HAZARD OF STOP-LOSS

PMI / EPIC

This is rather distressful. PMI just got stopped out and as usual, it went right up after taking care of me. The hazard of using the stop loss! On the other side of the ledger, I low-balled (NOT LOW ENOUGH) some EPIC and it got filled at $10.50 and continued to tank. Is this a falling knife? Could be. The company missed by a penny (due largely to FX), and actually guided up for the year, and stock promptly declined by about 15%. The valuation becomes compelling as it is traded under 10XE06 and the visibility is reasonably good by way of its deferred revenues and booking. Is the market over-reacted? I see a lot of towels. I believe it has and it should recover, particularly if management could deliver its earnings. In any event, I don’t see a lot of down side risk and risk/reward is rather compelling, particularly if you take the current level of NASDAQ into consideration. Having said that, it provides very little comfort when it tumbled another five percent immediately after you have bought it! I hate those situations. Target is $15. No stop loss.

MOT

I also picked some MOT late this morning. The company blew the estimate away and upped its guidance, gained more market share, and generated decent growth and cash flow. Even though it gapped up by 5%, I believe the stock is still reasonably valued (14XE05, 13.4XE06). The street did not appear to be very exited about these numbers (as analysts are lukewarm at best). MOT has been rather consistent in the past few quarters and it should get more respect. Target $20, stop loss at $14.63.

I have added quite a few positions in the Tech sector over the past few weeks. Most of them have reasonable valuation, good results, increased forward guidance. It all depends on where the NASDAQ is going from here. If NASDAQ confines to trend downward, these positions will likely go down as well. If NASDAQ reverses, it should provide a decent gain in the near term. In any event, I feel rather comfortable to own these stocks for a couple of years, provided economies do not falter too dramatically from here.