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Technology Stocks : Full Disclosure Trading

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To: Jacob Snyder who wrote (200)	4/13/2002 12:54:02 PM
From: robert b furman	Read Replies (2) of 13403

Hi Jacob, I have watched this dialogue between Cary and you this week.I had the very same dialogue with Cary re: JDSU last month. Cary's approach to timing is an excellent timing tool that helps prevent a premature position(price/sales ratios vs historical trough valuations).It is of great value to learn his thought process. I believe Cary requires a quantitative turn around in trough sales values as his "timing trigger". In my experience,buying into fear - when no one knows when the sales will trough is a safer buy (lowest possible draw down of the account). Cary's approach does however require much more patience. To the extent that these bottoming stocks have double bottoms,triple bottoms ,and a final shakeout (and most stocks do have thses scary price actions - quite intentionaly I believe)Cary's trigger might well coincide with a peceived turn up in sales rates.Sometimes however the pure low may be missed. Cary's patience for the perfect entry is a very admirable trait - let's face it most of us afterall are restrained by a finite level of resources to invest.So being selective is really what it is all about. I also think it is important for an investor to know himself. I have no expectation of making the perfect timing entry point.I prefer to select debt free stocks with good margins that also cycle off and on over a several year business cycle.It's really not that complex. I also never miss the bottom 10% or the top 15% as I look back.My trading expectations are pretty loose - the middle 50-75% of the range. When everything is bad and the damage to price is very low, I just buy them and hold them till the next business cycle turns- it takes 12-24 months usually less. I bought Jdsu around 4.80 last month - I felt pretty smart as it flirted with 6.But now as it pops below 5 - I'm tempted to add to it again.I'm hoping 5 becomes support. One thing for sure : when Jdsu's business is announced as having turned up from its bottom - 5 will not be possible. I'll feel safe with my below 5 purchase and Cary will be liking to make a position feeling more comfortable with an improving sales rate.With the intensity that Cary applies thruout the day - he may well even catch Jdsu at 5 and have the perfect buy. Neither of us will be feeling too bad about our approach when the stock hits restistance at 10. When Jdsu's sales rate picks up (afterall they've added the IBM division purchase) - the new reorganized company will feature tremendous margins and profitability.I'm not sure anyone knows how explosive these earnings will be - but the employee count has been trimmed by half to two thirds in most of these companies. Almost every company has one great expense - People. Tech companies also have R&D Make no mistake - all of these managements know that their R&D investments made during troughs HAVE to have huge markups to recover their investments.They will price accordingly The combination of 50% margins and fewer people will result in upside earnings much greater than the topline revenue growth. This awareness will/has already brought valuations of semi equip stocks to "high values".As topline revenue growth continues the next consolidation level will propel multiple expansion and the time to sell to the newly informed public will be appropriate. I think a big key to the whole conversation is the cycle of rotation that goes on.The semi's were the first to decline.They bottomed in October of 2000.They double bottomed march of 01 triple bottomed in Sept 01 and have now had a nice run up to a higher cosolidation level. Telecoms were the last bastion of strength in 00- they're still bottoming.EMC's were late bloomers as well-they're still bottoming.Software run late in 00 - they're still bottoming(triple). 12-18 months from now we'll all be very glad we purchased the discounted goods of 02. No one is ever wrong or right until you've bought em - held em and sold em.Then with more money in your account than before, you will be rewarded with greater confidence and wealth. The dialogue that keeps us paying attention and focused on a daily discipline is the adventure.The destination is nice (another zero or two in account)- but it's really the trip that is the true reward. I don't think anyone is really wrong buying low and selling high.I do truly believe that the conversation on Wall Street will once again highlight these technology leaders as the "safe place to put your money". The best part of it all - I'll be trading my "once cheap stock" for their " highly valued/hope purchase for cash.gg I think next week will help advance that concept. Bob

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