Melissa -
I went ahead and looked at the PSFT price history, as you suggested.
In addition to getting a better feel for the volatility, I wanted to check the validity of your statement that "..This stock can easily move 20% within a month both up and down."
The Facts:
1) From January 1993 IPO to about mid 1994 the stock was essentially even. Nothing particularly interesting about any volatility patterns in my opinion. Lets ignore this since it was prior to the beginning of the sustained uptrend.
2) From mid 1994 through February 1997 the stock rose quite steadily, without any significant pullbacks. During this 2 1/2 year period there are numerous examples of thresholds that were crossed never to be seen again. In fact, it does not appear that there were any 20% corrections at all, let alone in a single month.
2) From February 1997 through April 1997 there is a significant pullback (about 40%) from the highs and it took about 6 months (August)to get back to the high. This is the only significant / sustained pullback the stock has had since mid '94 when rapid growth began. The reason can be traced primarily to the acquisition of Red Pepper for around $200 million, which apparently some feared would stunt overall growth.
3) Since August the price has fluctuated from a low of 27 1/2 to a high of 39. During this period, there do not appear to be any 20% corrections. The closest we can come to this is the Dec. 31 high of 39 down to 32 in late January, or 18%. It is interesting to note also that much of this fall can be reasonably traced to an external trigger - Asia implosion.
Though I can appreciate what you are saying about volatility, you seem to have exaggerated the case somewhat. Your statement "..This stock can easily move 20% within a month both up and down." has absolutely no basis in historical fact. It has never happened, not once! In fact, since 1994 the stock has moved down 20% or greater only 1 time.
What is even more extraordinary is that if you remove the Red Pepper pullback and the Asia jitters pullback, since April 1994 through present you are left with quite a smooth and sustained uptrend.
You seem to be confident in the things you say, but I wonder what you base your statements on.
Rick. |
