Glenn, my 'understanding' of AOL is overstated.
Stephen,
I am not so sure it is overstated. Your post was as thourough and well thought out as I have seen in some time.
I haven't understood most of whats
happened recently with the market ... last earnings I had four plays, three shorts and one
long. In retrospect I still believe I was wrong on only one ... but they all lost money for
me.
I believe both you and I are "old dogs" here. We are use to fundamentals driving a stock with occasional momentum based on some TA that eventually corrects. There is an interesting phenonmenon that I do not recall occurring during my years of experience. This this the baby boomers inheriting a lot of money and having nowhere to place it but in mutual funds or investing themselves.This was summed up last week with an interview with some money manager on CNBC. He was questioned regarding the market's tremendous growth and if he thought it was over valued. His answer was the market is way over valued. However, at the end of each day, the marketing department of the firm for which he works indicates how much new money was placed into his mutual fund. This has typically been, in his case, been $50,000,000 per day. He stated he completes a days trading and then has to decide what to buy with the additional $50,000,000. All stocks appear fully valued but the investors in the funds want their money working in the market. The next day he buys KO or something at an inflated price, etc.
On two occasions, the long and a short, only an analysts comments sent the stocks (for
me) the wrong way. The long was hilarious, after the company beat earnings easily, the
analyst said he saw problems going forward. No details, and the price has recovered ...
but it lost over 4 points next day.... and so far there's no problems on the horizon. On
another occasion, a massive one time charge put down to a shift of accounting methods
hid a substantial loss and an R&D and licensing balance sheet amortisation that was totally
out of hand and growing. It would have been the next three years incomes and even with
the charge-off grew by 33% over previous year !!. It was horrible and even the thread
members who were long the stock were horrified ... but all that was reported was that
the company exceeded estimates by a cent !
These market reactions are occurring constantly and due to analysts making statements likely due to the fact they are confused as well. Case in point is COMS recent earnings. I did not have a position but was amazed at the market initially taking COMS up on such a poor quarter. I thought everyone lost their mind.
We've seen it with recent earnings announcements. Lots of the tech companies are going
downhill fast in my opinion..... too many players in the same arena that isn't growing fast
enough or has growing competition from abroad. Does anyone see this .... do they care
??
I do not agree with the above statement although the statement was a generalization. I do believe we are in a technical revolution and the growth of this industry will increase but it still will come in cycles. Companies behind the technology curve will lose.
So ... with AOL we have an industry leader, household name, the stock keeps going
higher, it has earnings unlike most of the internet plays, it makes deals on a regular basis
and reports good news consistently, has no Asia exposure, is at the forefront of potential
e-commerce, has 'unlimited' future potential for growth and profits ... etc, etc .....
I'm sure you get the picture !. The key is not to understand the company or the stock, but
understand the American investor. AOL is a microcosm of the whole market ... the
ultimate self-fulfilling mechanism. The informed mm's didn't want any part of this
market at the beginning of the year but had to play cause the 'general investing public'
went ahead without them and started driving things forward.
This goes back to the interview I saw. AOL is the only short I have that concerns me. They do have some earnings. They do have new contracts and they possibly have a decent future in the Internet Commerce arena. AMZN on the other hand, is a "commodity" company. There are no walls to entry for competition as there is with AOL. They offer nothing above Barnes and Nobles or www.books.com or the coming Random House. Some one keeps buying them????
So ... with AOL we have an industry leader, household name, the stock keeps going
higher, it has earnings unlike most of the internet plays, it makes deals on a regular basis
and reports good news consistently, has no Asia exposure, is at the forefront of potential
e-commerce, has 'unlimited' future potential for growth and profits ... etc, etc .....
I'm sure you get the picture !. The key is not to understand the company or the stock, but
understand the American investor. AOL is a microcosm of the whole market ... the
ultimate self-fulfilling mechanism. The informed mm's didn't want any part of this
market at the beginning of the year but had to play cause the 'general investing public'
went ahead without them and started driving things forward.
A some what political statement with relevance to the market. Quite true.
I am going to continue to believe that fundamentals will eventually rule. I plan to maintain my course and do my homework. I anticipate making some errors but making some correct decisions that outweigh the errors.
That is it<G>
Glenn |
