Tuesday, July 19, 2005

The Slaughterhouse Awaits

I suppose I will discuss a few recent trades since my last update. I sold off Solectron (SLR) at $3.75. That resulted in a tiny gain of 0.20. I did some more research, and I now feel that its recovery might not come as soon as I had initially thought. That said, I will continue to keep a watchful eye on it.

I mentioned before that I had sold the EBAY July 35 call contracts at 0.40, covering my entire position. Well, on Friday EBAY closed about a nickel over 35. Monday came and 100% of my shares were assigned. This resulted in a small profit. Anyway, I re-entered EBAY at 35.09 after being called away and sold out at 35.41. That's the good news.

The bad news is that I decided to take my chances with Yahoo's earnings release today, and I re-entered EBAY yet again at 35.20. This time, for only half the initial position size. Yahoo! (YHOO) choked on its earnings this quarter, and the investors slammed it. In sympathy, EBAY went down sharply in afterhours trading. It settled around the 34.50 mark when the afterhours session ended. But, the bad news doesn't end here.

I also had the not so bright idea to pick up a moderately sized position in Intel (INTC) prior to their earnings release today at 28.60. Chalk up another disappointment. INTC down sharply as well afterhours. It seems that the investment community was really unhappy with their margins. Couple this with in-line revenue guidance going forward, and it was clear that INTC would not escape the bloodshed. The company faced some supply-side issues as well as increased competitive pricing in the server space. However, they see continued momentum going into Q3, and they expect their gross margins to improve to 58-62% as compared to this quarter's 56.3%. I will hold on to see if it can recover quickly. Taking a longer-term view, I don't see anything horrible in today's report. But, I entered this as a trade. So, to be disciplined, I will not be holding this long-term. I'll be looking for some recovery (if any), and exit.

Now that the bad news is out of the way. I'll end on a more positive note. Motorola's earnings report was great. I don't care that the street sold off on it. How can you complain with their upward guidance and great numbers. They beat earnings and revenue expectations. They shipped more handsets than expected. They guide revenues higher by 5% and earnings by 10-15%. But, what do I know? It sold off afterhours. Good thing that Motorola is one of RFMD's a major customers. Perhaps this means RFMD will have a strong showing on its earnings day. RFMD closed at its highest point (6.55) since I established the position. Hope it continues, I'll need the help tomorrow.

Finally, one of my long-term core holdings, Amgen (AMGN), had a blowout quarter. Stock is trading up nearly $6 afterhours. Today, a friend of mine mentioned to me some favorable things about large cap growth companies. I would like to think that Amgen qualifies. It sports a market cap of nearly $9B, and it sports a 15% growth rate.

So there you have it. I guess I will face the butcher tomorrow. Maybe I'll get lucky and escape his wrath with only a flesh wound. Time will tell. It always does.

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