Complimentary Copy from last night:
June 2, 1997
Dear Friends,
We have been absolutely overwhelmed by the numerous requests for a subscription to CALIFORNIA DEALS. So much so, that I haven't even had a chance to review how my stocks have done today. Indeed, when it comes to investing in such volatile stocks, that could be deadly.
Those of you who requested to be put on the list today received a dated copy of the first mailer. In it, two stocks that seemed to be approaching a breakout were reviewed: COMS and XYLN. COMS, a stock I believed would test $43 and then make a run into the 50's, has done so within two trading days -- alot faster than I could have imagined! I felt that a move and a close above $53 sometime in the near future was imminent. That would have taken us to into the $60's. Sounds easy, huh? If only...Indeed quick profits were to be made, my buying price last Friday of $44 is nice and tasty, but alas, I think it would be wise to take short term profits. It seems that momentum abruptly stops when the stock approaches it's 200 day MA. If there were ever a time for the stock to breakout, it would have been today. Instead, I saw weakness thoughout the day.
Of the two stocks reviewed, XYLN looked the better. Indeed, this is still the case, with XYLN making a move of 1 3/4 today (8.5%.). On the surface it looks good, doesn't it? Stock is up, CALIFORNIA DEALS is making money on call options, the new Ferrari is within grasp...or is it really that good? Don't be fooled. Indeed the close at around $22.5 takes us within grasp of a breakout. But wait...notice how the stock actually had a high of 23 3/8 today? It subsequently fell by 3/4 from the high by the close. Does this mean, sell? Well...Because I have XYLN at an average of 19 1/2 and am long, I'm keeping it. However, CALIFORNIA DEALS is raising the yellow flag on any further buying of the networkers today, including XYLN. The run-up in the last few weeks has been impressive. Maybe just a little bit too impressive. I feel it's time to take a breather. In the short run, this could hurt XYLN, but in the long run, the company looks to have WINNER written all over it. One need only look at the Cabletron announcement today to see that...
<<Chairman and Chief Operating Officer Craig R. Benson said that management does not yet have details for the quarter of fully explain these expected results. He indicated that demand appears to have been strong during the quarter for Cabletron's newer high-end switching products (hmm, XYLN?) such as MMAC-Plus 6 and SmartSwitch 6000 and for its Spectrum Software but softer for its traditional shared media products and some other mature products. Delays in production availablity on the new SmartSwitch products created a backlog on these products and may have resulted in some lost sales opportunities (from whom?). He said that sales results for some operations, particularly Europe, fell substantially short of their targets at the end of the quarter. >>
...if you hold XYLN at low prices, you're holding what appears to be a strong company. If I were trading it, I'd say be very careful...this one could go either way by 15% simply due to volatility in the sector.
Now for the juice: Like Bobby DeNiro says, "I'm hearing things." Today I got a call from a very reliable source; a source who informed me of the CSCC merger several days before it occurred. Let me start by saying that I am 75% certain that ASND will NOT make earning's estimates this quarter thus prompting a pre-announcement.
1) CSCC merger and product transition is occurring
2) Whitree merger merger and product transition is a little slow.
3) Japan is VERY slow (huge part of ASND's focus).
4) Europe is slow (how many times have we been hearing that from all companies?)
5) Slowdown in product cycle and maturity of products.
I'm looking for the networkers to give back some, but NOT ALL of their gains, and ASND in particular to go to about $46. Because I like the company, I would become very depressed to talk about what would happen if we went below $46...so I'll wait. If the stock closes below today's price, I am going to purchase a few puts. Mind you, shorting is one of the scariest investment strategies, and I have only been successful in a few stocks (NSCP at $70, CUBE at $40, SPYG at $50). It was easy with last year's ridiculous valuations, this year it's not as clear cut...BE CAREFUL.
In summary:
Networkers have had a nice run-up. Of them, XYLN looks to be one of the strongest in the group. However, one of my top ten rules of investing includes not to trade in any sector which is experiencing "problems." Indeed, long term, the networking sector is undervalued relative to it's growth rate. But for those who like to maximize their gains, CALIFORNIA DEALS is not buying at this time and would pair down for a few weeks.
Summer Doldrums is here...??? |
