Every stock is being dragged out in the street and shot. It doesn't mean that they all deserve it. Markets move to the extremes, due to swings in the prevailing emotions. Right now, we're approaching the extreme panic/fear end of the spectrum. Much of SMTC's peers were not cheap, and so they needed a little shave. But SMTC has yet to indicate any problem with business, due to the Asian economic mess. SMTC's business is more dependent upon shorter-term demands, such as purchases of PCs, cell phones, networking equipment, etc. It's likely that consumer/end-market demand for these products will be stronger than the capital equipment & technology investment markets, such as chip-equip and networking. Because a lot of Asian companies are uncertain about the near-term future, they have been curtailing purchasing decisions, resulting in cancellations or push-outs of orders for equipment upgrades and capacity expansion. This tends to happen because these Asian companies are being very conservative with their capital investing plans. However, once this situation resolves itself, which may not happen for a few quarters, they will likely resume heavy buying of such equipment. At that point, many stocks that make these products will be damn cheap, and they'll probably rebound to double or triple their low prices (similar to the summer 1996 phenom for chip stocks). I don't know if SMTC is going to have problems, but any problems are likely to be temporary and industry-related. And since I'm not as good at timing as I am at picking good stocks, I'm not going to sell SMTC. Aside from the psychological damage that has been done in these stocks, the long-term fundamentals are still fantastic. But Wall Street (and institutions) is completely short-term oriented. Unless you can sell before the big money, you may miss the opportunity to sell at a higher price. Even so, I suspect that we're much closer to the bottom than to the top. And if you liked a stock's fundamentals at $60 or $50, it should look even better at $45 or $40, even if the short-term business outlook may be slightly worse than rreviously expected. I'm not saying that this is the case with SMTC. But I'm not eager to buy any more shares until the market regains some sanity (perhaps that will never happen?!).
Todd |
