This belongs on Clown thread...
>>Wrong! for Monday
By James J. Cramer
The Street.com
N E W Y O R K, Dec. 13 — It isn't enough to just acknowledge that
the old rules don't apply.
You have to look at what may be the new rules, trying to spot what
makes a winning stock stay winning.
We have a bunch of different prisms at work here.
First, the earnings surprise model still works; in fact, it works
better than ever. Take Sun Micro. It continues to deliver upside
surprises and it continues to go up.
The thing that has disappeared is the valuation constraint. There
used to be analysts who would downgrade on valuation and there used to
be mutual funds that would sell when things got too expensive. Now those
things don't happen.
You can still make an excellent case for earnings surprise
monitoring though. It is, even at these levels, what keeps me in on
Yahoo! and makes me wish I were longer. Same with Cisco.
The ‘Killer Model'
Second, the “killer model” analysis has made you a ton of money in 1999.
That model says, “If you can find a business that scales, that
allows billions of dollars in revenues to result by simply executing
well, then you will have a fabulous stock.” This rationale works for a
host of dot-coms and dot-com infrastructure plays.
Finally, the revenue surprise model works great if a company has
more revenues than it can handle.
We used to think that what mattered was how to bring those revenues
into profits. Now we just presume it will happen. You may disagree with
that, but be careful: Amazon just hit its 52-week high, totally
validating this model. << |
