RtS,
Message 19294393
what do you think about going long SAY at today's prices?
After the significant correction it has faced, going from 35 to 20, I feel inclined to SAY yes. But if you believe in the value of revealed preference, you will find that my trades speak louder than my words. I held it at 35 because I felt it was still very early and had not yet reached its potential.
The most astute feedback I have received concerning this investment was from Cary (MIT-trained ex-programmer) who said the good news is that you are right, all this work is going to be migrating to India. The bad news, Cary said, is that profit margins are going to go to zero. There is some hyperbole here, but I think he is essentially correct. For a two to five year play, I think SAY is an excellent investment candidate at these levels. For a ST trade there is probably too much headline risk in this election year, with jobs being such a hotbutton issue. That is what makes it a good opportunity in the MT. In LT, 5-10 years, Cary is right. The software industry may not be that attractive.
Interestingly, the reason why Cary is not that attracted to software is the margins. It's a labor intensive industry. He's right. That is why the industry is such a perfect fit for India, with its resource endowment long on labor and short of capital. I think Cary underestimates the LT profit potential, but it doesn't really matter because, as Keynes said, in the long-run we're all dead anyway.
My plan is to watch it closely at these levels. I think there is pretty good support at 20 but would not eliminate the possibility of further erosion in ST. The safest course is to wait until closer to the election to make your move when the outsourcing headlines start to fade and the stock price movements once again start to reflect improving profits.
JMO,
Sam |
