The market rise yesterday is certainly a boost for the bulls, but it still doesn’t prove that a big surge is in store, because the economic figures needed to support a sustained rise are lacking. For that reason, it’s still necessary to exercise care, because if you caught a good share like Comverse(Nasdaq:CMVT) at the beginning of the month, you’re in a good position; you’ve already made a pile on your investment. If you invested at the beginning of the month in ECtel (Nasdaq: ECTX), however, a much better share (judging by the economic figures at the beginning of October), you made a big loss.
Were the figures ECtel published yesterday so bad? Absolutely not; they were superb, new records of all kinds again, but the share dived 18.4% yesterday to almost $7.70. Please don’t say I’m comparing Comverse to ECtel; I wouldn’t do that, but I want to show you how the market thinks. Yes, how the market thinks, not how the analysts or experts think.
Comverse is at $8.20 today, 17% higher than at the beginning of the month, while ECtel is at $7.70, 8% below its starting point for the month. What have the two companies announced since the beginning of the month? Nothing significant that could have a substantial impact on the share prices. ECtel’s announcement yesterday even strengthened the company economically, compared with Comverse. Actually, if the same investors were asked again today what share to buy, Comverse or ECtel, they'd answer “ECtel” again without any hesitation – unless they've had dealings with Wall Street.
I’m telling you that in recent weeks, several veteran major New York portfolio managers have been accumulating Comverse, and not touching ECtel – not even checking whether it’s cheap or expensive, interesting or otherwise. Why? Because they sense that communications shares have hit bottom. But even if that’s true, shouldn’t they buy ECtel anyway? Of course they should, but that’s according to economics, not business. Comverse is going up, despite all the negative factors surrounding the company, because the feeling is that the communications industry will emerge from its crisis soon, and Comverse is a leading player there. It has $2 billion in the bank, excellent connections, agreements with major global firms, and a superb management, not to mention the fact that company has been streamlining in the past two years, and will be one of the leading companies in the recovery. Is that true? Who knows, but that’s what they think.
The people buying ECtel are economic bargain hunters, a category that doesn’t include many institutional investors. Why did the share plunge over 18% yesterday? On a $2.5 million supply? Do you really think it’s possible to get my pal Steven and his friends to run after shares like this to accumulate them, one by one? Even Comverse is small change for them, but at least they’re aware Comverse exists, that it’s a “leading communications player,” and these guys are into accumulating communications shares in a big way these days. So I say that at a time like this, you do one of two things. You find something economically justified and good, like ECtel, Zoran (Nasdaq: ZRAN), or maybe a few of the small shares floating around the market that are in the middle of turning around, despite the tough situation, and you sit on it until it reawakens. Or else you go with the “leaders”, the “major leaguers”, and others of that ilk.
For example, I thought Attunity had disappeared, been delisted, run away, or something like that. The share, which won people’s hearts during the boom, fell apart. Truth be told, I was sure the company wouldn’t survive the crisis. The share, which began yesterday at $0.98, rose 22% in the final hour of trading, probably when figures from its financial results began to leak out.
Keep in mind that in addition to the blow we all suffered as investors, and the fact that share prices sank like a stone, several events took place in the world, one of which was very important. Companies learned to survive, and the hidden hand made a selection in the markets. Some people in the market are now looking for very small quantities of shares like Attunity (Nasdaq: ATTU), Sapiens International NV (Nasdaq: SPNS), and Mind CTI (Nasdaq: MNDO), which survived the past two years, and are now showing clear signs of recovery.
One of the most important criteria for bargain hunters operating in market like this one is what they see when they look at companies like Attunity, Sapiens, Mind CTI, M-Systems Flash Disk Pioneers (Nasdaq: FLSH), and anyone else who survived the past 30 months. Clear signs of recovery gets their attention. A company, which survived the past 30 months and published a report like the one Attunity published yesterday has certainly won its laurels, and is worth consideration for investment. At the moment, it matters not how Wall Street behaves regarding the share in the coming months.
Don’t you dare buy Attunity because of what I say, and certainly not because of your past experience with the share. You have to check things out. You have to dig, and do all the research you should have done two years ago. All I’m saying is this is a typical story of a big emergence from crisis.
Published by Globes [online] - www.globes.co.il - on October 24, 2002