Tech rebound muted so far as recovery begins slowly
Sun Sep 1, 11am CT
By Michael Happel - a rebuttal to Nick Olivari
Chicago (my kind of town) - Technology stocks have seen meager gains since the stock price rebound began last October and claims of a new bubble are so far off base that they hardly deserve mentioning.
The deflated stock bubble prompted retail and institutional investors to blindly sell anything remotely related to tech --telecoms, semis, internet infrastructure and software stocks, all companies that were going to survive the downturn and still be viable businesses going forward. All of these companies were dumped mindlessly after falling to obscenely low prices. Pessimism was the order of the day and almost all companies in these categories saw their stock prices drop to frighteningly low levels.
At the bottom of the worst bear market in six decades, the selling frenzy peaked in the face of a potentially strong rebound.
"What's leading the analyst's community's fears of a new bubble is the fact that they don't understand statistics. Instead of saying a stock has recovered 3 or 4 % of their loses, most analysts get confused by the reciprocal statistic that indicates a stock has rebounded 200% or 600%. The question that most analysts should be asking is how many people were buying at the bottom and how many people have actually created 300% by their actions", said Michael Happel, individual investor, who has seen his trading portfolio rise 100% in 2003 by not listening to the investment community's analysts.
Happel notes that looking at a statistic like MSFT is up 21% is only looking at one side of the coin and that many people have purchased MSFT at much higher prices.
MARKET IS COMING TO IT'S SENSES
There was a blatant disregard for viable companies at the October bottom. Companies like NT and LU, which had seen 99% and 98% of their stock prices disappear(or $60 and $80 per share), have seen roughly 6% or 2% of their net losses return to their stock's prices as of last Friday (they've recovered $2.50 or $1.25 per share of the $60). While these rebounds may appear large when looking at the percentage gained from the nadir, it is a small comfort for most owners of the stock.
"The analyst community hasn't had a clue on where some of these companies are going in the future", said Mr. Happel. "These analysts only see the billions of dollars in writeoffs and losses these companies have had over the past 2 or 3 years. They fail to see how many of these same companies have repositioned themselves for future success, how their balance sheets have been cleaned up and that many of these companies have debt levels that are very manageable going forward."
THE DEFAULT OPTION
"Anytime an analyst sees a statistic like the 600% gain in Nortel stock they immediately default to their standard response: 'the stock has gone too far, too fast!'", stated Mr. Happel. "I was trading NT in Sept and Oct of last year and I know that very few were able to justify holding onto the stock when it was trading around 50cents. The stock would drop 10 to 20% in a day and the weak hands where being shaken out. Only a few traders picked up the stock at the bottom and a very small portion of those buyers have held on to the 600% gain seen by NT since Oct." |
