Agreed, trying to pick the absolute bottom is usually a fruitless endeavor. My goal is always to buy securities where I think the margin for error is significantly in my favor. If the risks are balanced I nibble a bit, and if they're not, I remain on the sidelines. As you might imagine, I've been doing a lot of watching from the sidelines lately. I remain content to wait, because I still think the risks are unbalanced. 1999 P/Es of 35 and 50 times earnings for SUNW and EMC, respectively, don't provide a lot of cushion, IMO. And these are two of the more rationally priced top-quality stocks in the group!
One of the concerns I have with the current investing mentality is how so many people are myopically focused on recent history. The rationale I so often see expressed for buying on these boards is more often than not along the following lines: "xyz dropped 20 points from last week so now it must be cheap", or something similar. This of course is a mentality born of a huge (and I mean HUGE) bull market ramp-up in these stocks. Success too often breeds complacency, which itself breeds recklessness.
The fundamental outlook indeed looks promising. I wish I could be as sanguine on valuations. But I guess I'm old fashioned that way.
SUNW's probably not a bad buy here. Over time, I'm pretty sure a position taken at these levels would reap decent, though not great risk-adjusted returns. But it's simply not all that enticing to me now -- I see better values elsewhere (mostly outside of tech). So for now, I'll just set a few deep hooks, kick back, relax, and wait.
Regards,
John |
