re: "in 1996, stocks like LSI Logic went from 60 to 12. The fact that LSI then went back to 90 and split would not have helped if one was on margin and had to sell out. You could also have bought AMAT for 13 bucks a share split adjusted. Same with Micron, from 95 to 17, and back up."
The comparison to LSI Logic may be fair, but not the others. AMAT is a cyclical, QCOM isn't. MU is a commodity, QCOM isn't. I think a better comparison would be to INTC, which lost about 60% in 1996. QCOM has already lost a larger % than that, from the January high.
At the moment, I can put about 10% of my money into QCOM at 55, and another 10% at 50. If we go to 45, then I would probably be willing to buy using margin. Why? Well, I don't know where the bottom is, but if the stock goes below 50, then it has made at least 3/4 of its total downmove. This is simple math. Unless you think the longterm story is suspect, there is little further downside at these prices. As the stock goes down, there is less and less risk in buying (or holding) it.
The last time I used margin was summer/fall 1998. From early January 2000 till mid-June, I have been 30-70% cash. I am a cautious investor, always trying to reduce risk, but assuming risk when I see a wonderful opportunity. QCOM in the 50s is one of those rare opportunities, like AMAT in 1996. So, I'm considering using margin again. Margin (and options) are powerful but dangerous tools. Used with intelligence, continuously balancing risks and benefits, it can make me a lot of money. |
