In the long run, choose caution
.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:
In early December of 2008, I e-mailed you for an opinion on JDS Uniphase. I had an $11,000 inheritance check and asked you if it might be a good gamble to “shoot the moon” and buy 4,000 shares of JDS Uniphase, which was selling at $2.45 per share. You told me it was not a safe company and to stay away from it. Well, I bought 2,000 shares at $2.55, but would have bought 4,000 shares if you had given me a good opinion of the company. As you know, the stock now sells at $13, and I still own it with a $22,000 profit, which would have been $44,000 if you had given me the correct advice. My wife and I are disappointed that you didn’t come through for us. But maybe you were having a bad day. We hope you are having a better day now, because we are going to give you a second chance. The same friend who told us to buy JDS Uniphase has told us to buy Emcore Corp., which is selling at $1.53 per share. Tell us what you would do. We also wrote another financial columnist just to be on the safe side.
P.M., Destin, Fla.
Dear P.M.:
I remember your letter. You told me that both you and your spouse were in your mid-50s; you had lost your job; neither you nor your spouse had an Individual Retirement Account; you were upside down on your mortgage; and if you were to “shoot the moon” and miss, your spouse might shoot you. So I suggested that you put that $11,000 in a long-term certificate of deposit and take the best job you could find till the recession blows over. And I also told you that JDS Uniphase Corp. (JDSU-$9.84), which traded at $700 per share last decade, had four CEOs during the last decade, that your purchase was a rank speculation and if you really had to buy the stock to take a gamble with just 400 shares. And even though JDSU did hit the moon, my advice was right as rain.
And I wouldn’t touch Emcore Corporation (EMKR-89 cents), which a decade ago traded in the high $80s. EMKR designs semiconductor materials, the tools and manufacturing processes to fabricate wafers and other semiconductor devices. And like JDSU, EMKR also designs and produces optical components for high-speed data and telecommunications networks. In fact, EMKR may spin off its optical unit.
Though revenues will improve, its balance sheet is looking better and management has had some success reducing costs, I doubt that EMKR will earn a profit this year or next. I also doubt that there will be any meaningful appreciation in the shares. So my advice is the same as it was two years ago: Buy a few shares if you must; also cash in 1,500 of your 2,000 JDSU shares and move that money to safer ground. If your financial situation hasn’t improved markedly by now, it doesn’t make a bloody bit of sense to risk such extreme exposure. Those stocks can crash just as fast (usually faster) as they ran up.
I’m not a tech master. I don’t speak the language; I don’t understand the compounding developments that can lickety-split make yesterday’s technology obsolete. I’m confounded by the astronomical price-to-earnings ratios that attach themselves to tech issues and think that those numbers are unrealistic. Those (plus a few others) are the reasons I almost never recommend high-tech issues in this column.
When readers ask for a high-tech recommendation, I usually point to several no-load mutual funds. Two high-tech funds on my radar screen are:
T. Rowe Price Global Technology (PRGTX-$7.21), which has a $300 million portfolio and a four-star ranking. In the past 12 months, it’s plus 84 percent. Its three-year and five-year annualized returns are plus 6 percent and plus 9 percent, respectively.
Firsthand Technology Opportunities (TEFQX-$4.83) has a small $38 million portfolio mostly composed of e-commerce stocks that manager Kevin Landis believes offer high growth potential. TEFQX is plus 83 percent in the past 12 months, plus 6 percent in the past three years and plus 11 percent in the past five years. I defer to pros like these guys, because I’m smart enough to know that I don’t know enough to pick tech issues.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775 or e-mail him at mjberko@yahoo.com. © 2010 Creators.Com
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