Brocade Communications

[Eddie Haskell]

Selkirk, I posted a thread in the general forum (not knowing there was a equities forum) concerning Brocade Communications (brcd). Some there suggested I run this scenario by you.

I bought it in September at about $10. It closed around $5. today. Any hope for this dog? Most at the general said hold, solid company. If so, what do you think time wise.

Eddie, the broke

 

[djv]

Want to take a chance. Chart Corp now at 76 cents. At one time was $32. It's business and markets down big for 3 years. There type of business can have these cycles. One of its main products is huge natural gas and oil refinery equipment. Some of these items as big as a house. Two or three big orders and stock will jumb 3 or 4 bucks. I believe that will happen some time next year. Could be a nice proffit for just a grand. And Not much more ar risk then 4 or 5 football losses.

 

[selkirk]

Eddie do not follow Brocade that closely and have avoided the overall sector (for the most part) for sometime.

as for the stock I have a general rule I do not dollar cost average on a losing position. this can get you into trouble so I follow this basic rule 90% of the time and often wish it was 100%. so bascially do not buy more of a losing position.

as for Brocade they should make between .12/.15 cents next year. Of coarse this company often lowers projections and did so in November when it stated would miss 1st quarter revenue and earnings.

perphaps a wider range of .08/.15 a share would be more appropiate.

the company hopefully will have growing earnings

one thing that does concern me is there debt, the

the stock does not trade cheap at around 40-50 X next years earnings.

on a year over year basis Net sales and Net income are showing improvements, the company should work at getting a higher ROE (return on Equity ) and try to make it more consistent from year to year.

the sector they are in is still expected to grow by at least 25% year over year for the next 3 years. you need growth in revenue and earnings to justify paying the high multiple.

Eddie you may want to hold it for now and see if there is any December rally, the last two months some companies that have none to little earnings and low revenue have made nice moves. Brocade might be able to rally with them and hopefully report some positive news, very volatile stock.

by the way eddie if they miss their revised 1st quarters numbers on earnings and revenue would probably bail.

thanks
selkirk

 

[Eddie Haskell]

Selkirk:

Thank you for your input. Originally thought about taking the loss this year as I did pretty well with Nvdia and F5 over the same period. However, I'm thinking I will hold based upon your advice as well as others who have told me the company, barring Enron type problems, is relatively solid.

I will closely watch 1st quarter earnings and will bail if they lower expectations. Thanks again.

Eddie

 

[TIME TO MAKE $$$]

Selkirk,

Thanks for helping Eddie out, I told him you were the master.