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Technology Stocks : IDTI - an IC Play on Growth Markets -- Ignore unavailable to you. Want to Upgrade?

To: Mason Barge who wrote (7707)	4/4/1998 10:32:00 AM
From: FJB	Respond to of 11555

Well said Mason. You make good sense. Bob

To: Mason Barge who wrote (7707)	4/4/1998 2:13:00 PM
From: Rob S.	Read Replies (1) \| Respond to of 11555

Mason, I agree with your general strategy of keeping a watchful eye toward the general trend and valuation picture. On one hand we now have a situation in which the overall market is valued at near record highs. However, the mega trend results of the end of the cold war era, the benefits of globalization, maturing of the baby boomers combined with productivity improvements continue to have a positive effect. Net flows into mutual funds in FEB reached over 24 billion with a shift toward growth funds and away from conservative, lower yielding funds (this is short term bullish but should also be watched closely as a contrarian indicator and sign of the nearing of the end of this leg of the bull run - when the inflows shift, watch out). Many small and mid cap stocks are not directly infected by slowdowns in Asia, are growing at a much faster pace than the general economy, and in some cases are just gaining the "critical mass" to profit from many of the economies of scale and I.T. productivity enhancements larger companies have been using to grow profits. This sector has been ignored for a variety of reasons; the large amount of the money flowing into investments has been into mutual funds which favor larger cap stocks. Brokerage analysts have consolidated regional operations through mergers and reorganizations and have reduced coverage of small and mid caps. And an underlying nervousness has helped focus attention on generally less volatile large cap stocks. Most often the last leg of a bull run experiences a shift toward small to mid cap stocks as the large caps run out of steam, enhancing the small-mid caps risk/reward. This shift is encouraged by the general high level of confidence in the overall economy and job market. I think that the semi equips are probably close to being at the low of their cycle but may be another month or two before they pull out due to more news of weaker than expected earnings, product cancellations, etc. The semis will continue to see over supply of commodity products such as DRAMs. And pricing presure will continue for PC components but at a decelerating pace. uPs will continue to be under price pressure as Intel rolls out their wilted Celery product line. However, IDTI/Centaur has the right product strategy to deal with the declining price and product maturation trend. The fact that IDT is going from having zero biz in the X86 market to production of up to several million parts per year with what should be healthy margins negates the negative effect of declining prices ("when ya aint got nothin', ya got nothin' to loose' (B. Dylan)). I like your strategy of hedging your overall position by being short on certain high flyers - this is a good lesson for many "bulls" to take into their investment kit. Ask yourself, "where can the market or sector go from here? What are the odds if will be up 10% to 10,000? What are the odds it will be down 10%-15% over the course of the year?" I think we may see a small correction soon but the upward trend is likely to continue through the spring. If that happens, I think it will increase the odds for a bigger pull-back in the late spring or summer.