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

To: techreports who wrote (47109)	9/25/2001 2:05:14 PM
From: Bruce Brown	Respond to of 54805

Bruce, i agree. It is probably safer and wiser to wait till JDSU and others become profitable, but I2 is an example of where it means nothing. I2 and JDSU were profitable and now they are not. Rambus is profitable and they may disappear from the planet in a few years. Should we as investors wait till companies are doing 10 billion in annual sales and producing a large amount of profits with 30 billion in the bank? Sure, the risk of one of these companies going out of business is slim, but so is the return. Possibly. The overcapacity that was built up in the boom years will not provide for all to survive. No, one doesn't wait until annual sales are $10 billion and $30 billion is in the bank before one invests. However, waiting until at least the stock stops dropping and some sort of a solid base is put into place with perhaps an economic recovery coming which helps the market anticipate a return to profits. If one loses the initial return, yet has the patience to wait until that process is completed, then the risk aversion might be at a more appropriate level. JDSU and i2 can be purchased in the thousands of shares at the moment for what it used to cost for only 100 shares. That doesn't mean profits are right around the corner, but if the stocks stop falling, a solid base is built where the price trades in a range for a period of time and then begins to break out of that base at some point in anticipation of a return to profits or improving fundamentals - then the risk aversion might be worth the wait. Entering into a confirmed recession following a boom period for technology certainly raises issues as to a company like Microsoft who has a load of cash, no debt and the possibility of surviving as opposed to a smaller company with less cash, debt and no profits. I agree with you that as the risk increases, the reward could also increase. I guess it depends on one's goal for each equity in terms of return. You know I keep a mix that includes the guys with cash hordes and more mature product adoption life cycles along with mid and small caps that are earlier in their product adoption life cycles. I don't expect the same return (or loss) from each. BB