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Technology Stocks : Aavid Thermal Technologies (AATT)

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To: Jeff Mulder who wrote (159)7/23/1998 2:43:00 PM
From: James Perry  Read Replies (1) of 185
The time is not normal. Investment monies flow into mutual funds,
which tend to be invested in blue chip stocks. But as money continues
to flow in, those stocks are priced to unsupportable levels. Small
cap stocks are still pretty much disregarded, and the next attention
grabber is the stocks with surging prices. It is always true that good performance is rewarded, and that poor performance is punished, but the momentum investor carries that to insane levels. We see internet stocks priced at levels that make the inflated prices of Holland tulips seem downright cheap. And here we have a stock whose revenue will decrease to an unknown extent. It grew nearly 50% last year, and it will not grow that much next year. Intel will change her order pattern. It remains to be seen whether she will pick up the orders of some of the "cheap" computer makers, but with good management and good product, that seems likely. It seems that at worst there is some uncertainty. To price that at 50% of the value of the company is downright ridiculous, but when the momentum boys dump their holdings, such is the absurd result. A fine time to buy. At worst, you might have to hold a year or two to make a bundle.
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