Jeff-
When I said that SMTC is nearly fully valued, I was referring to its current valuation compared to its historical valuation. I don't think that stock prices can ever really reflect the true worth of a stock. Depending upon how accretive the Edge deal is, how SMTC's operations perform in Q3 and Q4, and how much growth the company expects for next year, the stock may not be fully valued at all. Assuming my estimate of $2.65, for the year ending 1/99, is possible, SMTC may be considered slightly undervalued. But based on trailing measures of valuation, SMTC is nearing what I consider fully valued.
That does not mean that I plan to sell any shares. That does not mean that I think the stock won't continue to perform very well. That doesn't mean that I would suggest that people not buy SMTC. It just means that SMTC is no longer the bargain that we've become accustomed to.
It may be time to reconsider why you (and everyone else) should continue to hold SMTC. When I bought it in single-digits, I did so because it was undervalued and it had great growth potential. This is consistent with my investment style. But I am generally conservative with my application of valuation measures to a stock, so I am more likely to set low price targets and underestimate the stock's potential value.
But I don't make the mistake of selling at that point. I will rarely sell a stock simply because it becomes fully valued. It needs to become overvalued and technically weak before I begin to unload. SMTC is not there yet.
My outlook hasn't changed, and I still think the stock will double by the end of 1999. I may be underestimating it again, but I only set price targets that I'm comfortable with.
Regarding THQ, tell everyone to buy Pax. Forget the EA and Disney stuff. As I see it, THQ's stock becomes more valuable by $1 for every 50,000 units of Pax sold. THQI certainly has better upside potential than SMTC at this point. But I continue to hold both, having never sold any of either.
Todd |
