Advanced Micro Devices
A Reason to Cover

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By yodalives
July 15, 2005

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Thought I would let everyone know that I decided to cover AMD at 19.36. I am lucky it spiked down this morning- I thought it would spike down to fill the gap and fortunately I was correct. I lost a few hundred dollars on that trade- could have been much worse- but I have now been burned on my first short. I was shocked and impressed with the earnings and the guidance. The numbers although the press released them as flat, seem to be improving in terms of margins, growth, etc....

I have a feeling that AMD will hit a point low enough in the next month in order for me to have held on and made some money- I read the earnings and the future outlook the company gave for the rest of the year- it sounded solid: better then expected Q3, increase in operating margins, a spin-off of Spansion that will help their bottom line, and the Intel suit in the works. Plus their new Fab in 06- just too much in the works and when that is combined with earnings it is time to cover. I wanted to get out before any possible upgrades as well; just too risky of a position to be in. I was blown away by the earnings, and that is the best reason to cover. I still think AMD is over valued based on fundamentals but I think with earnings and all the speculative stuff in the works it is likely to go up rather than down over the next 3-6 months.

My first AMD shorting lesson: Never short a company just before earnings without having genuine expertise in their business and calculating the possibility of a blow out quarter into your decision.

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