H: Here are my morning ruminations on CPQ.
1. Being a rationalist it is hard for me to believe that the pop up in CPQ's share price yesterday was caused by the Faber CNBC story about an internet play.
In the first place, there was nothing new in the story - it has been far better researched and articulated here by rudedog and on the Yahoo thread by "she".
Secondly, there was nothing intrinsic to the story that said CPQ became a better buy - normally, news that a company is buying another would depress the buying company's share price, especially if the costs and benefits were as unclear and speculative as they appear to be in this story.
Thirdly, the volume of buying and the timing, towards the end of the day, suggested that it was not by "air-heads" following the latest internet rumour. It was by big institutions feeling very safe that a 10-25% price rise in CPQ was imminent.
Fourthly, both rudedog and "she" have reported that despite their best efforts, the security around CPQ's plans was exceptionally tight. Why would Faber be able to breach it?
2. I think it more rational that the pop-up was influenced by a leak about Microsoft's results. The relationship between MSFT and CPQ's products is classical.
3. If I am right, then we are where we where. CPQ is approaching earnings. If the earnings are .41, as I predicted, then we have about 5-12% to go in the share price before consolidation. If there is a blockbuster announcement (which might be blow-out earnings of .44 or above, and might also be an announcement about the shape of the "elephant") then we probably have 15-25% upside before consolidation.
CONCLUSION
I will not sell and will not buy until I get a feel for the earnings or the news. There is now a stronger chance that I will buy for an upward momentum play - but I am cautious. |
