Hi All! Wild couple of days! These are the kind of weeks that result in my being asleep by 9pm having barely digested whatever my wife feeds me....Its wild in the markets right now. Becareful on Monday, I dont think you will see a strong recovery on Tuesday....
A couple of notes:
1. First, I apologize to anyone that stopped in at 8:30 or so this week to discuss the Jag notes. Recall this was the first week we decided to do this and unfortunately it coincided with this immensely higher volatility and lots of preopen action. Couple that with it being something new that I havent worked into my busy schedule and.... The net result, on three of the five days, I simply got so busy with preopen action, I was unable to get in there early and discuss the jags. Our clients have to come first.. We wil get it down this week.
2. Hope to see you all tommorrow at 6pm. est. at the Chat Session on OTC trading...http://www.yamner.com/chat
3. Lastly, this thread is greatly enhanced by the fact that we keep random stock hyping off it. Nonetheless, on occassion, we do discuss a specific stock for analysis of the play. I really dont have the time to post on threads other than this one, Irby's, and usually like 1 stock thread that I think offers potential and a heady discussion. Below is a post I put on the WDC thread...I thought it had some reasonable analysis that many on this thread could use. The analysis remains the same regardless of what stock you are talking about.
Please do NOT take this as an endorsement of the security but rather an endorsement of the analysis.
WDC-
Recent downturn....You could see it coming when the stock began fading off new highs and couldnt extend, which tempers this rally. Now with CPQ prereleasing, we could probably see a bit more to the downside. I had stated taht the stock looked overextended at 20ish and the upgrade by Oppenheimer? was the Kabosh for the short term. I didnot expect this kind of pullback but you could see the hard drives getting real weak. SEG down from 26ish, qntm down from 26ish and WDC as well. I am glad that I had written those Apr 25 calls for 3/4 when stock touched 20. Nonetheless, as I had a few posts back, in retrospect, I would clearly rather have sold the stock. Nonetheless, none of us have hindsight.
A few notes: I still like this company alot. Infact, for those who maintain proper investment strategies, including not leveraging too much in any one stock and not buying the whole position at any one time, lower prices are a GOOD thing. If pricing environment returns to a normal state, WDC lead by the cost conscious Haggerty is the kind of company that has proven it can make a couple bucks a share. ie. yes, I am disappointed that the position in this stock I have is down about 20% in two weeks, nonetheless, I had anticipated buying another 70% more and was hoping to average up. Nonetheless, if they are going to take a stock down, take it down hard, kill it, scare everyone out of it, get the blood in the streets and then we can get stock in the hands of strong holders. You might note in looking athte volume, that the move down from 20 1/2 to recent 16 1/2, lets call it 20% was on a very, very small percentage of the stock changing hands. If most holders havent ditched yet, they are comfortable with current story/fundamentals. they understand the pricign environment and can live with it. Yet if fundamentals change, good or bad, you will see an uptick in volume, either to 20 or 12.
Personally speaking, you can either be a momentum investors buying the dells and MSFT's at their historic highs at PE's greater than traditionally supported, or you can be a value player. The momentum investors have had a couple great years in select stocks but they usually get their heads handed to them sooner or later. With stocks like EFII, RMBS, ZITL, etc. it was sooner. Dell and MSFT , because they are excellent businesses, might be later. They could fall 50% still be considered well-valued, not under or over and somebody will be out 50%. Dec, 200 a few years ago, bot out by cpq at 60ish. IBM took ten years to get back to 160 presplit.....I look for value plays, good companies, strong management, good fundamental business, currently facing economic cycles causing problems.
You could also mathematically look at it in the following way: Dell at 140ish. If all went very well, perhaps the stock has 20, 30 points to theupside this year, about 20% return. If all went poorly, the stock goes to 60....to me thats a 80:20 risk reward, 4:1, no good. WDC if all went very well, the stock could get to 30, 40 in a year....if all went poorly, the stock goes to 9, 10....thats a 6:24 risk reward...more my style...Risk reward analysis (althought the above one is very basic and all that could be presented here) is important for every investment decision.
Now, in my opinion, WDC fits that bill. Storng market share, gaining in more profitable enterprise, gaining qualified OEMS in desktops, very strong management, relatively clean balance sheet, trading near lows, hated by Wall Street, and facing a fierce pricing war. You're right, this environment is flat out ugly, gross, an absolute disaster. But thats why this stock once 50+, making $4 per share is now 16 dollars. If you think the industry is going down, PCs will lose their importance and that files wont get exponentially larger, etc. then you hate the sector, stay away. But if you like the sector long term and think these companies are smart enough to remedy the overcapacity issues (and they have all taken steps), then someone made a great observations:
A few months ago , WDc, SEG and QNTM all bounced on bad earnings (albeit a few were better than anticipated), RDRT bounced on bad earnings....APM bounced on bad earnings.....classically that smells like a bottom. Not guaranteed as we all know there is no such thing, but a reasonable bet.
As far as takeover, SEG is a bit to diverse, i like them both, but I think WDC is more a pure play, more efficient and less overhead. WDC is trading at a steep discount to revenues (forget earnings because they arent there this year).
Another point, hopefully everyone is exercising prudent investment strategies, allocating and not becoming too concentrated in any one stock. ie. the drugsector was great for myself and clients over the past few weeks while the hard drives were a disaster....Dont ever put so much into anyone stock...some do go to zero.
By the way, we are having a free chat session at yamner.com on OTC trading Sunday at 6pm est.
A couple guest speakers will be there.
You can get our newsletter which we send out every few weeks by emailing me at steve@yamner.com ..put Subscribe in subject.
Regards,
Steve@yamner.com |
