Looking at the chart of the last 6 years,
siliconinvestor.com
I realize something odd. There must be almost no current stockholders who bought anywhere near the current price. The stockholders fall into 2 very distinct groups:
1. The first group are those who bought before 3/99, when the stock was unknown and unloved, and went nowhere for years. Anyone who bought then, and is still holding, is someone who bought before it showed up on anyone's momentum screen. These are investors who know the company thoroughly, who know the industry, who are intimately familiar with the technology. They are not momentum traders. They still have large cap gains. My guess is they are likely to continue to hold, as long as the longterm story is intact, which it is. They are hurting, but they are Believers.
2. The second group of investors are those who bought from September 1999 till very recently. These are momentum guessers, people who pay no attention to valuation, people who think you can't pay too much for a good stock. The definition of a "good stock", to these investors, is anything that goes up 5 points every day. Discussions of P/S, cash flow, P/E ratios, just bore them. If PEs are used at all, it is with an E from so far in the future that any guess cannot be disproved, no matter how euphoric. These people are really hurting, especially since I think a lot of them bought out-of-the-money calls, and bought on margin. My guess is they are selling heavily, and will continue to sell until they are completely out of the stock.
Other than these two groups, there are only a few people who bought in the middle of the 1999 runup, and a very few who have bought in the last week.
So, who is going to support the stock? Who will buy, and keep buying, to create a firm bottom? It will have to be the first group, and a new third group. The third group, who are just starting to buy, are value investors who buy quality beaten-down techs. People who bought Intel in 1996, Apple in 1997, or Oracle in 1998. People with cast-iron stomachs, who feed on the trash that Mr. Market has thrown out. There are a lot more people who know about the stock now than in 1998. They are following the stock, thinking about buying, maybe starting to buy.
Once a bottom is formed, these investors will pile in. And a while later the momentum guessers (who never learn), will also pile back in. So, I'm thinking that this stock won't spend too much time at the bottom. It will be straight down, and then straight up. The exact bottom will be determined when the fear is finely (and finally) balanced by the greed. I don't think news or fundamentals will have much to do with it. Before sentiment turns, all news will be interpreted negatively, and used as a reason to sell. After sentiment turns, all news (maybe even the same news), will be interpreted positively, and used as a reason to buy. |
