Re: BTW, you got any new candidates (we've discussed INTC and MU I believe)?
patron, unfortunately we don't live in a market where you can trade fundamentals. If we did, I could have made a lifetimes worth of money over the last 6 months.
Overall, I follow this pattern when analizing; overall market --> sector --> individual stock. When entering a position, I first look at company fundamentals (I think this should be the first criteria for any trade). It ain't this easy though. Next is the spin the ANALysts are trying to put on the situation. Finally, I use my own half-assed guess of where I think the stock is going. Ultimately, earnings will speak for themselves so I don't try to fight them. A good example of this is ORCL. 20% growth is pathetic for this company in this industry with this valuation, but as long as the ANALysts set the targets low enough to give them an upside surprise, I don't fight it even though I know how flawed the fundamentals are.
On to some shorts. I'm in Silicon Valley and decided to stay the weekend and ended up heading up to SF for the weekend. There are currently hundreds of startups there all looking for employees. If you're in the industry, it's hard to go far here without some clown trying to talk you into joining their company. The "irrational exuberance" here in the Valley is worse than anywhere else on this planet. Anyone thinks if they round up $10 mil and a few employees, the next step is IPO and everyone is a millionaire or billionaire. Speaking for my fellow computer geeks, I can say that we as a group know nothing about business or money. Many are lured by the sweetest option deal without looking at company fundamentals. I won't name any names, but a few of these guys I talked to this weekend were just downright stupid. It amazed me some VC firm was willing to bankroll them to begin with, considering I've been hearing that VC is drying up here in the Valley. If these flakey startups are still getting bankrolled, there's no shortage of funds. I like poking fun at them, so I start with the simple question "how are you going to make money and how soon?" Not to my surprise, I got answers like this wasn't important now if they didn't just change the subject. I did run into a few guys with good ideas that understood business and knew what they were talking about. One guy in particular said, "we don't plan to make any money off of internet advertising revenue, that business model is dead". This guy came from a company that relied on ad revenue, but left when he saw what was going on. This seemed to only enforce what I already knew.
I have no idea when the day will come, but ANY company that relies on ad revenue is in serious trouble. I haven't taken the time to look at any public companies, but YHOO comes to mind. I use Yahoo for mail and some other stuff, but do I pay anything? No way, it's all free. After a few years on the net, do I even notice the ads all over the page? I don't even see them anymore. Advertisers are starting to figure this out. These companies are all going down big time, but the question is when? They are all very volatile, so you could be right in the long run and still get your ass handed to you in the short term.
I think the best short out there will be Intel, but not yet. |
