Dear "brother,"
Regarding your question about whether to take your loss: There are as many different trading styles as there are traders. If you typically utilize strict trading loss limits in your trading, my advice is for you to continue to use what has worked for you in the past. One thing I know for certain, the price you pay for *anything* is merely an accident of history: that is, you have to make a fresh judgement every day on what values are achievable for your holdings, what risk you are willing to bear, and what alternate uses you have for your funds.
As for the IBM hypothesis, you know how I feel about it. However, it seems profoundly odd to me that management went to such great lengths to stipulate its feeling that it was "chasing" market share at the cost of current earnings. Ordinarily, companies attempt to strike a balance between their short-term responsibilities to their shareholders (and the current valuation of the company's stock)
and what is necessary to build long-term values. In this case, their choice is so one-sided, that I have to wonder if something else is
driving their decision. I have never seen a company take such a blatantly one-sided view of this question. Perhaps, given the acquisition activity in fast ethernet now, management has decided that building the top line (sales) will create more value for shareholders in the "short-term" than building earnings. If this supposition is correct (and at the moment I am just thinking out loud, so to speak),then there has *already* been a decision to move toward the sale of the company.
I am sorry that I can not give you definitive advice, but as you know, markets are two sided, and at any given point in time, reflect all the available public information regarding a company. The direction NPIX takes will reflect senior management's view of what actions can be taken to maximize shareholder value (as discounted back to present dollars). In my mind, sale of the company results in greatest value to shareholders, not only in the short term, but also in the long term. I predicate this view on the prices being paid now for similar technologies, my belief that the current bull market is long in the tooth, and my recognition that shareholders take a considerable bear market risk the longer they retain ownership of *any* security. It remains to be seen which route management takes, however.
I hope this is helpful. (Keep your fingers crossed about tomorrow...maybe the downtick will be confined to only a few points.) |
