Sue,
There are a couple of ways of looking at the current situation. One way is to view the recent slipage as tax loss selling. This would be our best scenario because smaller stocks typically have a stonger recovery from the January effect. I suspect that if what we have is primarilly a tax related event, then we should see things start to improve towards the end of this week and right before Chirstmas and carry through the start of the new year.
The other way of viewing the current situation is to see it as part of general market weakness, in particular the technology weakness, and indirectly as a result of the "Asian turmiol." Many technology stocks have been hit especially hard as a result of the Asian situation and this does not come as an over reaction in my opinion. The situation in Asia, and in particualar S. Korea, is dire. These economies have been growing healthily for many years now and that is all about to come to a grinding halt. Companies over seas are going to find it difficult to generate working capital and citizens are going to bear the frustration of lost purchasing power from devalued currencies and feel the brunt of the economic collapse. These situations will likely put a screetching hault on capital expenditures by these countries and this is why you are seeing those companies that have exposure to these countries see their stocks slide. In the longer run their may be an opportunity for some U.S. technology companies, especially those that face competition from Asian companies, because the inability to find the capital to invest in new projects will cause some Asian countries to lose their competitive edge.
How does this all fit together for Touchstone? My interpretation is that the recent weakness in the stock is related to three things; a weak technology market, tax loss selling and increased competition for utilities software. I suspect that the later two are the major culprits here and that they will be relatively short lived problems.
With many investors having substantial capital gains from the extraordinary bull market of the past few years, those who have any losses in stocks will likely take them to offset the tax penalties of those gains. TSSW falls into that category. The recent advertising campaign run by McAfee for their VirusScan product is probably scaring some loose holders of TSSW stock into selling. I consider the recent slide to be loose holders because of the size of the sales, gnerally 100 to 1000 shares. McAfee has far greater staying, marketing and distributive powers than TSSW and this was known from the begining by most of us. But, as has been pointed out innumerable times on this board, TSSW does have a highly competitive product, a new management team and a relatively strong financial position, all of which offer substantial opportunity going forward.
Past the Chirstmas season I suspect that the competive presures will subside some and a more objective and conscientous investor will consider TSSW. They will see the strong financial statements, the cost cutting undergone by the company, the new managment on board, new product introductions and increasing sales and earnings prospects, and they will be back in the stock before the next earnings release.
Wayde. |
