Nice Pinhead & Shoulders formation on this dodo. Buyout rumor is complete crap spread by insiders to get liquid.
#reply-9053440
"What is often overlooked is that a reasonably valued (even undervalued) stock can get
sucked into the internet craze, when a portion (but just a portion) of the company's
business is done on the internet. This is fine, as long as the craze continues; but when
there is a pull-back (as there was the other day), the "undervalued" company's stock
price tends to suffer just as much as the price of the "overvalued" companies.
Let me give you a concrete example from my own portfolio. Earlier this year, for the
sake of my portfolio's diversity (I owned no financials), I bought stock in a holding
company called Southwest Securities (SWS), with subsidiaries that provide investment
banking, investment advisory services, securities clearing -- and securities brokerage,
including on-line (mydiscountbroker.com) brokerage.
So it got sucked into the on-line brokerage craze. Now, SWS had -- and still has --
reasonable valuations (including a p/e of under 20), real earnings, a real profit margin,
real ROE, etc.
I find it difficult to evaluate financial firms, but nevertheless SWS looks much more solid
to me than the firms that are perceived to be its competitors (e.g., AMTD, EGRP,
JBOH, NDB), and cheaper than them all (including the profitable ones, like Schwab).
On the one hand, I should not complain. At one point, SWS had gone up 100% from
the date I bought it; it is now up only 50% -- but that is nothing to sneeze at, either.
What bothers me, however, is that its fate is linked to on-line brokerages as a group.
When the group does well, it will do well; when the group takes a hit, it will take a hit.
When ETrade announces that its losses were less than expected (!!!), as it did today,
stocks in the whole group will do well, however profitable or unprofitable they are
individually. And if it had announced that its losses were more than expected, I am sure
they would have all fallen in tandem.
You ask (I am sure): what's your point?
It seems to me that most of the enthusiasts who buy "internet stocks" (i.e., stocks in
companies that do SOME business on the internet) PAY NO ATTENTION
WHATSOEVER TO VALUATIONS, let alone real profits or real revenues. What
they appear to be looking at is momentum ONLY. (Why else would a sleazy little firm
like JBOH have a p/e of 550, as against SWS's p/e of 19?) The trick is to toss these
stocks around, like just so many hot potatoes, to make as quick a profit as one can, and
to get out as soon as possible.
Analyses like Prof. Seigel's seem to me to miss this essential point.
Your thoughts?
jbe" |
