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Technology Stocks : HDCO - Why sudden dip?
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To: rich evans who wrote (539)1/16/1999 12:24:00 PM
From: kolo55  Read Replies (1) of 572
 
I bought into this decline- ouch!!

I thought the Robertson Stephens downgrade would only take it down about 10-15%, who thought it would take it down 25% in the face of a rapidly rising EMS and technology sectors. Especially since RS only went from a Buy (equivalent to a Strong Buy at other brokers, to Long Term Attractive (equivalent to a Buy at other brokers). They didn't downgrade to Market Performer status.

There must be something I don't know about what's coming. It seems incongruous that Hadco is selling off like this in the face of rapidly improving business fundamentals in this sector. But then again, I didn't see the downturn in the board business and the pricing pressures caused by the Asian markets collapse in October 97. But then, the whole EMS sector was demolished in three short months. This doesn't appear to be happening this time.

I think that Hadco probably cautioned analysts to expect lower margins due to higher pass-through material costs. And some holders just took RS's downgrade and bailed. But there is a common misconception about margins in this sector. People think that you can look at margins and deduce pricing, whereas most of the time margins change based on product mix. Still Keith Dunne is knowledgeable enough to know this, but perhaps his firm's clients and other fund managers aren't.

I have as much as I want at this price (this is getting down close to my original entry price). But if I didn't have any HDCO, this appears to be an attractive entry point.

I should have waited to let the storm over the downgrade play out, before re-entering. Oh well.

Paul
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