I appreciate the notion of value as well, and I do look at those figures. In fact, P/S has long looked good for AMD when compared to Intel, while P/E has generally not looked so good in that comparison.
However, this was a particularly bad argument:
When AMD was growing rapidly in 2005, their value metrics where completely screwed up. Therefore, value investors wouldn't touch them with a ten foot pole. Now the value metrics are good, and value investors will keep the price from dropping too low.
2005, would have been an excellent time to enter the stock, with an exit in the spring 2006. To have avoided it then based on value metrics, only to jump in now because of them, is a rather excellent testament against using them IMO.
Plenty of money can be made by investing in companies undergoing cyclic competitive pressures, but you do need to look at what portion of the cycle you are in. I suppose that all wise value investors might be buying now, fully aware of the competitive landscape in 2007, with the goal of making money in 2008+, but I doubt it. I intend to keep making money off AMD, but as I have stated quite a number of times since the spring, I see near term pressure, and since I don't short, I have reverted to almost day trading the stock, with an eye towards any events that cause volatility. I don't see that changing much for the 1'st half of 2007. I certainly don't try to predict tech issues much past that. Too much can change in this horse race. |
