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Technology Stocks : PSFT - 1997 Outlook [closed thread]
PSFT 0.00010000.0%Oct 29 5:00 PM EST
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To: McNabb Brothers who wrote (667)12/18/1997 3:18:00 AM
From: Chuzzlewit  Read Replies (1) of 940
 
Mike, your brother in an earlier post promised some fundamental analysis to justify the short. Now you are talking about a "doji". I think you guys are just playing for a downturn in the high-tech market and are simply looking for some high P/E stocks to short. That's not a bad strategy if the techs continue to be hammered for some time.

But, for what it's worth, I think you guys are playing it wrong with PSFT, and here's why. There was some discussion several months ago about the biggest constraint on PSFT's sales being trained consultants. This is true of some of their competitors also, so this implies that demand has outstripped supply. This shortage effectively supplies a buffer in case demand contracts. But it is also important to distinguish between the kinds of sales constraints that exist. For example, JBIL experienced a capacity constrain in the form of manufacturing capacity. The problem here is that manufacturing capacity takes time to bring on line, and JBIL has lots of competitors ready to fill the void. PSFT's constraint is the same one shared by all of its competitors and is addressed incrementally.

Now this is not to say that the techs will not go through periods of convulsive drops, and when that happens high beta stocks drop further faster than their low beta brethren. But frankly, I feel safer in a software company with negligable Asian sales in this kind of market than a hardware company with significant sales to Asia (such as the chip equipment companies).

Regards,

Paul
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