Folks,
Take a look at the Gem's long-term charts and you'll see that this recent sell-off is nothing particularly unusual for the stock. That it is taking place amidst a huge sell-off of the Internutz stocks is actually a back-handed compliment I'll get to below. My immediate point is that the current downward trend is every bit a part of the territory of investing in Gemstar as is enjoying the upward trends. That people are frustrated by it frankly surprises me. If you're truly frustrated I have empathy for you but at the same time I ask that you simply learn to happily live with the ups and downs of this stock as a fact of life, not a source of frustration.
RocketMan sez: However, I don't see the selloff in gmst to be of the same nature that we have seen in other tech leaders. Granted, this is not the same as a csco or msft, but it is a naz 100 stock with large insitutional interest, so we should not expect it to trade like a penny or like a no-earnings internut.
I disagree to a large extent. There are a lot of companies whose stocks skyrocketed last year because of enthusiasm for the B2B and B2C opportunities in the coming decades. Many of those stocks are 50% to 70% off their highs. Even the really strong companies such as AOL and Yahoo! are 32% and 47%, respectively, off their highs.
A year or two ago I was suggesting that Gemstar would eventually be viewed as a portal. When that happened, the stock acted accordingly and soared last year. And this year it is also being treated like a portal and has tanked nearly 50%. If you want to invest in a company percieved as a portal, that sort of volatility goes with the territory and should not be a source of frustration.
If we focus on the fact that it is a Naz 100 stock, compare it with QQQ, a trust made up of the 100 largest non-financial companies on the Naz. QQQ is off its highs almost 20%. I wouldn't be surprised to always see Gemstar sporting a beta of 2.0 or more compared to QQQ. That GMST has fallen more than twice as far from its high as QQQ needs to be put in the context of how far the two have risen. QQQ was born a year ago, rose about 140% to its high and settled back to its current price almost an exact double from its origin. In the same period of time, Gemstar increased about 500% to its high and settled back to the current price about three times higher than a year ago.
I may be wrong, and hope I am, but maybe there is more to this story than we know.
That is a very smart approach in my opinion. We should never get the impression that we know everything, that we will always use impeccable judgement, or that management can do no wrong.
On the other hand, a few years ago a close friend sold the stock at my recommendation because each of us had recently been burned by a company whose true story was known only by a few, not the public investors. Gemstar was tanking like mad on no news and we were worried that she was going to get creamed a second time because of info not available to us. In the end, the stock recovered and the company went on to improve its fundamentals as has always been the case for Gemstar. She later bought back at a much higher price than she sold at but did so with the comfort that she felt management is properly runing the show. Having lived through that experience, having been an owner of the company for more than two years and having followed it for five years, I will be shocked to learn that the stock is declining because of something we don't know or can't surmise is a possibility.
Add to the Naz sell-off the fact that we don't know if the merger will go through and that I don't even know if I want it to go through. I suspect I'm not alone in that regard. If I'm right, there is a lot of uncertainty. As you know, the market hates nothing more than uncertainty and tends to show its displeasure by establishing strong downward trends until something gives investors reason to be more certain of the future.
In essence, so what if the stock has fallen 50% from its high. It's not the first time that has happened if you look up the data when it was called GMSTF. The stock has still tripled from year-ago levels. The fundamentals remain the same. The long-term picture remains solidly in place.
To put some cold water on the table, I'm not sure the stock is a particularly great buy at the current price. I do know it's one heck of a lot better value than when it was twice as high about a month ago. But there is so much to wonder about. I don't have the slightest idea how to determine a fair value for the company. That being the case, the stock might still be overpriced.
Just my opinion.
--Mike Buckley |
