The latest Motorola (MOT) story is quite interesting. Carl C. Icahn, the billionaire investor is seeking a seat at the Motorola board. The stock is up 6 percent today on the news. Folks, it’s time to buy Motorola. As we have mentioned before, MOT at the current level is a buying opportunity. It appears Mr. Icahn assessment is inline with ours, Motorola stock is cheap and was oversold.
A couple of years ago, Marvell (MRVL) were among the high flying stocks with great potential. For those that are not familiar with Marvell, this company produces the micro-chips that go into cell phones, video games and all sorts of gadgets. They are the brain behind a lot of the products we use on a daily basis. Marvell’s main competitors are Texas Instrument (TXN) and Agere Systems (AGR). In the last six months, MRVL has been rumored as a potential Leverage Buyout (LBO) candidate after their stock declined drastically. At one point it was trading at $15 per share.
Google (GOOG) continues to dominate business headlines; the earning call this week will again put the company at center of attention. Google’s earning has become a bored lately. Whatever the estimate is, GOOG will likely beat it by a mile. In that respect, it has become boring. Unlike other company’s earning, there is no need to hold your breath. The question is how much will they surprise. The days leading up to Google’s earning release will be volatile, but we believed the longs will prevail. We also believed this week could be an exciting week for technology, specifically within the internet sector.
IBM, the granddaddy of technology has evolved over the years. It is hard to imagine where technology would be today without the existence of IBM. This company is responsible for more patents and innovation that any other computer company. Today, IBM is no longer just a hardware company that most of us have come to known IBM has evolved into one of the most powerful technology consulting company in the world. Let’s take a closer look at IBM.
There are many approaches and various ratios one can utilize when evaluating stock, but the price/earnings (P/E) multiple is one of the most important determinants of stock performance and has a direct bearing on the price behavior of a share of stock: other things being equal, as the P/E ratio moves up (or down), so does the price of the stock. It's a key variable in determining the amount of capital gains a stock is capable of producing and, as a result, has a substantial impact on defining a stock's return potential. In fact, it's the centerpiece of the so-called P/E approach, which uses a stock's price/earnings ratio to determine whether the stock is fairly valued.
Apple Inc., (AAPL) stock has plummeted to its pre-iPhone announcement level. Trading at around $85 per share, this represents about a 12 percent dropped from its high of $96 per share. What a difference a week makes. Last week, everybody and their brothers were talking about the iPhone. The buzz is still there, but we have to admit, the thought of shelling out $500 for any gadget seems expensive. Perhaps the market has over-estimated the success of this product. When there’s so much hype built into the stock, it is prudent to be skeptical. Couple with negative sentiments regarding Steve Jobs involvement in the options scandal, the enthusiasm has somewhat diminished.
After countless years in the red, has Sun Microsystems (SUNW) found a way to make money again? After its latest earnings, one could say the company is certainly heading in the right direction. Sun reported second-quarter profit of $126 million. This is a complete reversal from a year ago, where SUNW lost $223 million (AP). A smaller company compared to its hay days, SUNW appears to be on to something.
All eyes are on Yahoo! (YHOO) today as investors are hoping for something to cheer about. Yahoo!(YHOO) is expected to report in line with expectation, but the forecast will be the main focus here. How’s the new management search going? How is Panama doing? Where is the business with newspaper outlets going? How’s the partnership with Ebay? These are some of the questions on the minds of investors. Will YHOO come out swinging or will the company set a tone of defeat?
1-21-07: Infosys Technologies Ltd. (INFY), the premiere Indian technology consulting firm continues to report very strong numbers. As far as we are concerned, INFY has proven it is for real in a market that appears to be limitless for now. The outsourcing business has been great for INFY, particularly in the last 5 years as Western companies accelerated their outsourcing efforts. As outsourcing of Information Technology (IT) resulted in significant savings to their client’s bottom line, companies of all size have now jumped on the outsourcing bandwagon. The net affect is strong growth for INFY and other “consulting” companies.
It doesn’t matter how we analyze Halliburton (HAL), this stock is just plain cheap at $29 and change. While some have speculated their growth is about to end as the democrats takes control of Congress, we view this as a buying opportunity. By the way, the democrat issue has already been priced into the stock, thus HAL is trading at current level. If you are a “value investor”, meaning you’re the type that loves sound investment at inexpensive prices, this is the stock for you.
Economy
Every time the Feds speak, you can pretty much guarantee the market will behave in a volatile fashion. Judging from Mr. Bernanke’s comments as he delivers his regular updates to Congress on the state of the economy, interest rate will likely remain unchanged the next time the FOMC meets. In our view, this is probably the most logical choice given there is little evidence to support a rate cut. Inflation also appears to be in check so there’s no reason to tighten. This “Goldilock” economy should provide stability in the equities market.
The FCC chief poured ice cold water on the hopes of XM Satellite
(XMSR) and Sirius (SIRI) shareholders today. The word is XMSR and SIRI cannot merge with the current licensing rule. As a result, XMSR and SIRI fell 10 percent and 6 percent, respectively. The question on most investor’s mind is should I buy or move on since the chances of a merger is somewhat diminished. As speculators have driven up the prices of these two stocks in recent months, we see this drop in price as opportunity to buy at discount. Here is couple of scenarios to consider:
There is no doubt online trading firms have revolutionized the way people invest. The availability of these firms has brought a new crop of investors to the market. Lured by the inexpensive commissions and the convenience of being able to trade independently, investors and traders have come to rely on firms like TD Ameritrade (AMTD), E-Trade (ETFC) and Charles Schwab (SCHW) to get their orders executed at a reasonable price. Therefore, it is not surprising to hear TD Ameritrade reported 69 percent surge in profit this morning. Does this mean it’s time to double down on online brokerage?
