Tuesday, July 22, 2008

Bookkeping: Closing Ciena (CIEN)

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I cry uncle on Ciena (CIEN). I reintroduced this name to the portfolio as we searched for a new tech name to take advantage of the stupidity of "each time oil goes down $3, hedge funds run into technology". [Jun 20: Adding Tech Exposure with Ciena] I thought the logic of that thesis was utterly stupid but it was what was "working" at the time, so my logic was I wanted something to go up (a sector or some names) when oil corrected.

Now with the Google, Microsoft, Sandisk, Texas Instruments, even Apple (although I disagree with the panic sell in that one on "conservative guidance"- shocker eh?) blowups in the past few sessions, my thesis that safety in tech was a misnomer is coming to fruition. Thankfully we didn't believe the hype and didn't have much exposure to the sector. Even stocks that were breaking out and showing relative strength a few weeks ago - such as Qualcomm (QCOM) or Marvell Technology (MRVL) - have now reversed and broken down. This once again exemplifies the hedge fund hands at work - "everything is a monolith" - all tech is bad or good - it's all the same "stock" - there is no fine tune discernation. It's good. Or bad. The most simplistic of analysis. It's all just "one big stock" to "them".

Safe? Breaking out 2-3 weeks ago? Relative Strength?

The Bear says no. If you bought these breakouts you were crushed. No Soup for you.

I. on the other hand. went for what I considerd a "value" play in Ciena - I could buy a tech stock well below it's growth rate. What a steal! But the market doesn't care and the stock simply drifted endlessly down before putting in a minor bounce here of late (we let some go last week into the bounce) but this (for now) appears all we are going to get. Now, I did not buy this stock as one of my "favorites" but simply as a way to hopefully capitalize on this dumb thesis of "safety" (that I didn't agree with). Now that the thesis has been blown up i.e. technology is not safe just because it does not have exposure to oil as an input - I don't have as much reason to own this. Plus the stock is not behaving well, but frankly after the demolishment of the commodity complex of late - it is hard to find anything doing well for more than a few days at a time. So I'd rather have cash and am out of the remainig 1.6% of Ciena in the $22.50s. No sugar coating this one, it was a bad position for us - a quick 13% loss in just a month. I still think it's cheap but logic means nothing in this market so I'll build up cash until i figure out a trend that lasts for more than a few days.

Long Apple in fund; no personal position


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