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Technology Stocks : Western Digital (WDC)
WDC 57.52+1.0%Dec 3 4:00 PM EST

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To: Sarmad Y. Hermiz who wrote (11030)5/18/2008 1:55:43 PM
From: go_gatrz  Read Replies (1) of 11057
 
No changes in what I do: still a reseller (services & hardware). Still work 7-6 most days.

Do I think WDC still has more upside? Since I still own it, yes. But since you've taken up STX again, ask yourself why did you buy STX? If you are like me, its because you see it as undervalued. And if you compare STX EPS to WDC EPS and their respective multiples, you will find they are today still equally undervalued. So if there is valuation logic behind buying STX, the same will apply to WDC.

But it would be foolish to ignore the fact that WDC is now trading at 10-yr highs. Let's ignore for the moment that EPS are at historic records (not just 10-yr). Being at these highs makes it susceptible to greater manipulation - and price swings. Thus, I sold off some newly acquired shares on Friday. But I still have plenty left (some from when you left).

As for what do I see for STX & WDC?

As for STX, I recently posted some viewpoints on the Yahoo STX board. The links are provided below - I'm not sure SI will allow them.

Seagate has some issues to work through, and I can't tell you how it will work out - yet. They have been somewhat of a puzzle to me. Your assumption about STX's enterprise business may not be all clear. There are some near-term challenges - from SSD, competitors, themselves - and WDC is on the horizon. Watch for something from WDC in the next qtr. I don't see a demise for STX, but it will not be as easy going forward as it has been for the last 2 years.

As for WDC, they are hitting on every cylinder plus a few. They got whacked after the last CC, but that was pure BS just like all the other times. The sharks never rest. That pothole has already been erased by a wide margin. They still have margin gains to come from Komag, the notebook business is surging beyond expectations, and they now have the areal density leadership in both 2.5" & 3.5". The world has been turned upside down, Capt. Jack Swallow!

So what do I think is coming next? First, I don't think business was or is as bad as many of the ANALysts wanted to make it sound. Also, maybe - just maybe - the elephants are coming to the realization that the storage sector IS HOT and that there is plenty of money to be made. And that is more true in HDD than any other segment. If so, then valuations should rise from their pathetic 8.5x to at least something over 10x. Heaven forbid we should ever see just plain old average tech multiples of 15x.

This is where I think the next stock price increase is going to come from - a valuation increase. The sharks will justify it simply because they can. If so, then both STX & WDC will benefit.

__________________________
Links for STX:
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messages.finance.yahoo.com

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