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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: DownSouth who wrote (10162)	11/12/1999 9:31:00 AM
From: freeus	Read Replies (1) \| Respond to of 54805

Thank you! Should I try to "time" when I sell a Q call to buy one of higher strike price (in order to have more)...or just do both at the same time? Anybody? Does that question mean I'm reverting to my former "trading" thought process? Giving up bad habits is so hard! :o)

To: DownSouth who wrote (10162)	11/12/1999 10:44:00 AM
From: Apollo	Read Replies (5) \| Respond to of 54805

JDSU...from Jubak's journal today at MSN MoneyCentral.. Comments from our colleagues in JDSU????? moneycentral.msn.com Contrast that to the risk/reward ratio in a stock like JDS Uniphase (JDSU). Here's a company with a strategy that's just as ambitious as that of RealNetworks. JDS Uniphase has set out to become the essential one-stop shop for anyone building an optical network. When a system builder like Nortel Networks or Lucent Technologies (LU) needs to buy anything, from a part such as a splitter to a complete sub-assembly, all they have to do is call JDS Uniphase. Other companies, such as E-Tek Dynamics (ETEK) or Jubak's Pick SDL (SDLI), may have great offerings in specific components, but no other company can match JDS Uniphase across the entire spectrum or make a system builder's life so easy by selling components already assembled into modules. The evidence from recent quarters is that this strategy is working. In the most-recent quarter, the company's module business grew about four times as fast as its components business. And, while it's tough to make exact comparisons because of recent acquisitions at JDS Uniphase, it looks like the company is growing faster than its rivals. That would mean it is taking market share. The strategy at JDS Uniphase is certainly grand enough to justify a $32 billion market capitalization. The dominant player in another fast-growing technology, Texas Instruments (TXN), is worth $74 billion, according to this market, and the market that JDS Uniphase has targeted is growing even faster than the market for digital signal processors where Texas Instruments is a clear No. 1. But this strategy at JDS Uniphase carries far more execution risk than does the strategy at RealNetworks. In its drive to become the dominant component supplier to the optical-network builders, JDS Uniphase has had to go on an acquisition binge. The company was formed in a merger of Uniphase and JDS Fitel that closed just this year. Since then, the merged company has announced or closed deals for AFC Technologies, a maker of optical amplifiers; Ramar, a developer of lithium niobate-based optical components; Epitaxx, a maker of optical receivers; and, just a few days ago, Optical Coating Laboratory (OCLI), a developer of thin film coatings used in optical systems. The strategy at JDS Uniphase is certainly grand enough to justify a $32 billion market capitalization. That's a breakneck, but necessary, pace. JDS Uniphase has had to move quickly to snap up these companies before someone else did. And the company can't count on having a high-flying stock to use as currency forever. But all mergers and acquisitions carry an element of risk, and when a company is doing deals quickly and in bulk, the risk increases. Somebody may have overlooked a problem at an acquired company in the due diligence. Managers may be handling so much that they can't avoid ruffling the feathers of key employees who then head out the door. The difficult meshing of different sales forces can result in missed sales and alienated customers. And it's not like JDS Uniphase doesn't have anything else on its plate: The company has said that it expects to increase manufacturing capacity by two to three times by the end of 2000. To a great degree, buying JDS Uniphase currently is a bet that Chief Executive Officer Kevin Kalkhoven, who has been a key player in developing the current strategy since he joined the company in 1992, will be as good at execution as he has been at vision. Less risk here It's important to remember while you're trying to weigh the risk and reward of a stock like JDS Uniphase that there's usually more than one way to play a trend or a hot industry. SDL, a stock I added to Jubak's Picks last week, doesn't have nearly the strategic ambitions of JDS Uniphase and it isn't positioned to become the dominant component supplier in the optical networking market. And that's reflected in the stock's market capitalization, a mere $4 billion. But analysts do believe the company will grow earnings by 61% in 2000 and by 37% annually over the next five years. Clearly, the company is going to share in the fast growth of the optical-networking market along with JDS Uniphase. Jubak's Archives -------------------------------------------------------------------------------- Recent Jubak articles: ? 5 stocks ready to join the party, 11/9/99 ? 3 stock picks to go with the mo', 11/5/99 ? 10 stocks to buy on the dip, 11/2/99 More? And its strategy carries much less risk. No big mergers here and no raft of acquisitions to digest. The company is concentrating on its niche as a maker of laser pumps and it keeps grinding out new products. The company's next-generation chips will sell for twice the price, but will allow optical-network builders to cut the number of amplifiers they need by half as well. This isn't a risk-free stock by any means. No stock that trades at 110 times next year's projected earnings per share is low risk. But the odds that imperfect human beings will be able to execute SDL's strategy well enough to give me an attractive profit in the stock are, I think, very good. I certainly want to have exposure to the explosively growing optical-networking market and, for me, SDL gives me that exposure with a risk that's not so scary that I won't be able to hang on through the inevitable volatility.