If I had marging debt I wouldn't buy anything, but that's just me -- I don't want margin debt. Yeah, covered my NTAP yesterday as well. Feels good, but I feel bad for the guy on the other end of the transaction.
Kumar was on the tube this morning and said that INTC's demand was strong at the beginning of the quarter and fell of a cliff near the end. We have to think about what this means before we buy with abandon.
Just musing, here are my thoughts about the situation -- still early in formation.
- European demand for US goods is falling because of the Euro and oil. Companies with large European exposure in markets that aren't growing rapidly don't look appealing. This means I wouldn't run to consumer staples.
- Any falloff in PC demand is bound to limit networking demand, but only on the margin. This is a high growth market, so fundamentally, the companies should continue to do quite well, but somewhat less well than before. Unfortunately, the stocks are priced for perfection.
- The rised in oil prices and the fall of the Euro are temporary, so we need to look beyond that. Will demand for chips and networking stocks be much higher than it is now in two to three years? I think so. But the high PEs of the networking stocks is very troubling.
- Chip and PC-related stocks are going to get clobbered today. That's not news. There may be reflex rallies, but with this European stuff hanging over their heads I don't expect to see big increases in their stock prices over the next few months. But look at the PEs -- very appealing for the long term. INTC, MSFT, DELL look like good candidates here, but will take a long time to pay off. A good strategy might be to buy these at bargain prices and sell calls every month.
I guess overall, I'd look to see what gets hit the most. If its INTC, MSFT, CPQ, Dell, while CSCO, Nortel, et al hold up well, I'd be tempted to move some cash out of the latter and put it into into the former. I don't like high PE at all here. I can't see how multiples of these high PE stocks can expand in this environment. They may not contract, but it seems to me that if you believe they are not going to expand you are taking on a lot of risk for little potential reward. So while INTC is going to be the whipping boy today, I'm less worried about it over the next few months than I am about the others, so it, to me, presents a better opportunity given the sale prices we are seeing. I don't say this because I have a large position in INTC -- my position is very small.
Whatever happens, this all is a temporary situation and provides an opportunity to buy whatever you think will be performing well two to three years in the future.
(This feels like more reasoned thinking than my initial response that I PMd to someone yesterday, which was along the lines of sh*tsh*tsh*t.)
INTCfan |
