Alvarion, ALVR, an Israel based WiMax provider reported good earning yesterday.
Dave Mock at The Motley Fool penned some excellent perspectives so I see no need to cover the same ground.

Instead I’d like to discuss investing in this type of high tech company.
I own ALVR in my personal account and have invested and profited from long positions over the last few years. Now that I check I first bought ALVR in mid 2004.
I view the classic investing style of Long Term Buy to Hold or worse Long Term Buy and Hold, LTBH, as one of the most dangerous philosophies newbie investors can be exposed to. I know I am in the minority with my view, as LTBH is one of the first concepts foisted upon new investors. Before people flame me, let me say that I consider LTBH an excellent strategy when used appropriately. The problem is it is often sold as the be-all and end-all of investing, the only path to financial success. LTBH is a fine strategy for investors who realise that investing is about the long term accumulation of wealth. Using LTBH to invest in established companies with a history of long term growth and good prospects of future growth, when the company is selling near its long term value based lows, is an excellent strategy.
Unfortunately many new investors are chasing instant wealth, they are swinging for the fences and then striking out as they combine this with LTBH.

The LTBH dogma does not mix with investing in volatile young companies and it does not mix with investing in technology companies. Unfortunately they are the companies that many new investors are attracted to and that is why I say LTBH is a dangerous strategy for new investors.

Alvarion is a classic take your profits and run company. Some may call it speculation and that’s fine and perhaps even a handy differentiation for investors to realise they should not mix speculation with LTBH. Young emerging tech companies like Alvarion present short term opportunities as their share price is based on investor sentiment.

I invest or speculate in these companies and in doing so I’ve found scores of bags, easy bunts to take, but very few home runs so I take my bunts. David Gardner from The Motley Fool is as good as I’ve seen at picking the home runs and while he has a terrific long term record I prefer slightly better odds. I’m not David. I’m not as good at picking THE winner. So I take the bunts. For me knowing yourself and knowing what style of investing suits you is one of the keys to investing.

There are scores of other ways to play Alvarion. One bad that way comes to mind and that is to hold it when their technology starts to fade. If that happens and it IS the highest probable outcome then the price will go lower than right now. However, that should at least be two years out.
If ALVR doubles and is still undervalued I’ll hold, fairly valued then sell half. I like to at least a vague plan.

In emerging technology and biotechnology stuff happens way slower than you think. I’d pegged 2007 as the break out year for WiMax and though ALVR did close on a high finally hitting positive GAAP to go with their previous positive cash flow and normalised earnings, 2008 could soon be 2009, but baring a market collapse I like my risk/reward profile for profits in or slightly over the next year.

Alvarion’s technology is hot and they dominate the WiMax sector with Intel as one of their main partners. Investors have sold Alvarion off on fears unrelated to their core business and this good earnings and forecast should provide a catalyst for a reappraisal. However, there is no guarantee their current cutting edge technology will the technology of tomorrow. That is another reason why it makes sense to take profits when investor sentiment is riding high.

Putting this all together. Emerging high tech companies are priced based on sentiment. The easiest way to profit from then is to buy when the story hasn’t changed but investors have soured on the stock, then sell when the price approaches the upper end of what investors have been prepared to pay. The simplest measurement for this is using P/E ranges. If a company is not profitable then ranges based on cash flow or revenue can be used.

If you’ve read this far I hope you takeaway and consider the following thoughts:

• Know yourself and what style of investing is for you.
• Investing is about the long term accumulation of wealth. Swinging for the fences is likely to see you strike out.
• It is OK to speculate, but keep your speculation to a small percentage of your portfolio.
• If a young tech company becomes overvalued then consider taking your winnings and don’t let greed or dreams of a ten bagger be your reason for remaining invested.
• Consider a strategy based around a core holding and trading positions. This removes a lot of the psychological issues caused by trading.
• Keep your eye on earnings, when they falter be ready to sell.

Cheers
Dean

More on Alvarion
Alvarion is a Tel Aviv company founded in 1992 with a market cap of $490M. They are focused on wireless high-speed network connections and are well positioned in the bourgeoning WiMAX equipment space. WiMAX is like WiFi on steroids, it’s faster and has a much longer range. Their products include cool features like orthogonal frequency division multiplexing-based technology. Lost yet? I know I am. In simple term they sell boxes to allow people in neighbourhoods, remote locations or buildings that are too expensive to rewire, to connect to the internet and talk to others. They do the last mile.

Never heard of them? Well, Alvarion have over 2 million units deployed in 130 countries. They rightfully claim to be the worldwide leader in wireless broadband with over a decade of standards leadership and the industry’s most extensive product portfolio.

Their customers are telephone companies, internet service providers and companies installing private networks.. I now see they have close partnerships with worldwide OEMs such as Alcatel, Lucent, Siemens, and Nera.

Courtesy Bigchart.com