Michael if you have carefully calculated the risk-reward ratio and have a viable model for the company, then who am I to tell you what to do with your money. The point I was making was that just holding onto the stock in "hope" of better days is a mistake. It is much better to wait until you can see the white of the eyes before shooting. Sure you may lose some profits, but an investor's first goal in the market should be capital preservation.
Since we are considering alternatives, tell me what is wrong with keeping cash or bonds? There is a lot of reason to suspect a slowing U.S. economy and perhaps a recession. 3Dfx will face a very difficult time if that happens. Take a look at the long term chart of LRCX. The company's market cap was reduced from 80 billion to 400 million due to the industry down turn. And this is one of the top tier companies in its industry. If I were to hold on to those shares because they were cheap, I would have been crushed on the way down. And if I had bought them when they were near their tangible book value, I would have lost almost 50% on my investment. I just feel that in stormy weather, it is best to stay close to the shore. Sure there are plenty of fish out there in the ocean, but I'd rather leave fishing for sunny days and not risk getting drowned.
Best of Luck,
Sun Tzu
P.S. The decision to buy or sell the stock should be independant of your past history with the stock. The axiom "if you are not willing to buy the stock today, then you should sell it" has more truth to it that most people will admit. |