When it comes to providing home loans and services, one of the biggest names is Countrywide Financial Corp. (CFC). Founded in 1969, Countrywide Financial Corporation originates, purchases, securitizes, sells, and services prime and nonprime loans; provides loan closing services such as credit reports, appraisals and wealth of other related services. As the housing market flourished so did CFC. In the last 5 years, the stock has split three times. However, 2006 was a tough year for CFC and many other companies in the mortgage business. In looking more closely at CFC’s situation, we believed there are good reasons to be excited in 2007.
Motorola and AMD have been taking a beating as both companies warned of
earning shortfall. MOT and AMD are down more than 10 percent following the news. Interestingly, the support level of these two stocks appears to be $18. Depending on your personal investment horizon (long-term or short-term), one can either take the lost and move or buy more at a discount. Let’s take a closer look at these two companies.
One of the dilemma facing most individual investors is how to quickly analyze company’s financial statements. With so many financial ratios, it could get confusing. Moreover, understanding ratios requires an in dept analysis and some financial background. The fact of the matter is most of us don’t have the time or knowledge to go through financial statements. Here three things one should at least consider when going through the balance sheet and income statement.
We started noticing Verifone (PAY) a few years ago when paying via ATM became more popular than cash. For those that are not familiar with Verifone, this company provides the machines and encryption technology that merchant use we can pay via credit card or ATM. The next time you visit the grocery store, look at the name of the machine as you swipe your card. You’ll notice it is from Verifone.
As most would agree, selecting the right stocks is largely a combination of timing and analysis. The analysis allows us to better understand the company’s business and their potential for growth. However, that’s simply not enough. What separates great analysts from the mediocre is the ability to predict the future surprises with some success. If you can consistently do that, you will find yourself on easy street.
We undersand two weeks into the New Year is hardly enough time to gauge how the stock market will perform the entire year, but despite a rough start, we feel 2007 should be another great year for stocks. When the market hits one of those bad days (and we will), keep these points in mind. Here are six reasons for our optimistic view and some companies to consider:
If you follow the IPO market, you are likely familiar with a recent IPO, NYMEX Holdings (NMX). The New York Mercantile Exchange is one of a kind trading platform and basically holds a monopoly in commodity futures exchange. As investors, we love monopoly or companies with little to no competition. NYMEX fits this mold. Trading slightly below its all time high of $150 at $123, is this the right time to get in?
A proven method of selecting which stock to invest in is to buy positions in companies that provide the products and services we use on a daily basis. When it comes to the internet, we remain bullish on Yahoo! (YHOO). While Wall St. has basically given up on YHOO and rightfully so given 2006 was a terrible year for the company, we believed 2007 could turn out to be a great year. Here are some reasons we believed YHOO is worth your time:
Apple Inc. (AAPL) is one stock we wish we own more. As we watched as this stock climbed from the low 50s (May, 2006) to its current level, we continue to be amazed at the resiliency of this company. Arguably one of the more innovative companies in the Silicon Valley, AAPL’s business model is straight forward and easy to understand. Unlike Google (GOOG), we can easily explain to our mothers how Apple makes money.
Many investors believe that the prices of stocks that split will increase in value because they are priced lower, which increases the demand for them. In contrast, advocates of splits do not expect a change in value because the firm has simply issued additional stocks and nothing fundamentally affecting the value of the firm has occurred. One might asked, is stock split a good thing?
The December jobs reported was impressive. According to the Department of Labor, U.S. employers added 167,000 new jobs. Unfortunately, this was more than what investors had expected. Normally more jobs are viewed as a good sign, but in this case it is interpreted as ammunition that the Feds will keep short term interest rates at 5.25% and possibly tighten. The investors that have been betting the Feds would cut interest rate in the first quarter of 2007 have been silenced…for now.
In the words of John D. Rockefeller, “The way to make money is to buy when blood is running in the streets”. A wise statement when it comes to investing. Early this morning, Motorola Inc. shares sank as much as 10% in heavy trading after the world's No. 2 mobile phone maker cut its fourth-quarter sales and profit forecast as handset prices fell amid fierce competition. Rival such as Ericsson, Nokia (NOK) and other generic manufacturers are eating into MOT’s profit margin. When MOT introduced the razor phone last year, it was a big hit. However, as someone once said, “technology has a shelf life of a banana”; competitors have now caught up.
Valero Energy Corporation (VLO) has been on our watch list for almost six months now. We have watched as this stock fluctuated along with the price of oil. When oil goes up, VLO follows suit; when oil tumbles so would VLO. Trading at $48.89, just a few point above its 52 week low of $46.84, we believed this stock is starting to look attractive. The last couple of days have been rough for VLO shareholders as oil has fallen over 10%, closing today below $56/barrel.
<Rant>What the heck is wrong with this picture? A CEO did nothing to improve his company’s bottom line for years and was eventually pushed out. On his way out the door, he is awarded over $200 million. This is corporate America at its worse, folks. Talk about being out of touch! Get this; the total package is seven times the $30 million Home Depot set aside last June for stores and employees that provide good customer service. Home Depot has 2,127 stores and 355,000 employees in the United States, Canada, Mexico and China. Are you sick as I am? The new corporate tag line for Home Depot (H) should be “You can do it, now bend over!”.
Happy New Year! As we start 2007 with cautious optimism, we feel this year could be as exciting as 2006 in respect to the stock market. However, given the recent gains, we also feel it would be prudent to go over your portfolio and sell some your positions if the gains have reached your original target. Taking money off the table and reinvesting it in other stocks will help us reduce the overall risk. With that said, the first stock analysis of 2007 is AT&T (T).
