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Technology Stocks : Vitesse Semiconductor
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To: Dan Spillane who wrote (390)1/9/1997 9:40:00 PM
From: Robert Schwartz   of 4710
 
Dan - I can't disagree with $50/share or more. I have been long on the stock for some time now. I did, however, sell a portion of my holding today prior to the close due to the market reaction last quarter. My theory is this: At 45 7/8 per share and a PE multiple of 73, vtss has considerable risk with any earnings announcement. Fail to meet or barely meet estimates and the stock goes down 50%. Slightly exceed estimates with any type of future risk (lower margins, etc.) and the stock takes a 20-30% hit. Greatly exceed estimates and the stock continues on its way up. However, at PE73, the market is already expecting vtss to exceed estimates. I hope I'm wrong, but I expect the stock to drop to $40 tomorrow. I understand January to be the best month for techs and small caps. If the market reacts negatively, it may be hard to get much of a bounce over the next few months. Regardless, all other things being equal, I believe vtss will have another outstanding year!
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