gbh, I read that JNPR article as well. Cramer's comments are about how the market has gotten cheaper. How can a JNPR still have a high valuation in this environment.
Right now he is looking at it as a glass half empty. I have also watched JNPR take off while the rest of the high fliers were tanking---it does not follow the pack a lot of times. That is perplexing!
My theory is that some of the old economy stocks are now getting more expensive as so much money has come into the Proctor and Gamble, Colgate etc. types of company. Many of the old economy companie are known for a lot of profit warnings and so much lowering of earnings guidance---making them "profit warning proof". That is why the money has gone there in addition to the risk averse behavior of the market recently.
If they keeping getting more expensive as I expect they will in January, and if the economy does not just collapse, we could be setting for strong gains in stocks with great growth but a high PE. Many investors are probably using the opportunity to buy into these stocks--JNPR Friday.
Maybe the worst is factored in. So much bad news on telco spending has hurt so many companies for so long. How much more is there to go?
All we need is just a slight move in the pendulum. If we see spending on internet infrastructure is not really slowing down as many companies in the industry have been saying; we could have an explosive rally propelled by short covering and funds wanting to get back in.
That is also why the stocks are dangerous if one wants to short them. The worries on these stocks have been around since September and have intensified with each given month. What if this is as bad as it will get.
What if it turns out to be not as bad, at least in optical?
Then then JDSU is trading at incredible bargain prices.
In addition, slowing economy also results in more outsourcing according to Selectron CFO last week. JDSU's business is parallel to the contract manufacturers like SLR.
I believe PMCS CEO had said that the networkers' cost structure is too high for them to do all work inhouse. They can do the work for 30% or 10% of the cost of what networkers will have to pay.
Companies like PMCS have the expertise to be cutting edge while new entrants will be too far behind to catch. This is the trend that will push revenues much higher for such companies---their cutting edge positions and barriers to entry.
This is why PMCS, JNPR, JDSU will trade at premium multiples. One just has to be patient and a little diversified in the short term.
I believe Cramer will be suprised by JNPR and JDSU. I do agree with him on financials as the best place to be right now. It is also the time to position for long term in JDSU, JNPR, PMCS, VTSS, AMCC--but buying a little at a time to average out the cost in the next month or so.
JMHO |
