Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (40533)	10/30/1998 8:58:00 AM
From: Gerald F Bunch	Read Replies (1) \| Respond to of 53903

SB "fundamentals and perception are two entirely different animals." It makes you wonder what carl is smoking doesn't it Regards GB

To: Skeeter Bug who wrote (40533)	10/30/1998 9:40:00 AM
From: Carl R.	Read Replies (1) \| Respond to of 53903

skeeter in reality all companies trade on perceptions of where they will be in a year or two. Why else would companies like Amazon be highly valued? Why would AMAT be at $35 instead of $10? Because the market perception is that in a year or two their dominant position will be profitable in the case of Amazon and much more profitable in the case of AMAT. If you trade looking through the rear-view mirror you are doomed to failure. Past earnings affect book value, but how many stocks can you think of that trade based on book value? It is true that for some stocks like Coke that their earnings and growth rate are highly predictable so you can use past earnings to project future earnings. But for many companies, and especially for cyclical ones, past earnings don't tell you much about the future, so you have to use something else, which is where projections and perceptions come in. If your perceptions don't match the market, that gives you a trading opportunity. If the market perception changes to your perception, your trade is successful. If it doesn't, you lose. But investing is all about figuring out which companies will be doing well in 1, 5, and 10 years, and the potential profit is higher if you find a company that has done poorly recently, but which will be doing well in a year or two. For this type of investment, I always envision an old beer commercial, but slightly change the words to "It just doesn't get any worse than this". That is the time to buy - when it can't get any worse, and it should get better. And of course the converse is also true that you sell when things are great and can't get any better. Will 1999 be worse that 1998? With all the dropouts from the DRAM business, I doubt it will be worse. I think it will be better. How much better I don't know. And I think 2000 will be better yet. Thus I think that the general trend for most semi companies will be up for the next couple years. It will have ups and downs of course as optimism and pessimism ebb and flow, but overall the situation will improve for all semis unless of course we get a total collapse of the world economy. As an example of my perceptions, I personally see little profit potential for Amazon because the Internet is incredibly price competitive. Yet I also don't see market perceptions changing any time soon, so I choose to avoid the stock. In fact I still see people who just have to own a "piece of the internet" regardless of the price. On the other hand I see the semi market improving, so I choose to play long on a number of issues. Your play on CMB caught a big shift in perceptions. CMB has been doing fine, but the perception changed swiftly to the perception that world problems would lead to larger write-offs. Even if those writeoffs never happen, the stock was still pounded, and you benefited from a correct anticipation in the shift in perceptions. So remember to keep your eye on the future, and not on the past. And good luck, Carl