Michael,
You might be right that AMAT is a good place to park your money. I personally think it's a great company, but I also think the stock may be temporarily a little overvalued. If your horizon is long term, that shouldn't matter. I could also be wrong. One thing I've learned is that popular opinion is often mistaken. Although it may sound counterintuitive since stocks are valued based on investor sentiment, it makes sense in a strange way.
I think of it as potential energy. If everyone is bullish on a stock, it has a great deal of potential energy because a large number of people who would invest in it already have. When new investors dry up temporarily and some continue to take profits, you usually get an overcorrection releasing some of the potential energy. In other words the higher it is, the farther it can fall. Of course, as long as bullish can become more bullish, prices will continue to rise.
If you look at stocks or sectors that have really run up in the past month, it has been because popular sentiment changed, not because bullish sentiment became more bullish. The market in general and specifically, Intel, AMAT, Cisco, Cpq, Dell, and even Microsoft had many doubters in April. Some more than others, but doubters nonetheless. Now, sentiment is largely bullish, lots of potential energy. Who knows how high stocks will go? One thing is sure, if you can pick a great company which people are mistakenly bearish on, when that sentiment changes, you'll be well rewarded.
Generally, I've found that to rely on what everyone else thinks about a particular stock is an easy way to buy at the top and sell at the bottom. Of course, we're all still learning.
Good luck,
Mike |
