From Alan Abelson's column in Barrons:
Not everyone is a bull. Incredibly, there are people out there who are convinced that stocks should be shorted rather than bought. That has not been, it's no secret, a rewarding conviction.
David Tice is not only a bear but a professional bear. Among other things, David runs a service called Behind the Numbers, which supplies mostly institutional clients with quite sophisticated analyses of things to be wary of in corporate operations, earnings and balance sheets.
We asked him last week what his favorite short-sale candidate was, and, without missing a beat, he shot back, "Micron Technology."
Micron is big in DRAMs and makes some nifty PCs, as well.
Over the past year, the shares have been as high as 60 and as low as 22. Lately, the stock has enjoyed a whirl on a firming in DRAM prices from their disaster lows. Investors decided that woe in Asia translates into cutbacks in production, with happy implications for supply and prices. And some major producers -- notably Toshiba, Hitachi and NEC -- have reduced output significantly. The major Korean makers were supposed to follow suit.
David isn't buying it. He credits the runup in chip prices to seasonal elements (including the usual production slowdown that accompanies the Chinese New Year), a pause to work off inventories and financing uncertainties for Korean manufacturers. However, he says, prices already are sliding back to $2.50, from a recent peak of $4.
The biggest Korean chip companies, he reports, are back in production, and global DRAM supply remains far in excess of demand, an imbalance that a slowing of new capacity additions will not seriously affect. He doesn't think low prices will deter the Koreans from producing as much as they can. They don't have much choice, and, he points out, their costs have declined dramatically with the drop in their currency.
Nor does he see any sign of an explosion of demand that would sop up the vast oversupply.
What that means for Micron, in his view, is a red-ink year. What that means for Micron's stock is a sharply lower price. |
