F5 Networks (FFIV) Up 25% in a Week

In my search for technology exposure to add to the portfolio last week, I almost added back F5 Networks (FFIV), a former fund holding [Sep 26: Closing F5 Networks] The chart was fantastic

Then I did something stupid. I thought. And I used fundamentals. Big mistake.

(1) I thought on the macro level, will their business really change now that oil is down? Will businesses suddenly report a surge in network spending? Nah. If anything this economy is slowing and businesses will cut back as that happens.

(2) I quickly reviewed the last earnings report - nothing special.

• Network equipment maker F5 Networks Inc (FFIV) reported a 12 percent decline in quarterly profit as it was hurt by higher expenses.
• For the third quarter, its net income was $19.1 million, or 23 cents a share, compared with $21.8 million, or 26 cents a share, a year ago.
• Total revenue rose 25 percent to $165.6 million, but was offset by an almost 34 percent jump in operating expenses.

(3) I quickly reviewed the valuation, $0.86 EPS for 2008 = forward PE of nearly 40x. Very rich for 20% growth. (PEG ratio of 2!)

So I made the worst mistake possible last Friday - I used my brain. Instead I should just think like a computer and make it simple "Chart good = buy"

Today it is up another 5%. Hedge funds want technology - at any cost. Declining earnings, rich valuations, shoddy growth, economy in US degrading - that is for humans to worry about.

Lesson learned. Next time - don't ask questions. Don't think. Thinking costs you money. Look at pretty picture. Buy when pretty picture looks good. End of story.

No position