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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Greg h2o who wrote (11672)	6/1/2000 8:54:00 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Now that I've had a chance to catch up on the disucssion since earlier today, I guess I better explain what I meant by saying the ONLY way to make money in SNDK is to invest for the long term. I wanted to set forth two ideas, as suggested both by Aus and Greg. One idea is that when a stock is very volatile, and when it is not clear why it should be so volatile, the average investor is going to have a very difficult time finding out when is a good time to buy in or sell out. The other idea is connected with downside risk and upside potential, and overall expected value of the transaction. Expected value is defined as the target price multiplied by the probability that the stock will reach that target. If I buy SNDK because I think it's going to 200, but the probability of reaching 200 in, say, a year is only 30 percent, then I don't want to pay more than about 60, since the expected value is only 60. In fact, if the probability is that low, then I don't want to pay more than I could get in a reasonably safe investment, such as a corporate bond yielding 8 percent. I also want to know the probability that the stock will go lower than it is now, for if there is a good probability it will go lower, then I might want to sell off some of my shares and wait for an opportunity to buy them back at a better price. So I am interested in the downside risk and the upside potential. My problem is that it is difficult to calculate the probabilities, especially when events such as the Seagate sale of shares can happen totally unexpectedly, and most investors won't know about it until it's too late. So, based on my experience of about 45 years investing, I've come to the conclusion that these unexpected events can and do show up with uncanny regularity, and I simply can't calculate those probabilities accurately enough to make very good trades. This is why I stressed that, for the average person, the ONLY way to make money on SNDK is to go for the long term. Art