Ken: I did not know about the COMPAQ warning when I posted. In COMPAQ'S case, I think a Friday warning is reasonable because it is such a widely held stock, and the weekend will give analysts and shareholders an opportunity to put things in proportion and squeeze out some of the emotion.
In the case of COMPAQ the market has been leery for some considerable time about its inventory levels. Its recent takeover is also the cause of concern about short and mid-term earnings
The combined effect of these warnings, and there will be more, may knock the market back again on Monday and throughout the pre-warning season. I do not know to what extent the networkers can impress on the Street that none of these warnings depress the amount of computer systems out there and the need for network connections among them, indeed, one could draw the conclusion that the market for better networking products is expanding faster than any other segment of the tech sector.
Consequently, in a jittery, irrational market, BAY's position may be eroded in the immediate short-term. But in the absence of hard negative news, it is difficult to see that it has much more rational downside. From where I sit it looks more like we are in for a period of volatility in the share price spiced by short-term rallies, giving rise to a lot of trading range volatility. Remember we have just come through a period of stable and gently upward mobility in the share price (except for the quick spike up from 31.75 to 35.25 intraday or 33.15/16ths at the close of that day). To answer your question, if I had new money to invest I would be tempted to buy on the dips. There are levels at which such purchases would be no-brainers such as 25-27. Above that it is a closer call. For a short-term trader a purchase at 28-29, which might be the lowest the stock will see, could be the base for a nice quick rally to 31-33, before falling back again. For a long-term trader, defined as four months or longer, I think the current price of 29.50 is fine and anything lower is a bonus.
The pre-warnings season, especially in a market at high valuations, is not going to be easy.
Like everyone else I am guessing.
Victor |
