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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (21338)	8/30/2000 10:54:27 PM
From: MGV	Read Replies (2) \| Respond to of 27311

Zeev, Any stock that is trading based on a price to sales multiple is discounting forward sales. You use the word "potential." That is another way of describing sales that are not visible. Now, there are many different degrees of "potential" as a function of probability. Probability is a function, in part, of visibility. In other words, the lower the visibility, the more speculative the "potential." The more speculative the "potential," the lower the multiple the stock deserves. To put it in terms you understand, the visibility of VLNC's future sales has fallen significantly after the last claim of a material contract. That is why it is languishing near its lows while other technology stocks have moved substantially above their lows. Some have even moved substantially beyond their March all time highs. Look at BRCD and SEBL, to name two. Therein lies the point about opportunity cost. Money invested in VLNC has languished at 15-16 or worse if one had bought on the head fake to 21-22 a few weeks ago. If you are a PM, VLNC has cost you performance relative to your benchmark index. The underperformance has been significant. If an institution purchased VLNC in calendar Q2, the underperformance is greater still and, in fact, represents a substantial loss. To put it another way, as the tech market has advanced, VLNC's explainable failure to move with it has exposed institutional owners to real losses. Likewise, simply by not wasting investment dollars on VLNC, institutional portfolio managers managing against the Russell 2000 have benefitted from VLNC's underperformance. The reason? The market is recalibrating the forecast of potential sales of VLNC based on lower visibility or heightened risk.