On Finisar: It Was a Mini Bubble

I wrote about Finisar (FNSR) on 2/10/2010. At the time the stock was at 11. I liked it then, and said so. It got up to $44 recently. Last night FNSR had some disappointing news. The market is going to shoot the stock at the opening for about $15 bucks (37%)

So my PnL sucks this AM. Yes, I still have a 100%+ return on the books. But I still feel a bit poorer. Such is life in equities.

Finisar is a good company. They make the switches that are necessary to regulate data on fiber-optic networks. They are part of the “Cloud”. That is a very hot segment that is going to expand over the years regardless of the broader global economy. I think that FNSR is an acquisition candidate. Their market cap this AM is $2b (down 800mm-ugh). This is not a very big “bite” these days. I have no clue where the stock will trade in the next few weeks. If it gets down to ~20 I will buy some more.

I’m kicking myself over this one. Not so long ago I looked at it. I’d held it for more than a year, so the tax strategy made it a sell. I had a 300% paper profit. I never get that, so I should have taken it. Some thoughts:

-There was a lot of “fluff” in the $40 FNSR print. It was a mini bubble.

-After a 100% gain in the big indexes where many individual names have seen 200%++ increases. There are MANY other ‘names’ that are now at ‘fluff” levels. Apple (APPL) & Netflix (NFLX) come to mind.

-Individual stock volatility is going to increase. As a result, broad market Vix is headed higher.

-The fucking Buy and Hold is dead. When big gains are presented, you have to take them and not look back. When you get lazy and are not proactive you get burned. I knew that. But I ignored it, and lost. What does this mean to the average 401K investor?

The FNSR blowout is, in part, a reflection of QE. Bernanke wants stocks to be valued at unsupportable levels. He thinks the wealth effect from overvalued stocks leads to consumption and economic growth. To some extent he’s right. But it goes both ways.

When I thought of offloading FNSR and taking those big profits I actually considered buying that new GM Volt. After all, the market/Bernanke/QE had just bought me a new car.

Well screw that. Screw FNSR. Screw the slow down in China. Screw the Volt. Screw GM. Screw Bernanke. And most importantly, screw me.

About Bruce Krasting 208 Articles

Bruce worked on Wall Street for twenty five years, he has been writing for the professional press for the last five years and has been on the Fox Business channel several times as a guest describing his written work.

From 1990-1995 he ran a private hedge fund in Greenwich Ct. called Falconer Limited. Investments were driven by macro developments. He closed the fund and retired in 1995. Bruce also been employed by Drexel Burnham Lambert, Citicorp, Credit Suisse and Irving Trust Corp.

Bruce holds a bachelor's degree in economics from Ithaca College and currently lives in Westchester, NY.

Visit: Bruce Krasting's Blog

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