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Technology Stocks : LSI Corporation -- Ignore unavailable to you. Want to Upgrade?

To: sea_biscuit who wrote (18936)	6/16/1999 11:05:00 PM
From: Wolf 2	Read Replies (2) \| Respond to of 25814

Dipy: Just out of curiosity (and forgive me if this has been asked and answered previously), why did you acquire such a large position in non-dividend paying LSI? Was this a 'youthful indiscretion' (~4 years ago, I think you said)?<gg> Regards, Wolf

To: sea_biscuit who wrote (18936)	6/16/1999 11:07:00 PM
From: uu	Read Replies (1) \| Respond to of 25814

Dipy: I have to say that you definitely have made me confused! On one hand you appear to have a Warren Buffet investment psychology of liking traditional stocks which pays dividend, and are very well established and are mostly outside of the tech sector (such as Exxon, Goodyear, Coca Cola, etc.). At the same time by your own admission you have 65% of your portfolio invested in a stock such as LSI which again by your own admission has poor performance track record and is due to be extremely volatile (if not overvalued) and mey even hit $30 or lower (or about 35% drop from its current price). It is like having a loyal dog and yet keep putting him down in front of everyone and everywhere you go! You either get rid of the dog and get something else, or if you like the dog then it does not make sense (to me anyway) to put him down all the time and speak badly of it! Am I missing something? You might find this funny, but in old Persia it was believed that in order to avoid jinx put on possessions and items one really liked, one would have to talk badly of those items and how terrible they were, etc. all the time so others would not put a jinx on it or as the expression went "the bad and salty eyes would stay away from you"!! Now could it be that you are doing the same thing ancient Persians did?! That is to talk badly of LSI in order to protect it from the "bad and salty eyes"?!!! Regards, - Addi

To: sea_biscuit who wrote (18936)	6/19/1999 3:41:00 AM
From: shane forbes	Read Replies (1) \| Respond to of 25814

Dipy: A company's growth rate is (retention percent) * (beginning-of-year Return of Equity). When companies retain 100% they can sustain much larger than average sustainable growth going forward. When they pay say 40% of income in growth they give up 40% of their potential sustainable growth rate. If they want to grow at the same pace as another comparable company they have to take on debt. Not good. With established companies in 'mature' industries there is no problem in paying a dividend. But in many cases in industries like high-tech it is better to reinvest since you have a better opportunity for growth by doing so. In high tech it is difficult to generate sales growth because of the competition. So they reinvest totally else they'd have to go further and further into debt. Besides I would argue that stock buybacks are more in vogue now and these do take place during market collapses. Even if there is a bear market no one will be clamoring for LSI to start paying out a dividend! Besides stock buybacks give the company more flexibility as well. And these days more flexibility is good - of course there is no free lunch and the salad (the 'certainty' of dividends) is out the window with stock buybacks. Recall the IBM buyback announcement which stopped a market plunge cold? There was another one from one of the big boys as well in recent months. Also though dividends stop 'falls' I suspect they also slow 'rises'. The dividend return part of the 'total return' formula implies that the cap. appreciation part of the formula is not as robust. (Preliminary observation) Besides many high techs (LSI included) are fighting for survival day in and day out and do not have the luxury of a 'steady-state' company like Exxon (which has been around for several decades) with steady sustainable Free Cash Flow streams way out in the future. Sure Exxon will see the occassional hiccup but they have a much higher earnings predictability than most high-techs. In turn this means that the high techs will not be too eager to pay out dividends as they may be starving for cash at sometime in the near future if things do not go their way. So it is all about comparing apples and apples. Companies like CSCO and MSFT don't need to pay a dividend to keep their shareholders happy.

To: sea_biscuit who wrote (18936)	6/23/1999 8:49:00 PM
From: Beachbumm	Read Replies (2) \| Respond to of 25814

Hi Dipy, sorry not to reply sooner but I was away for a while. I see that you kept LSI on the front burner for me though, so maybe I'll slip away some more!! Not trying to flog this horse too much, but I will say that I think we are both on the right track. On the one hand, to take your example of Exxon, you used a beginning year on this investment of 1980. Well, I'm from New Orleans, so let me tell you about the oil boom/bust. From 1980 to 1985 or so you would have loved owning Exxon. Then came the bust when oil prices fell from $35 to $10 a barrel. Entire subdivisions in Houston and New Orleans were abandoned. I remember folks just leaving their keys on the kitchen counter and driving into the sunset. In New Orleans we lost about 10% of the population as people left in search of work. NOT a fun time to be owning Exxon. Very doubtful that even the dividend could have sustained an ordinary investor's stomach. Then, of course, we got the Valdez tanker spill. My point is just that I'm not sure what takes more guts to stay with -- the supposedly safe Exxon and MO or some juicy high techs. Now, on that other hand, I still kick myself sometimes for selling the old ticker symbol C -- I mean Chrysler. Forget for a moment about the Germans. When I sold Chrysler it was paying me a dividend of 12% on my cost basis. Shoot, that's better than the long-term average return from stocks. But these dang autos were supposed to be cyclical and they had had some mighty fine years. I assumed we were due for a good sales pause. It never happened. Auto sales have been humming along and the mix of trucks to cars means the profits have been bubbling. I guess when this whole economy tanks then the car sales will finally come down. Maybe interest rates will rise enough to bring them down. It would have been great to have held C for another year or two, but I always thought you bought the autos when they couldn't pay a dividend and sold them when the dividend got too rich. Oh well. This investing world just gets more and more interesting all the time. Beachbumm