Something to think about
Everyone has their own reasons why they have faith in AMD "this time", but I have to think we are the minority view at the moment. I started following AMD in November. My account was ready to go, but I didn't want to make any moves because it was uncertain what kind of shakeouts the new year would bring. Some of this from possible Y2K fears, some from delayed profit taking for tax reasons. I knew I was going to buy AMD, but just had to time it out. In hindsight, I shouldn't have waited so long, Y2K turned out to be a joke and there wasn't a huge correction to start the year. Hindsight is always 20/20 though.
Anyways, I scheduled a trip out to little d for the double witch in January. It's a good vacation, and I like to hang with my uncle. He's retired in his early 50's thanks to a broker with great vision. In the early 90's, his broker convinced him to through a couple 100K into CSCO, MSFT, INTC, and AMGN. I'm not sure what's more impressive, that the broker made these picks in the early 90's, or that he convinced my uncle to let it ride. Hence, he retired 10 years early. When I was there, my uncle had rolled over 20K from another account and asked me if I thought it was a good idea to buy some more INTC. I said, you already own close to $1 million in INTC, why not through the money into AMD? Thus, we called the "brilliant" broker from Bear Sterns.
It was a pretty interesting conversation. When my uncle brought up AMD, his broker laughed and gave us 10 reasons not to buy AMD. All ten reasons were the history, the history, the history, etc. According to him, Q4 was a complete fluke. AMD has done this before, then they always disappoint the next quarter. They're a badly run company. So what about the current situation? As with many brokers, he didn't know shit about technology. According to him, INTC could destroy AMD anytime it wanted to. I asked about the Athlon, stating it looks like AMD finally got it right. He didn't understand what ONE good design was worth. Regardless, he strongly reccommended not buying AMD and my uncle listened.
I think this is the typical attitude of many people on wall street towards AMD. Anyone that's a little older than me has watched AMD's performance and not been impressed. They're looking for another good quarter or 2 before the bandwagon effect starts. Everyone knows if AMD didn't have a checkered past the stock would be worth $50 billion right now.
Anyways, I got back and dove into 2 weeks of hibernation studying every piece of info I could find about AMD and semi's. I concluded that AMD was a screaming buy with more upside than any other stock in the market. I'm so conviced it's a buy, I loaded up on 5000 options I plan to execute, instead of buying a few hundred shares.
Now, as earnings near, I'm a little perplexed as to how this stock is going to act the next 4 weeks. There is 9.4% of the float short. I have to think that many of the shorts, following advice similar to my uncles broker, are looking at AMD's past and looking for a disappointment at earnings. We all think this is not going to happen. Then, what happens to those 10.3 million short shares? The put/call ratio is at a 10 year high for AMD, signaling the options players are very bullish.
I posed the question earlier, how can we get real time stats on short interest? I think this is a the key stat going into earnings. Are the shorts going to get worried and cover before earnings? Or are they going to get stuck trying to cover after earnings? Will there be a new wave of shorts moving in when the others cover, thus having a balancing effect? This is anyones guess, and will vastly impact the price of the stock more than any other factor over the next 4 weeks in my opinion.
Q1 earnings could signal a paradigm shift depending on what AMD says. Let's assume they beat whisper numbers and say Q2 will be flat to nominally above Q1. I think this is a given, many others do here as well. Given this situation, manipulation of the stock will not be possible to save the shorts. I think there's a pile of money ready to move in if Q1 turns out good and a positive forcast is given. Much of my reasoning comes from talking with veteran investors like my uncle, the guys waiting for AMD to prove themselves. Assuming this happens, I wouldn't be suprised to see $100 very soon. This would only give AMD a market cap of $15 billion, still making it the most undervalued stock in todays market.
These are just my thoughts, any comments?
chic |
