The chart of the Light Reading Index reflects some of this improving sentiment. As seen below, the steep decline seen in the first part of the year has gradually flattened out, and the chart is working hard to find a base. The bad news is that we are still seeing new lows – most recently in the 245 range. For now, it looks like we are in the third, drip-torture leg of the optical bear market – hopefully the final stage of the decline.
Given that stock markets tend to rebound before the economic environment does, we look forward to an uptick in the Light Reading stocks before the end of 2001. So we are picking those companies that are best positioned for recovery – which we anticipate will not be fully apparent until mid 2002. Mostly, we focused on companies that are either lean, mean, and focused on individual markets (Extreme, Juniper, ONI, Sonus), or those that have a solid market position generating steady cash flows and customer accounts (Qwest, EXFO, Digital Lightwave).
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