I am in agreement with you, which is why I am using NT as my leading indicator; whenever Nortel shows two sequential quarters of flat revenue, IMO a fundamental rebound is in the works. I also believe that this time around the chips will do much better than the equipments. To begin with, most fab utilizations are between 30%-70%. This means that there needs to be at least a 50% increase in chip production before there is real need to order equipment. Secondly, as a whole,IMO, chips seem better value than equipement. And finally, this business down turn has to have reduced the cost base of chip makers more than the equipements.
However, as we all know, there is difference between fundamental rebound and stock rebound. I suspect that the flat part of this "U" recovery will have ups and downs that the market will mistake for inflection point. When that happens, I will try to ride it up but be ready to go short (or at least sell in the money calls).
BTW, I've been terribly busy and been in and out of the country for a while, which is why I've been so quiet. Still, this past quarter has been one of the most profitable ones ever. Aside from the quick 30k trade on EXDS, shorts of VRTS, BRCM, and MANU have paid quite well. I covered VRTS (sadly too soon at high 30s but not too bad for a 20+ gain). But I am still short MANU and BRCM (I may have missed the bottom on that). The only shorts that have been stubborn are XLNX and AOL. On the long side, DSPG, NSM, and to a lesser degree PRIA have done well...and I almost forgot, I recently opened a far in the money puts on 4000 shares of KKD which have been doing well and I expect will do very well going forward.
Best of luck to all.
Sun Tzu |
