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

To: Jill who wrote (25819)	5/15/2004 11:08:50 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

Jill, SNDK has now moved down again, but I think the main reason has to do with the overall market fears about the impact of higher interest rates, higher government debt, and an even larger current account imbalance. The question is not whether SNDK will recover but whether stocks in general will do better, even when they report extraordinary earnings gains. That is the risk I see in stocks like SNDK, which already trade at a higher price-earnings ratio than stocks in general. Still, I'd rather invest in companies that have low debt and growing product demand, no matter what the investment climate, as long as the expected return on investment is reasonable. I can think of a lot worse stocks than SNDK in a market such as this. The problem with trading call options, as I see it, is two-fold. The price of SNDK shares is somewhat unpredictable in the short run, as it appears to be a favorite of short sellers. If one buys call options expiring in three to six months, or longer, then one pays a fairly large premium, which may or may not be recoverable as the call approaches expiration. One way around this is to sell in-the-money put options expiring in about three to six months in order to take advantage of the premium. If the shares rise in the interim, one can buy back the puts and take the money and run. If one has more confidence that the stock will rise enough to make the puts worthless at expiration, then one can continue to keep the position open, pocketing the entire amount of the earlier sale at expiration. With the shares currently below $24, it seems to me that a striking price of $27.50 or even $30 is within reach. The main risk, in my view, is the performance of the market in general, not the short term prospects for SanDisk itself. Art