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Yahoo Priced To Miss


May mean more punishment for beaten-down stock.

Broadcom (BRCM), Infinera (INFN), Yahoo (YHOO), Anadigics (ANAD), VMware (VMW)

These are the reports I'll be watching post-close. The market for tech is currently undergoing the kind of selling faced by many other sectors, with strong reports from Google (GOOG) and Apple (AAPL) being sold down hard. Likewise, weak reports from other companies have been sold down even harder, even given the discounting level already embedded in most technology shares.

While it's true that the NAZ has very modestly outperformed other indices during this last downturn, that isn't the whole story. First, the biotech group has strengthened notably, which helps the NAZ overall. Second, the NAZ's market cap-weighted nature has also supported its price, as names like Microsoft (MSFT), Intel (INTC) and Cisco (CSCO) were already pretty beaten down before this latest move lower, thus providing support to the downside.

However, under the surface of larger cap names we're seeing full-fledged capitulation. This is good. It hurts if you own some of these names, to be sure but we won't be at the true bottom of this cycle until stocks quit getting crushed on bad news.

So when does this end?

In 2002, it ended when the preponderance of the small- and mid-cap tech stocks were trading between 1 and 2 times cash and many names were trading below cash. Although, as has been previously stated, most of those had high cash burn rates.

I don't think we'll see valuations at those extreme levels during this cycle - but anything's possible.

So, onto the names:

BRCM (BRCM): I've long favored this name, but greatly reduced my long to prepare for buys or eventual reloads in Google, EMC (EMC), commodity shorts and a couple select finance longs.

I think the report will be fine; BRCM may chose to guide conservatively, giving us Google Redux Number 2.

Infinera (INFN): This stock has moved away from its favored status (both by me and the Zucch), becoming a possible source of funds. I don't want to give up on them just yet, but I may not stick around long enough to be proven right.

Yahoo (YHOO): Well, I hate to say something's priced for a miss again, but Yahoo is. We'll see if the market can keep dishing out punishment to stocks already beaten down to deep value levels.

VMWare (VMW): I'm watching this mainly to see what happens; if VMWare falls much further, it'll make EMC that much more attractive. EMC reports tomorrow morning, and we could be setting up for a really good entry if VMW gets hit after that report.
Position in MSFT, YHOO, BRCM, INFN

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