Smart guy this steve.. But being a trader and broker he has some sound advice always..
To: +dougjn (1643 )
From: +steve goldman Monday, Nov 10 1997 7:51PM EST
Reply #1644 of 1647
This post responds to Dougs post about trying to pick the bottom, catch a falling knife, versus waiting for a reversal and jumping aboard.
As well, I thought I would make a few comments regarding the overall market the past few days.
The past few days have quite simply been ugly for both traders and investors. Most of the traders have had some real rough days since Weds. last week. It is tough to make money trading when stocks open on gaps (whichyou expect and thus avoid buying into as a trader), and then pull back significantly. The overall market has been pretty bearish with slight pops to the upside. Welcome to a bear slide...down 40, down 20, up 30, down 50, down 20 , down 50 up 30. This period reminds me of the 1995? or 96? correction in technology stocks when INTC was 50, HWp was 47, CPQ was 30ish, etc.
On days like this, I get a bit frustrated tring to trade stocks since nothing seems to go your way. Quite simply, I don't trade. Its easy, you work on something else. You contact clients, you catch up on other items, you pay attention to other work you have been putting off and you give it a break. Taking a break is important at times to get a clean slate and fresh mind. Obviously, if something truly showed up I might capitalize but that has not been the case the past few days.
The overall sentiment of this marketplace has turned bearish. Investors would much rather hold cash right now than stock. I had told some clients on Friday that this Iraq problem is going to start weighing on the marketplace. Don't kid yourselves. We drop bombs, the Dow drops 10%, easy. We get bombed, dow drops bid time. Remote, but we are talking about our hard earned cash here. You can take advantage of this paranoia that is starting to develop but be careful, there are a lot of mines out there in the field.
Anyone check some of the prices on some of these stocks? Bull market? I think it can be safely said the great bull market is over or atleast we are onto the next phase. Most stocks are down 10 to 30% from their recent highs. Some of the techs, well, lets just say they havent had fun the past few months. wdc, apm, seg, rdrt, asnd, fore, xyln, bay, intc, hwp, cpq, muei, gtw, the list goes on and on....tech is dead. Quite simply, tech has not performed well at all the past few weeks. Nonetheless, amidst the disasters, there are some great companies with true value that have gotten caught in the downdraft and if done reasonably, keeping cash in reservse for special situations, some prudent investing might reap decent rewards.
Doug posted that he disagreed with my grabbing stock in some of the hard drives as they have pulled back significantly the past few days.
Dougjn, Excellent point! I like to think of it as a falling brick which tends to smash through everything until it hits bottom. Nonetheless, there is great opportunity when bidders step away, assuming you are buying the right companies.... There a number of factors, again, including:
a. tolerance for risk
b. quality of the company, mangement
c. balance sheet,
d. market share
e. market environment
f. perception of quality on wall street
g. extent to which the market over does stocks
h. the extent you have a cash position and how you anticipate getting in.
For me, for my long term portfolio (which I keep distinct from cash for trading), I have had cash for a long time and am starting to pick up some of the high quality techs that have been hammered. I can't pick the bottom so I sets either time or price targets. (ie. I will buy 500 wdc every 4 points or every week) etc. which helps me average in. I have seen it 100 times, they turn stocks on a dime and no fundamentals will change or appear to change and the market will begin to recover as well as individual stocks.
As well, since wall street always goes to extremes on the downside and upside, I would consider today a bit of blood letting. I mean, after Friday, to follow through with a day like today, people, individual investors, margined investors just start throwing in the towel. When that happens, I start buying, quality only!
Lets look at a few. Solid companies. (Wdc does 4+billion in sales per year), solid earnings (albeit lower for next few quarters...wdc$4.00 for prior 4qs which needs to be still considered in evaluating their balance sheet and ability to weather a downturn)., great management, strong stock buyback programs, high growth industry.
Ibm? non=factor since WDC and SEG do relatively little business in that 1000 hard drive area. The biggest pricing pressure is coming from 2.1 and 3.2 hard drives which are just too small and not wanted by oem manufacturers and are tough to move of the comp usa shelves.
Ultimately, the market has been real, real tough lately....a true bear slide. You have to put your money somewhere. I, personally, would rather own quality companies with quality managemnt with substantial revenues and market share. Good management will see way through it. Some of these 10, $15 stocks that make .05 per quarter might never recover.
Who knows? Obviously I would rather had paid 24 or less for all my wdc, but then I think these are some good prices on a good company. As well, I have seen this kind of overreaction many, many times. The same thing happened to the networkers last year, csco fell to 40ish, usrx to 40, asnd to 30ish (although that would have been a good out), bay to 16, etc. Most of the hard drive cos have relatively small floats and are instiutionally held with large short positions, a relatively bullish factor.........(where was it today?)
Good point, doug, that will keep you on the safe side of things. On anything other than pricing pressures I would probably wait for a recovery. Nonetheless, I want to get some cash to work and I like some of these hard drives...I started buying APM today. I mean, if that isnt overdoing it, I dont know what is. The stock just made 66 cents per share for the quarter and its about 18....wow! brutal!
Nonetheless, it is important to remember that noone can get them right all the time, the key is to maximize the right ones and minimize the errors.
Without a doubt, this has been the worst week for my long term portfolio in the past year. I am probably down more than 10% in the past two weeks. Nonetheless, I really, really like some of the deals I am getting on the companies I am buying.
Regards,
Steve@yamner.com
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