This morning I decided to bite the bullet and go long AMD (NYSE: AMD 14.13). For those of you who don’t know AMD, it is Advanced Micro Devices, the 90lb weakling vying for computer chip marketshare from 800lb gorilla Intel. What am I thinking?, this thing has been a dog (one with lice and flees). The pilots jumped outta this plane last September at $28.00 and since then it has lost significant altitude, traversing as low as 12.60 in April 2007. I do have history with this stock through a couple of quick trades on the way down with my overall result being net positive. With that being said, I removed my nose plug and pulled the trigger at 14.10. Oh boy, do I have a soft spot for underdogs!?

The company has had a VERY challenging year so far. It lost a ton of money in a price war with Intel, took on $2 billion more in debt and saw its workstation market share shrink thanks to one of its customers Sun becoming cozy with Intel. To add insult to injury, Barcelona, its first Quad Core chip has been like vaporware with rumors of possible delays. Finally, there has been chatter about becoming a fabless chip company by outsourcing chips to fab makers like Chartered Semiconductor. This has the potential of being negative as it can stretch out development time of chips. But this is not necessarily a bad thing since they can save a ton of money and still keep development time in check thanks to an existing close relationship with Chartered. After all, Nvidia is a fabless company and has managed to do extremely well. Many rumors are swirling around this company with the main one being possibility of a buyout, but that’s not why I’m here. You CANNOT time buyouts as you may end up holding stocks indefinitely waiting on one.



My main reason for buying this name is Technical. The chart suggests a turn in AMD to the upside may be in the works. I normally don’t purchase stocks so close to earnings, but I think the ‘broken old record’ negativity of the street could spawn a short term rally. AMD is such a hated stock that ANY glimmer of good news can make this thing pop. If we break above its short term high of $16.00~, we could possibly see $17.50 (200 day moving). Another positive note is that AMD has issued subpoenas to Intel’s Lawyers for allegedly forcing computer manufacturers, retailers and distributors to buy Intel chips instead of AMDs. I know, I know, I can’t invest waiting on the outcome of a court case, but this serves as perception of fighting back, which may help fuel any rally.



On the analyst side, Lehman raised ratings to $15 from $13. Do I trade purely based on these guys recommendations? NO. But there is one Analyst in particular, Eric Ross of Think Equity that has always been right on the money with this stock. He had some positive comments on AMD yesterday morning, but external fed pressure kept it in check, very nice! I have used use this opportunity of market unrest due to the Fed Meeting on Wednesday to snag a couple shares.

As with any investment, I have already defined my exits should things go north or south. Investing in this company is more speculative in nature because you have a company that is doing very poorly trying to claw their way out of a ditch. Buzzfans, do I lose my shirt or make a couple extra bucks? We’ll see, but I feel strongly about this one. Do you Due Diligence and have good one!



Disclaimer: I am LONG AMD stock as of the posting date of this article. This post is merely to present an idea and not to try to persuade you to buy/sell any security within. Please do your own Due Diligence BEFORE making any trades.

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