Khamdy wrote:
Opening oneself up to other stocks that have very few lawsuits and are making plenty of money (ie. EMC, ORCL, GLW, SEBL, PSFT, BEAS and etc...). These are the companies that will take off when the economy is recovering.
I asked:
How do you know they will "take off"?
Khamdy responded:
Do I know if they will take off? No. I do not know.
That's quite a different comment than "these are the companies that take off when the economy is recovering".
(5) most of these stocks prices are close to 52 weeks low. Last week, I bought BEAS, EMC, NTAP, GLW, and ORCL for long term holding. Are they going to go up? I do not know. Investing is like gambling.
We should examine the first issue that a company and the stock of a company are two separate entities. The supply and demand issues of the 'stock' of a company is what will or will not propel the share price. The fundamentals behind the company are, of course, what will determine if economic recovery will have a positive influence on each company's fundamentals. Improving fundamentals of the company usually leads to increased demand for the stock of the company as those fundamentals improve. Hence, if one is studying the company as well as the demand for their products - be it EMC, Corning, Network Appliance, Oracle, BEA Systems, Peoplesoft, etc... - it could very well be that an economy that recovers enough to increase the capital expenditures of the customers of those companies will eventually lead to increased demand for their products.
It follows that an increased demand for the products could lead to improving fundamentals for the companies which could then lead to increased demand for the stock of those companies depending on a variety of factors. I'm not so sure that I would equate all of that process with 'gambling' if one is following the cyclical nature of supply and demand for the products and the stocks. Perhaps a better selection of word choice would be to use risk/reward. The risk is that we do not know what the demand will be for products from EMC, BEA Systems, Network Appliance, Oracle, Peoplesoft and Corning in a recovering economic environment at this point in time. Not knowing that, how can one "predict" they will be the companies that 'take off' in a recovering economy? It could be a list of 'other' companies or rather, the stocks of 'other' companies. The economy could recover, but the demand for products from certain companies not increase which would lead to fundamentals not improving. Some cyclical moves take much more time to benefit from improving demand and fundamentals than others.
So, to avoid the 'gambling' nature, one watches the industry group and sector to see how the companies within a group (such as application software, networking, semiconductors, chip-equipment makers, fiber optics, storage, etc...) within technology are performing - both the leaders and the laggards.
As an example, if you were watching EMC and Network Appliance, you also want to watch like a hawk companies such as IBM, Sun Microsystems, Brocade, McData, Gadzoox, Inrange, Storage Networks, Emulex, JNIC, QLogic, Veritas, Andiamo/Cisco, Dell, Compaq, HP, Finisar, Hitachi, Nishan, or the up and coming Zambeel (a new NAS company), etc... to see how the fundamentals of the companies as well as how the 'stocks' of the companies are performing.
In addition, following and paying attention to projections for each industry's segment in terms of current market penetration and what the future looks like in terms of size of the market for which each company will be trying to grab pie is worth the effort. As an example, here's one in regards to the SAN industry:
datacore.com./sanindustry/sanind_stats.asp
or the IDC and Gartner SAN market share comparison:
siliconinvestor.com
Combining the study of a group's fundamentals and the technicals of the 'stocks' along with the industry projections/studies helps balance the risk/reward factor of choosing investments. We also have the dynamics of the technology game being played in each sector to consider as generations of technology are introduced, evolve and others mature.
BB |
