lml - You raise some good points. I am just trying to look forward 24-36 months and determine where all of these new revenues are going to be coming from. I do agree with you that AFCI is not a "value" investment (at this time) but rather a growth story. Therefore, I probably need to hedge my specific (stock) risk exposure accordingly. AFCI is currently one of my largest Tech holdings right around 10%.
As you know, one of the most difficult decisions in investing is when to sell. I am just trying to make a case as to why I should NOT sell. I have posted inquiries on both SI and Ranging Bull threads to hear what other AFCI investors think. You have put forth some very good arguments as to why AFCI continues to be a good hold. Many of the responses I have seen so far on SI & RB are based on emotion, gut feelings which show me that many who own this stock really do not know the business or the industry this company is in.
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The Marconi settlement can be viewed IMO as positive and negative. Your explanation is but one possible out come and in fact could turn out to be a net gain for AFCI. The potential revenues from this geographical region are huge. I would like to hear something from management as to what their plans are in FY 2002 and forward. Specifically their strategy for developing this regional market.
This business represent just over 5% of their current sales which at this time ARE NOT growing at 40% per year. These revenues are fixed per the litigation settlement. If as you state, "... it will be difficult as once the UMC is installed it becomes part of the legacy infrastructure that the carrier will be loathe to abandon....", then perhaps this settlement provides an edge to AFC as long as management has a long term plan to further support these new customers. From what I can tell, these customers are Marconi's and AFC is not allowed to directly work with them. Therefore, AFC may be shut out of any future customer service revenues.
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I highlighted your post on the Raging Bull thread as it was a very good response (which stands on its own) and thought it might inspire other comments from AFCI investors on that thread. The responses on RB were few with limited facts and of low quality.
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Your comment "...Well, if you're truly long the stock then sell it, and stop trying to convince yourself its overpriced. The stock is overpriced to a value investor, but not necessarily so to a growth investor..."
Generally, my sell discipline is similar to my buy in strategy. If you look at my earlier posts back in August 1999, I accumulated these shares over an eight month period. Unless I can determine that the growth story is still in the early stages, then I would slowly sell a portion of my position over the next eight months. There are significant capital gain tax implications that I would prefer to spread over several years. I simply have not made that determination yet. I do not short companies but rather look to other emerging companies to invest my proceeds in.
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Your comments regarding LU and WCII "...As far as LU and their IAD with WCII, and LU's own NGDLC, your concerns are way overblown...". I would like to see my companies be proactive rather than reactive. I still think our management made a stellar purchase through GVN but would have been happier to see a new contract announced with WCII (one of our top five customers)for these IAD products rather than to a competitor.
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I thank you for your feed back as it has provided me more food for thought. I do think it is healthy to play devils advocate for any investment you own. There is one intangible assets AFCI has going for it, its management. I think I will continue to hold my shares for now but will utilize a covered call strategy spread over this year and next year to reduce my specific stock risk.
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"...In contrast, the same cannot necessarily be said for the value investor who for example have been clinging onto paper & other commodity stocks for years and really haven't seen their "value" unleashed..."
Generally, I agree with you here, but you have to also buy the asset at the right price. I try to utilize a mixture of both growth and value in my portfolios.
W. Buffet would disagree with you on this point.
(http://www.berkshirehathaway.com/1999ar/1999final.html)
"...Our lack of tech insights, we should add, does not distress us. After all, there are a great many business areas in which Charlie and I have no special apital-allocation expertise. For instance, we bring nothing to the table when it comes to evaluating patents, manufacturing processes or geological prospects. So we simply don't get into judgments in those fields.
If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter. Predicting the long-term economics of companies that operate in fast-changing industries is simply far beyond our perimeter. If others
claim predictive skill in those industries -- and seem to have their claims validated by the behavior of the stock market -- we neither envy nor emulate them. Instead, we just stick with what we understand. If we stray, we will have done so inadvertently, not because we got restless and substituted hope for rationality. Fortunately, it's almost certain there will be opportunities from time to time for Berkshire to do well within the circle we've staked out.
Right now, the prices of the fine businesses we already own are just not that attractive. In other words, we feel much better about the businesses than their stocks. That's why we haven't added to our present holdings. Nevertheless, we haven't yet scaled back our portfolio in a major way: If the choice is between a questionable business at a comfortable price or a comfortable business at a questionable price, we much prefer the latter. What really gets our attention, however, is a comfortable business at a comfortable price...."
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We have been having a very interesting discussion on the LSI thread regarding value and growth (http://www.siliconinvestor.com/msgs.gsp?msgid=13467135). I own LSI at a split adjusted $5.50/share bought around the same time as AFCI. I can make some very good arguments that LSI's growth (and stock price) continue to be excellent 24-36 months out (perhaps even better than AFCI), so I continue to hold. However, I would not establish a new position (in either company) at current levels.
EKS |
