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Technology Stocks : Applied Magnetics Corp
APM 1.560+15.6%Nov 18 3:59 PM EST
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To: Don Earl who wrote (10994)12/11/1997 9:54:00 AM
From: Jadrew  Read Replies (1) of 12298
 
When to Short ?

Don, the activity on this thread seems to picking up. Must mean either A) The stock has risen a lot or B) The stock has fallen a lot. Okay, given we know which one it is, what should an investor do now ?

Seems everybody is dumping on this stock (sector). The analysts (gee, lets see what their consensus was 6 months ago), anybody who bought it at a higher price (I assume especially the institutions) and the shorters (who obviously wish to profit from a further fall in price).

So when shouldn't somebody short a stock ?

1) When a stock is at a 52 week low AND short term survival (liquidity) is not in question. APM has substantial cash resources ($170 million ?)
2) When a company can meet its capex without going to market into the forseeable future (no dilution potential).
3) The company can adjust to a changing technology (subjective).
4) The market for the product isn't falling (obsolete) (are people still buying pc's with hard drives ?).
5) When the "hype" is totally negative, and a lot of shorts are out there.

I'm not saying this is a sure thing (this is a 9-12 month product life cycle technology), I just don't believe the rewards in shorting are worth the risks at this price ($13) and the company's cash position.

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