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Technology Stocks : Data Dimensions
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To: michael tantleff who wrote (2532)8/4/1997 7:13:00 AM
From: hasbeen101   of 4571
 
Michael, I realise you don't want a debate.

Just to clarify my position to anyone reading this thread, I'm neither long nor short DDIM at the moment.

My analysis is that it will be worth $5 sometime, but it may be as late as 2001 until the market recognises that DDIM is only worth $5. If it takes that long, then the following calculation applies:

Say I get the opportunity to short DDIM at $35. Maximum profit potential is $30 in the best case, but the capital required is $20 per share (at least) assuming the broker requires 50% margin and I want to be able to hold on at least to $40 in a squeeze.

The best possible profit would be 150% ( $30 / $20). Over 4 years, that is a compound return of 25.7% per annum. Not so wonderful, since I can get that from a mutual fund with much lower risk.

This analysis assumes that everything goes as well as possible for the short scenario, except for the timing. Let's face it, there's little chance of this bubble bursting real soon now.

Other things can go wrong:
+ the broker can call the stock back at an inconvenient time
+ A squeeze could go higher than $40
+ Someone who thinks this company is worth a lot could take it over at a ridiculous price (stranger things have happened in stock market booms)
+ I could get sick of enduring high risk for limited profit potential.

My bottom line is that I believe DDIM is only worth $5 but STILL it's probably not worth shorting since the profit potential is much greater if I buy and hold excellent companies at reasonable prices.
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