Zain.. a very good post. Look at this piece from Cobot..
Stay away from those 10th story windows! We realize fully
the pain you and other Internet investors have felt over
the past six weeks. We've felt it ourselves. Speculative
stocks and quality stocks. Large stocks and small stocks.
Profitable stocks and unprofitable stocks. They've all
been taken out and shot.
During this period of pain, you would expect many investors
to start throwing in the towel. And indeed they have.
We've heard all types of bearish comments and forecasts
recently. One said we're on the verge of an Internet
depression. Another said the Great Bull Market that
started in 1982 is all done. And somebody else said the
damage inflicted on the Nasdaq will take years to repair.
Statistical sentiment figures also show extreme fear. The
put/call trading volume ratio has been moving higher in
recent days, showing option players are getting more
bearish. (They are usually wrong at major market turning
points.) And the put/call price premium ratio (which looks
at prices rather than volume) just hit its lowest point
since 1987!
Their emotional message is clear….run away from the stock
market!
As we've said many times, you shouldn't worry yourself over
what some pundit says is in the cards. Ask yourself, where
were these dire predictions at the end of August? Or at
the start of March, when stocks were supposed to go up
forever?
The point we're trying to make is that it's human nature to
feel pessimistic after the market falls and optimistic as
it rises. So take these predictions with a grain of salt.
Meanwhile, for those who really are wondering whether the
long-term trend is intact, we want to assure you it is.
How do we know? Well, one of the driving factors of the
market is liquidity…it's what pushes prices ever higher.
Right now, one measure of the money supply (the Money Zero
Maturity measure, or MZM) has grown 8% over the past year.
This is solid growth. To put it another way, the MZM has
expanded a cool $350 billion over the past fourteen months.
Translation? There is plenty of liquidity being created in
our economy.
Or how about this: There is currently just under $900
billion parked in retail money market funds. That's
clearly a ton of potential buying power.
Add to these liquidity totals the fact that inflation is
dormant, productivity is soaring and profits for the
leading Internet firms continue to grow relentlessly, and
you have the recipe for a long-term bull market.
Now realize that all of these fundamental factors should
convince you that the market's long-term uptrend is intact.
But we must watch the market itself to find out when the
turn will come. Right now, with the i-TIMER negative, you
should stay defensive, although you could do a little new
buying right here if you feel you're under-invested.
Either way, our goal today is to convince you the outlook
is as bright as ever. The market will undoubtedly get
going eventually, and probably sooner than many think.
And the rise will be led by exciting Internet growth
stocks…just when doubt and gloom prevent most investors
from buying them.
Stock Updates
Another hectic week, another mid-week update that reviews
all of our recommendations. It's our job to keep you in
touch with our latest advice. And that's what we're using
this and other updates for.
Let's get started:
Ariba (ARBA): For those who bought along with us, Ariba is
showing a growing loss. We'll hang on here because (a) the
market could be bottoming, (b) some support has appeared at
110 and (c) Ariba's future growth is bound to be awe-
inspiring. On Tuesday, Ariba and i2 Technologies announced
an expansion in their relationship that allows each company
to resell the other's B2B solutions. If ARBA can hold up
here, it could have a nice rebound. HOLD.
Broadcom (BRCM): Broadcom was hit hard Tuesday, as chip
stocks were sold by investors of all type. Since we want
to focus any new buying you do on those stocks that have
held up best, we placed BRCM on hold. But be sure to hang
on if you have a profit or a manageable loss. We're
optimistic this is just a correction in the stock's long-
term uptrend. HOLD.
Check Point Software (CHKP): After holding up well
throughout this correction, Check Point was slammed at the
open yesterday. Although buyers did halt the decline, they
didn't jump in as forcefully as we had hoped. Still, right
now, CHKP is less than 20% off its all-time high. And
that's great strength no matter how you slice it. Upcoming
earnings should be great. You can buy a little if you
don't own any. BUY.
Elantec (ELNT): Chip stock troubles! That's the main
reason Elantec has come down the past few days. It's a bit
weaker than we'd like, but there's solid support in the
mid-70s. Again, we expect this firm to report good results
for the quarter. For now, we still believe new buyers can
buy a small position. If you own some, hang on, but as
always, be sure to watch your loss limit. BUY.
Enron (ENE): For such an innovative company, you don't
hear much about Enron. Maybe it's because investors still
think of it as just an energy stock. While that
conventional wisdom has some merit, Enron is growing by
leaps and bounds, thanks to the Internet. It's true…ENE is
a slower moving stock than our other recommendations. But
we feel it has great upside potential. The stock found
support near 80 and looks OK here. BUY.
Extreme Networks (EXTR): Could Extreme, with sales of only
$262 million, be one of the next great networking stocks?
Is that what the stock's stunning 308% gain since the
market's bottom in May, including its recent strength, is
telling us? It could be. The market for Gigabit Ethernet
switches is exploding, and Extreme dominates it. So buy a
little EXTR if you don't own any. BUY.
Mercury Interactive (MERQ): We could complicate this
paragraph with all sorts of figures and support levels.
But we won't. Mercury looks great. And it just released
Topaz 3.0, a Web site performance monitoring solution that
provides early warning of slowing response times. BUY.
Network Appliance (NTAP): Our latest recommendation has
found good support in the 110-120 area. And we note that
it's given ground only grudgingly over the past few weeks.
It appears big investors aren't willing to let their NTAP
go. With the amount of information stored ready to expand
50-fold over the next few years, Network Appliance is set
for super growth. BUY.
Power One (PWER): After a painful selloff three weeks ago,
Power One has stabilized. Its rally has begun and, so far,
the stock has acted well. If business continues to be
great, the rally should persist. Conversely, if the stock
peters out soon, it's likely that Power One is having some
problems. We won't anticipate what happens. Right now,
the stock looks fine, so we advise holding on. HOLD.
Here's the ratings list:
BUY -- CHKP, ELNT, ENE, EXTR, MERQ and NTAP.
HOLD -- ARBA, BRCM and PWER.
SOLD since Monday's Letter -- SIVB, on Tuesday's special
bulletin. |
