My accountant told me today that the clients of his who got themselves in big trouble (margin on suddenly fallen high-fliers) have already taken their losses to pay their tax bills. Though certainly many haven't yet most of the damage has already been done and most of the panic selling has already been done.
This past week's damage will have repercussions but the strongest growth stocks and most undervalued quality companies will get picked up by bargain hunters now. Everyone's down on weak dot.coms now but don't forget many of them have already dropped 70-80%. They're hardly overvalued anymore. In fact look for mass consolidation in the sector. I bought CMGI today at 52 which I consider a bit risky but the upside potential is great considering Alta Vista and a lot more they have going for them. I see a probably 45-95 trading range there, for example in the near future, though that's just my guess, and one example.
In any case if there is another sharp drop on Monday the buys will be too compelling for knowledgeable investors to ignore. Nibbling will start followed by some major buying. The Arab Prince buying 400 mill of CPQ last week is an example of the type of large buy-ins which will start happening to the best undervalued stocks. And right now there are a lot of these type bargains.
This weekend the big story should be the crash, how to perceive it and what to do what about it at the top levels of government and business. Stock buy-backs, takeovers, rallying cries, upgrades, you name it. And don't forget in all the doom and gloom the earnings season is upon us and they should be pretty good for the most part, and better later in the year for many computer firms. MSFT's legal problems aside, we have a booming world tech market. Everyone has to be in the net these days and these are just growing pains and natural evolution to separate the wheat from the chaf, as they say. I consider firms like IBM, LU, UIS, CMGI, CPQ, WCOM, etc. to be big winners going forward and selling at bargain prices now. IBM for instance has I think 14 billion guaranteed revenue a year just from longterm contracts not including any new or smaller deals.
NOK, ORCL, INTC etc. have fallen to very reasonable prices. COMS is a bargain at 16 PE. So are there any real over-valued winners left? If so, name them. Most of the high-fliers from previous months are now hammered into the ground. CPQ for instance has 5 billion in cash. Why wouldn't they start a stock buy-back at $24 a share? Just another example. Many retailers are making great money and some are debt free. But they are now selling at 52 week lows. Banks and financials just came back down to earth from their recent run-up. EGRP at 19 just as they're about to start making real profits? T at 50 before their spin-off. There was definitely air in the bubble last week but now I think it's pretty well punctured. This kind of climactic mass selling is usually followed by a massive rally off a hard floor. Only question is whether this is the floor or there's a little more left. If there's more it won't be much IMHO. |
