Why SFE now? Many reasons: Oversold, sitting right on 200 day moving average. Stochastics: the most oversold it has been in the past year. Other non-technical reasons: CATP acting well, [only 10% off high and up today in a very bad market] TLAB looks really promising with the combination of CIEN and CCSC [TLAB up strongly today on good volume and this is essentially SFE's #2 position right? Rumors of possible buyout from CISCO not to farfetched at some point, or other possible suitors, or just fine if they go it alone.] Some of the other partnership companies have corrected almost to much and are interesting values in their own right [DTPI, DOCC, SCAI] This all leads me to believe that the downside to NAV is limited and since the premium has contracted, the downside to SFE is minimal, especially with an exciting rights offering probably to be announced soon [this alone should prevent SFE from going to a discount to NAV]. All this against a backdrop of new highs on the long bond and the probability that short rates should be coming down [which is incredibly supportive to the PE ratios of the high growth companies we are dealing with], growing pessimism which is a contrary indicator, and the fact that most of the partnership companies are not very exposed to the Asian problems leads me to conclude that the risk/reward is great.
Aside: For those who do not own TLAB [CCSC] take a look. If one buys CCSC at Mondays close, and assuming the deal goes through, you will get .72 shares of TLAB. Essentially you are buying TLAB at $60.76 a sh. TLAB closed at $64.50 This also has positive implications for SFE's NAV as the arbitrage is removed when the deal closes. |
