re: reasonable reentry price?
Yes, as I posted when I bought them, I started buying the 2003 20s when the stock hit 13, and then switched to buying the 2004 15s as soon as they were available. And bought them all the way down (last 50 contracts with the stock at 6.09). I always buy the longest-term LEAPs available, and usually at a strike price about 50% higher than the current stock price.
Since I got in at lower prices, my decision is easy here. I hold, sell a bit on rallies, maybe add a bit on dips. If I didn't have a position, I'd have a very hard decision to make. It could go either way, and I am uncertain: we could be seeing a breakout here, the start of a lot of momo money piling in, and the stock takes off and never looks back. We also could peak here, and be backing and filling for months. Probably, if I didn't have a position, I'd look elsewhere, at another stock, and buy NTAP only at lower prices. EMC hasn't made such a spectacular bounce off the bottom as NTAP. I never chase a stock. I try very hard to buy at the point of maximum pessimism, but when I miss it (and this has happened more times than I care to remember), I refuse to buy it at prices I consider too high. At any price over 13, I wouldn't buy LEAPs, even 2004s. And at any price over 17, I wouldn't buy the stock, even for a LT position.
Let's assume the most optimistic possible scenario: in calendar year 2002, NTAPs earnings rebound to where they were in 2000. That would be $0.30. Let's assume profits grow 40% after that, and NTAP gets a PE equal to the growth rate. Then: $0.30 X 1.40 = $0.42 EPS in 2003, and $0.42 X PE of 40 = stock price of 17. I don't see how even the wildest Bull can justify paying a price higher than that, today. The fact that we were close to that price, at yesterday's peak, given current macro and industry conditions, indicates there is a lot of hopes and dreams in the stock price, even now.
I know the above is a meandering indefinite answer. If I had to pick a specific buy-point, I'd buy when we retest the 50-day moving average (at 11.2 now). A partial position, planning on scaling in, in case we retest recent lows. Knowing there is a not-small chance you don't end up getting any. |
