7-27-07: While it is premature to call it a crash, it sure feels like it. The DOW is down another 200 points. In case you are counting, that’s 500 points in just two days. The question on most investor’s mind after another brutal day of sell off is where the market will go from here. Will the market continue to slide or have we reached the point where equities are now cheap enough to start buying at discounted prices.
7-11-07: Another day, another record. Where do we go from here? The resilience of this current market is quite amazing. The high price of oil no longer fazes anyone. Who cares that a barrel of crude is now over $72 and appears to be going higher. Who cares the housing market continues to struggle. Who cares the country’s budget deficit is at a dangerous level. And who cares that we are borrowing most of the money to cover our deficits from China, our biggest banker. While some investors may choose to ignore these economic factors, it is important that you do not. The weight of these economic factors will eventually take it toll in the form of inflation. As the DOW keeps breaking new records, keep your eyes for additional warning signs. It is our view; this market is due for a correction.
7-26-07: Forget about the sell off that is going on right now, primarily caused by the dismal housing sector. Do not panic, the market will recover. Look at the price of oil, close to $80 a barrel. This is a good opportunity to add those energy stocks to your portfolio. We see some obviously bargains out there such as HAL, VLO and CVX. These companies need not worry as they’ll continue to make a killing at the expense of consumers.
7-24-07: The sell off in recent days has many investors asking if this is a temporary correction or something more. Sparked by fear of further housing slump, dismal earnings and bearish outlook from mortgage companies, the DOW is down 226 points. As we have mentioned before, the housing market has always been a concern. However, most analysts believed the worse is behind us. This might not be true. Considering the mortgage industry is tightening its lending practices, more pain could still be ahead.
7-19-07: Google’s (GOOG) Q2 failed to exceed expectation. It would appear the lofty expectation has finally caught up. Despite a huge net profit of $929, it was not enough. In fact, the company missed by 3 cents per share (reported $3.56 vs the expected $3.59). The out of whack expectation is fundamentally why owning Google is such a risk. Personally, this is good news as we are sick and tired of hearing how great this company is. Everybody and their brothers on Wall Street keep hyping this stock. Perhaps this miss will quiet the talking heads on Wall Street down. Google should fall back below $500 where it belongs in a few weeks.
7-19-07: Poor Ebay (EBAY), no respect from Wall Street this morning. After posting a solid Q2 and beating the Street by 2 cents per share, EBAY is rewarded with a sell off, currently trading at $33.50 (down about 1%). Why this harsh treatment? There is growing concern that its core auction business has reached a plateau and appears to be on the decline. This is evident in its listing (2% less compared to same period prior year). The conservative guidance for the remainder of the year also did not help. Should investor dump EBAY and head for the hills?
7-12-07: We first wrote about WFMI back in September of 2006 when the stock was flying high in the $50 range. Our position was the stock was overvalued as it was trading with a high P/E given its growth rate. This morning we learned the CEO had some hand in pumping the stock. Instead of focusing his time and energy on leading his company, this guy spent his day posting on financial boards, at time pumping the company’s stock and attempted to suppress Wild Oats (OATS) stock so his company can basically buy it at a lower price. Hmm…isn’t that illegal?
7-11-07: Another day, another record. Where do we go from here? The resilience of this current market is quite amazing. The high price of oil no longer fazes anyone. Who cares that a barrel of crude is now over $72 and appears to be going higher. Who cares the housing market continues to struggle. Who cares the country’s budget deficit is at a dangerous level. And who cares that we are borrowing most of the money to cover our deficits from China, our biggest banker. While some investors may choose to ignore these economic factors, it is important that you do not. The weight of these economic factors will eventually take it toll in the form of inflation. As the DOW keeps breaking new records, keep your eyes for additional warning signs. It is our view; this market is due for a correction.
7-3-07: Some of you requested our opinion on Bank of America (BAC). In our view, BAC at current level of $49 per share would not be a good entry point. This is a slow moving stock; upside potential appears limited. To put it into perspective, it has been almost two years since we last looked at BAC, back then it was trading around $44 per share. In two years, BAC has delivered only $5 of appreciation to shareholders. Despite a healthy dividend payout, this rate of return is unacceptable.
7-3-07:The recent appreciation of RIMM shares has been great for the long term investors. Since reporting its earnings last week, the stock has jumped about $40, now trading a little above $200 per share. A few months ago we predicted RIMM was undervalued at $135 per share when Wall St. sold off as the company guided lower than expected. Those that have bought it back then are now reaping the benefits of buying when others were panicking. In RIMM’s case, it was an easy call given the company’s sound fundamentals.
