was he when the stock was at $21. Remember, in the stock market, the rule is that, by the time you may figure out what to do, it is usually too late to do it. It would be interesting to find out how much is the short interest on BORL as of today. The more, the better for the stock as this provides a cushion against decline.
Well, this is my opinion. I am of course interested in any other opinion on the matter.
Have a nice week-end. Ghassan. |
