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Technology Stocks : HDCO - Why sudden dip?
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To: jeffbas who wrote (434)4/7/1998 11:06:00 AM
From: rich evans  Read Replies (2) of 572
 
Market is overreacting in my opinion. Visibility is short in this industry. At Q1 CC everything looked rosy which was in middle of FEB. Then orders slowed quickly. Lead time now is 4 weeks for HDCO . The
CEO and head of Sales went around and talked and canvassed their customers. Customer visibility also poor but optimistic on recovery but can;t say just when. But with 4 week lead time, orders could recover quickly with shipments in 4 weeks. Also it would not take much to start leveraging their margins up. They are at 81% capacity. Above 85% they indicated the leverage is significant based on absorbtion of factory overhead etc.CCIR was forecast orginally at 155 million in annual sales and HDCO at 800. Yet they warned that this quarter sales would be 205 mill together.. And they did not see pickup yet for Q3 so indicated Q3 would be same as Q2. But if it happens sooner or in Q4, Market/Analysts should get news and stock would react in my opinion. And HDCO was asked if they saw a return to old margins and indicated they were cutting cost everywhere they could and old margins is their goal. Old margins were 7% net for both HDCO and CCIR . But of course we must now figure in the increased interest for CCIR deal and for some the new amortization which I tend to ignore. My conclusion is that this stock is a good buy for a time horizon of at least a year.But my $40 puts come due in Oct but they may be O.K still.

Rich
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