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Technology Stocks : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: JC Jaros who wrote (37641)	11/12/2000 10:20:57 AM
From: rudedog	Read Replies (3) \| Respond to of 64865

JC - you seem to be taking an adversarial position here when that was not my intent. But my portfolio this year would have been very sad without CIEN, which was 8% of my holding in January and is now nearly tripled. SUNW was my biggest option play by far (actually two separate plays), and on an ROIC basis the best investment I did, with a combined gain of more than 600% on the original investment. CIEN and SUNW represent more than 70% of my gains year to date. If I had not sold those SUNW options when I did, and just done a buy and hold, the picture would be a lot different - I would be looking at a gain of maybe 20% on SUNW and would be under water overall for the year instead of being up. I invested in SUNW in 1989 and held most of that until 1994 - so I think I qualify as a long term investor, even though I have not held an equity position in a while. I also spent many years working closely with the company and still have many friends who work at Sun, so I also have more than a casual view of the company's culture and spirit. Up until about 1994, I was a working guy who dabbled in investments - and the work side of my life was pretty intense, on the order of 100 hours a week. My "portfolio" consisted of only 3 or 4 stocks at a time, and I didn't pay much attention to it - I only checked stock prices every few months! In 1994, those stocks were CPQ, which I bought into in late 1991, SUNW, which I bought in late 1989, and MSFT, which I bought in 1988. I was somewhat surprised to find the MSFT stock up an astounding 1,500%, and the CPQ up 500% - and my investment gains in 1994 were more than my gross income from work! My reaction to that was to cut my work schedule in half - as a consultant, that was easy to do, and suddenly I was able to spend a lot more time with my family and enjoy life a little. I was also able to spend a little more time on investments, and started a more serious plan to build investments as the basis for my income rather than salary. SUNW looked like the weak horse in the stable - it had been up and down the previous 2 years, but it was only about 14% above where it had been in January of 1992, as opposed to a nearly 300% gain for CPQ and a 70% gain for MSFT. So in fall of 1994 I sold off most of the SUNW and put it into INTC. In 1995, I saw a rise of 250% in the value of that portfolio, which pretty much meant that I did not have to work any more, and I cut back to maybe 30 hours a week on consulting. I got serious about developing a financial plan. I determined that since I was still at the peak of my earning ability, I could afford to take some risks - after all, the worst that could happen was that I would have to go back to work full time. My goal was over the next 5 years to develop my portfolio to the point where I could maintain my lifestyle on a 10% return on that portfolio. I used a variation of the "all your eggs in one basket" approach you proposed, by shifting 70% or so of the portfolio to the "strongest horse". In 1996 that was INTC for an overall portfolio gain of 150%. In 1997, I shifted away from CPQ and into DELL, for an overall gain of 170%. In 1998, I shifted mostly back to INTC, and also started playing options. My return was a little over 100%. And amazingly enough, I had achieved my investment goal - my portfolio was large enough that a 10% return would more than meet my lifestyle needs. I also thought it unlikely that I would continue to roll the winning dice - an accident and 3 lucky picks does not make me the next Warren Buffett. So I decided to diversify into a portfolio where no single stock made up more than 10% of my holdings, and also with less dependence on high tech. I also started a more aggressive options play. 1999 was another good year, with overall returns over 100%, about half from option plays. That puts me in a position where I can be comfortable with only a 5% return - I could put it into CDs! That's why I am saying that investment strategy depends a whole lot on what your goals are, on your circumstances (whether you are dependent on investment income or not, for example), and on how much time you want to put into it. Your strategy may be just right for you. But to hammer someone who decided to take some or all of their bet on SUNW off the table when it is near its high, especially if they have a big part of their portfolio in SUNW, is neither reasonable nor fair. SUNW is certainly higher risk at the top of its trading range than many other stocks which are beaten down, as the last few weeks have shown.