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Strategies & Market Trends : Z PORTFOLIO
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To: Kelvin Taylor who wrote (11505)2/4/2004 12:00:08 PM
From: DanZ  Read Replies (2) of 11568
 
VSH is overvalued in my opinion. I considered other factors as well. In no particular order:

1. The stock had short term support at 22.50 and I thought that it was a low risk entry point. I traded off this price last week and made between 50 and 75 cents per share.

2. I don't think that the bulls will give up that easily with this stock. They ran it all the way to 25 a little over a week ago. The company releases their earnings this week. The question is whether the run to 25 was a prelude to better than expected earnings or wild speculation. I am guessing that it was a little of both, but mostly due to better than expected earnings. I have said that I think VSH will beat the estimate this year, just not by enough to justify their multiple when you look at their long term growth.

3. Should the company beat the estimate for last quarter (very good chance they will) I think that the stock will rally (perhaps the final gasp) before people realize that they can't sustain that much growth over the long term.

4. The Nasdaq is holding on to support at 2000 and the QQQ at 36 (so far). If the Nasdaq bounces, VSH should bounce as well.

I elected to hold off selling when it broke 22.50 because the offer immediately fell to 22.40 and I wanted to see where it settled out. When it appeared to settle out (ran the obvious stops below 22.50) in the 22.20 to 22.40 area, I added to my position. Time will tell if this was a dumb move or smart.
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