Roger's 1997 Short Picks Message Board

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Strategies & Market Trends : Roger's 1997 Short Picks

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To: Roger A. Babb who wrote (7664)	12/2/1997 11:31:00 AM
From: Franco Battista	Read Replies (2) of 9285

Roger, in my opinion the December downtrend in tech stocks has begun today. It was a scary day yesterday and a bad start to December for shorts, however, December is usually a bad month for tech stocks. Many tech companies pre-announce that they will not meet earnings in December and institutions tend to react much more violently to these pre-announcements because of their year-end. I've often seen this effect start to snowball and institutions get more jittery and start selling most of their tech holdings to lock in profits. We saw the same thing happen last December, then we saw a short rally in January (the famous January effect) and then a renewed downtrend which lasted until April when the bull came roaring back. A downtrend has solidly re-established itself in the tech sector since October the 14th. The bull has tried during this period at several times to come roaring back but has not succeeded. Yesterday was another attempt and my feeling is that it will not succeed in December. I have continued to increase my short position by selling out of the money naked calls that expire this month. The premiums are huge because of the volatility. As you already know, this morning CS, WDC and ALTR pre-announced that they will not meet estimates. The most interesting announcement came from ALTR which announced that they will have flat revenues and flat earnings, they also said that part of the problem is in their Asian sales. They were downgraded by several analysts including one from Smith Barney. I am a Smith Barney client and I can tell you that ALTR was one of their favorite stocks. I receive a fax every day of the Smith Barney morning summary and ALTR has been pushed by their analyst almost every week. Let me read to you what their analyst had to say on November 21th about ALTR. The analyst is Jim Barlage. Altera- Jim Barlage ALTR $49.00 1/h Target $75.00 -Jim continues to point to ALTR as one of the best long-term stories in the semi-conductor industry. -sales continue to trend higher this month, up sequentially from October. All geographies are growing. No issues in Asia Pacific. -Jim reiterates strong buy. It goes on some more but you get the idea. In the first week of November he announced that after speaking to management October sales were sequentially higher from September. This morning Altera is down 12$ after having risen 6$ yesterday. Jim Barlage downgraded the stock. No doubt they will now send Jim on a long vacation somewhere. No doubt some Smith Barney client are really mad this morning and are selling. No doubt Smith Barney will be liquidating some of their holdings. From the reading of the morning summaries it was evident that Jim was speaking to management continually, he seemed to have input about their sales on a week to week basis. Jim does not seem to be the only one who was arriving at the wrong conclusions about the stock since 3 more brokerages downgraded this morning. Whatever bad communication was taking place came to a crashing end this morning with the pre-announcement. These events IMO are very important and will put a serious damper on the recent tech rally. -

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