Hi Sun,
Not sure when the world will wake up and realize what an impartial bunch they are but got to give Faber and Kernen a thumbs up for trying with the penguin skit...
Another subject:
Here is another article taken from the source...
Setup Your Shopping List
September, 22 12:47 PM EST
by Ram Seshadri back
The damage from Intel's announcement is here. But like many investors, I can tell you that I was stunned last night when I looked at my portfolio. Based on after-hours quotes, my portfolio had shrunk 16% in a day! It was not fun because I had both longs and shorts in my portfolio and I had considered my portfolio to be rather balanced between the two. And add in the fact, I didn't even own Intel! Once the shock of seeing my portfolio's bottomline subsided, I thought: what if all these after-hours quotes were just plain wrong? The idea took a nice turn when I looked over my portfolio again to see if I held any companies that were either suppliers to Intel or were in the same industry as Intel. Nope. Next, I checked to see if there were any announcements from any of portfolio companies after-hours that would warrant such a drastic move. Nope again. That's when it hit me: All these after-hours quotes were bogus! They were from panicked investors and smart hedge funds who were taking advantage of the panic caused by Intel to bid prices for all tech stocks at $10 below their previous closing level an hour ago. Once this sunk in, I started taking a serious look at some of the quotes for my portfolio stocks. May be there was an opportunity here to add to some of my longs at 10 bucks below what I would have paid for them a few hours ago.
The result was fun. I was buying stock in after-hours on a panic!
Though I didn't get "hit" on any of my offers, I learnt something valuable about after-hours markets that I want to pass along to the rest of you.
The after-hours market is still illiquid and phony. It is a pale shadow of the normal market. It is a place for posturing rather than for real trading.
Anyone looking at their stock quotes after-hours in times like this and thinking that they will be the real prices when the market opens the next day are wrong. For example, none of my stocks opened anywhere near the ridiculous levels they were being quoted off-hours yesterday. Most of my stocks opened $2 or $3 lower and made up that amount in a few hours today (some are even curiously up).
Another lesson learnt: Keep a shopping basket of stocks to buy always because you never know when you will need it!
For example, I have been keeping a shopping list from April that I put to use in June to make a pretty good gain the markets that month. Similarly, when I saw the downswing in July, I started keeping a shopping list for a potential meltdown in October but it has come sooner than I thought. I am now covering my shorts and buying some more of the stocks I like.
That brings us to my next lesson: what have I learnt anew about the tech market recently?
1. I know that PC demand in the last quarter (typically the strongest quarter for the PC market) is going to be weak. Make that very weak. That tells me that anything to do with PC's is dead money for the next 3 months. I am going to avoid any and all stocks in this sector.
2. I know that cellular handset growth has slowed from its hectic pace last year to a more reasonable 20-30% pace this year. That implies that high-priced multipl stocks in this sector will get killed (because their high P/E's imply higher growth) while the low-multiple stocks are going to do okay and in fact, even thrive. That's why I like a low-multiple stock like Audiovox in this segment (I wrote about this a week ago See Article). Audiovox announced earnings that beat estimates by a penny but the stock went lower anyway because people are waiting for the 10Q to know if the inventories are bulging or if they have stabilizied. I think it is prudent to wait for the 10Q and then buy. You can do you own research and find stocks that have low-multiple but will thrive in a 20-30% growth environment.
3. I know that semi-equipment and chip stocks tied to the PC industry are dead. However, what about semi-stocks tied to the cellular or the telecom equipment space? Are they okay? Once again, I think growth expectations have come down for the telecom and cellular equipment companies but that doesn't mean growth has become zero. It only means that the high-P/E stocks are getting their multiples compressed while the low-P/E stocks will do well, and even thrive in this environment.
4. I know that (for some time now) big-cap tech is the most overvalued piece of paper in this country. I will avoid this group like the plague (as Intel has shown why). Try to stay away from anything in the Internet, Tech space that has a huge market-cap company that is growing in the single digits but is posturing enough to make it seem like it is growing in the 20% range (I don't have to name names, just look at any Fidelity or Janus' top 20 holdings and you will know the answer in an instant). This is the part of the market that is dangerously overvalued and needs to be slaughtered. I will rejoice the day when fund managers go back to their roots and find the mid-cap and small-cap techs that have become value stocks simply because they have been ignored for so long. Cheers when that happens!
What's left in Tech to invest then?
1. Well, there is tons of software stocks that are tied to the growth of the Internet and to Fortune-1000 businesses that are doing well. Once again, their growth expectations have ratcheted down but their growth is not zero. You need to find software stocks in the infrastructure, B2B areas that still have seen no slowdown in their customer's spending. That will be the best bet going forward.
2. There is still the biotech area that is strengthening while the rest of tech is wilting. This area is a potential goldmine if you know how to navigate it (and a potential landmine if you don't know what you are doing). I would suggest looking at this area in a tech meltdown.
3. The optical sector is still hot though a lot of air is coming out of this bubble.
4. The storage sector is hot though once again it is a bubble.
5. The international tech sector is a bargain bin right now. You can take you best tech stock in the US and find a counterpart abroad that is trading at a fraction of the US tech's value. I think that Korea, Japan and Singapore will come back next year and you have to be prepared for it.
Now there you have it - my current thoughts in a nutshell. I will post an update later and see if I need to tweak my game plan a little in the coming weeks. |
