I do know your feeling about some companies forever being in
a turn-around phase. I bought some Borland (BORL, now Inprise
INPR) many years ago when it had fallen from the 80's to 20.
Since then it fell to under 5, jumped back into the low teens,
and lately has bounced between 6 to 10. The company lost money
for years, and only in the last couple of quarters has become
slightly profitable. So for me, that was definitely a dog.
I kept holding it, waiting, and waiting, and it just wouldn't
recover. So I really lost most of my investment on that one.
I finally sold it on a temporary spike to 11 a few months ago,
and cut my losses. Today it is between 8 and 9. But I held
onto it for 4 or 5 years, while during the three years before
the Asian Flu hit, the stock prices on average doubled. So in
addition to losing half of my investment outright, I lost the
doubling+ of my money that I would have seen with a typical
mutual fund. Altogether, I lost 80% of what I "should" have.
(That presupposes 20-20 hindsight.)
I guess that kind of behavior is what you wanted to warn us
against, but you certainly rubbed people the wrong way jumping
right in with the "dog" remark.
You have to remember that not everyone now in AXC got in when
it was high. Some people got in after it dropped to less than
3. I'm in at an average price of considerably less than 3,
closer to 2 1/2. I don't know exactly without reviewing my
transactions.
And at this point, the price of the stock is so low that I
see little downside risk. So I don't feel the need to cut my
current small losses on this one. I'd rather wait a few more
qtr.s to see what develops. And there are some plausible reasons
for hope that something could develop with Ampex. That is
the name of the game in tech stocks, right? You take big
prices swings in stride, you're willing to take a paper loss
and ride the stock of a company you believe has promise, and
you know that you are gambling with your money, period.
Let me give you another example. I bought some Seventh Level
SEVL at less than 2. They are a former game company (Monthy
Python computer games) which is now repositioning to sell
a Web animation tool. This company was doing a LOT worse than
AXC, namely shrinking much faster AND bleeding money, and
was in danger of going under due to running out of cash. Gee,
why did I buy it? I'm not being sarcastic, I really don't
remember, and in retrospect, it doesn't make much sense.
I stumbled over the name on the Broderbund BROD thread or
something, when somebody mentioned it or cross-posted. There
were some believers in that company, just like in this one,
who called my attention to it. I don't know why I liked it,
but I bought it mainly because I had about $250 left over in
an investment acount and just felt like buying 100 shares
of something. Subsequently I accumulated 1000 shares. Big deal,
$2000. Then, with no advance warning, the company signed a
contract to license their animation tool to another company,
RealAudio which had a contract with Microsoft to provide
streaming stuff as part of Windows 98. Can you spell rocket?
The stock price spiked to 9 the next day, closed at 7, and
lucky for me I happened to check the prices that night (I was
on vacation). Next morning, sitting at a borrowed computer,
I bailed at 12, the stock peaked at 13. Then when people
slowly realized that the company had a long way to go before
any profits rolled in, no cash, negative income, etc. the
price tanked. Just another one of those internet things.
Now it is in the toilet at 4 to 5.
I made a small killing. Even if I had missed my chance for
a 500% profit, I would still have more than doubled my money,
while the jump-on-the-bandwagon people got fleeced. The moral
of the story is that you never know what can happen to the price
of a $2 stock.
Ampex may have been subject to some large revenue declines,
but it has still managed to control costs and keep earning
money. I find that alone impressive. Everyone likes to look
at revenue growth. Apple Computer has had increasing revenue
in many quarters in which their losses were out of control.
Their future is far from certain, not because of revenue
decline, but because of management chaos and losses. Compared
to them, Ampex looks well-managed indeed.
Ampex has a lot more know-how than the handful of programmers
at Seventh Level with their one software tool. Ampex actually
makes something physical - top-notch tape drives - not just
software, so it is not so easy for an upstart company or
even a big one to just take over their market, the way
Microsoft for example has usurped some product categories.
The biggest danger I see to their technology is a sudden
order-of-magnitude decrease in the price of solid-state
or disk storage per capacity. When that happens, tape storage
is history. Due to the introduction of DVD, I predict that
video cassettes will soon go the way of vinyl records, and
not long thereafter also the CD's that killed the records.
I have a Travan 3 backup system at home. The price for tapes
is CHF 50 for 1.6 GB uncompressed, compared to CHF 143 for a
1 GB Jazz disk. The tape is slow - it takes me hours to back
up the whole system, whereas a Jazz drive is about the same
speed as a hard disk, therefore it would take me maybe 20
minutes, max. But the Jazz disks still have to be changed out,
as I have more than 1 GB to back up, and mainly they cost 4.5
times as much per GB as tape. Not to mention that the Jazz
drive costs twice as much as the tape drive, but that is a
one-time expense. If the disks, with fast random access, were
as cheap as the tapes, the tape drive would be gone overnight.
With all due respect to Ampex, I hate tape. I've always hated
it, from the days of cassette-eating tape players and crappy
sounding worn out cassette tapes. Digital is where it is at,
and anything which can't be stretched and eaten is better than
something which can (well, for data storage, anyway ;-))
Ampex knows this, and they are working to stay competitive
on several fronts: keep lowering the cost per GB of tape
storage; get around the access time problem with indexing,
caching, and super-fast robotic drives; and look to see where
and how they can get a piece of the disk drive market, in case
the tape market as a whole does collapse. Then they also have
their know-how and products in the film editing market, which
are somewhat coupled with theÿtape formats, but not totally.
Is Ampex likely to take off like a rocket any day now, like
Seventh Level did? I have no reason to expect so. But then,
I was in for the long haul with SEVL too. Seventh Level is
still a good company for the long run, I think, but I took
my profit when the stock price reached a level where I
thought the chance of a further big increase unlikely. Others
have seen hype with AXC - like you I presume - and been burned.
If Ampex hadn't been hyped unrealistically in the first place,
that wouldn't have happened, and there would not be such hard
feelings.
I'm not claiming to be a clever investor. I just got plain
lucky once. In total, my portfolio has been performing like
crap. I'd be better off in a mutual fund, no doubt, based on
my choices so far. But I'm learning, and in a few years we'll
see for sure. In the meantime, I'm not gambling with money I
don't have, nor with my entire retirement savings. I just can't
get myself to buy a company like Microsoft which I fear,
irrationally or otherwise, is overpriced and will crash as soon
as it is subjected to the curse of being in my portfolio. I'm
hoping for big returns - doubling my money in a relatively
short time - with these tech stock investments, but the risk of
getting stuck holding a flounder after bottom fishing is
commensurate. I see much more reason to be optimistic about AXC
than I had with BORL, so I'm taking the risk. |
