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Technology Stocks : Seagate Technology -- Ignore unavailable to you. Want to Upgrade?

To: tom pope who wrote (4776)	3/16/1998 11:56:00 PM
From: dave g	Respond to of 7841

medium and long-term view of SEG: Using the put methodology I described earlier, I would say that the SEG 22.5 April puts are appealing right now. With the stock at 22 and 5/8, the puts last sold at $1.50. If you have to buy the stock at 22.50, you pay 15.75 cent/month/share in interest (calculated with Waterhouse's 8.4% rate). So your initial premium covers your expenses (commissions aside) for 9.5 months. Meanwhile, I think that you could continue to at least cover interest with covered calls one month out so long as the stock stays above 17. If I was not already overweight in SEG, I would probably sell those puts. I think SEG's stock price should begin to recover in the next 3-6 months, given the predictions of a cyclical upswing in the second half of the year. I would add that I have been working in Thailand since Sept 96. SEG has a sizeable manufacturing presence here and should begin to show reduced costs -- certainly for labor -- as a result of the currency devaluation. The Baht has strengthened in the last few weeks, but I doubt it will get much stronger. I noted that SEG (in January, I think) announced it had suspended Baht hedging operations, so we have hopefully seen the end of currency contract charges. The Baht is presently around 40 to the USD, whereas it was stable at 25 until July 1997. Anyway, while I feel confident about a short-term recovery, I'm not sure that I would be able to recommend the company as a long-term (3-5 year) investment. I simply don't know that SEG is well-positioned to hold its own against the heavyweights (IBM, Fujitsu). The wild card seems to be whether Quinta's new optical system will give SEG proprietary technology with broad market appeal. I continue to be impressed with the frequency of SEG software press releases, but I don't feel able to evaluate the impact/future of the software division. Comments are welcomed. And as for your question, Tom, about maintaining margin, I would note that I don't invest on margin, I only use it as a reserve for when I get put. It affects my calculations insofar as I figure out the margin interest per share per month. But since I'm not investing on margin, I consider my opportunity cost to be zero for that which I leave idle to be able to cover my puts. Hope this helps. Dave.