Perspectives Weekend Edition - Jun 11
Commentary
The profitable companies of the S&P 500 have lost 1% in the market year to
date. Those members of this benchmark index that have lost money have
returned about 24%. It seems, if you are a shareholder of one of these
companies anyway, that it pays to lose money.
In this month's Business 2.0 magazine (which is an excellent magazine for
anyone with an interest in doing business on the Internet), there is an
article which focuses on the 14 billionaires that have recently been
created through public Internet companies. 14 people, most of them
relatively young and lacking the scars from a life in business, have seen
their net worth inflate to over a billion dollars.
The key word is inflate. Internet frenzy is no secret to anyone who follows
the market, and the word which Microsoft Word's spell check insists should
be capitalized, Internet, seems to be blowing the air into this speculative
bubble.
When will it burst?
Oldtimers of the market, those who reminisce about the bear market of the
70's, insist rational thought will prevail and money will return to quality
run companies with real earnings. The young guns, those as familiar with a
keyboard as they are with a pen, laugh at the oldtimes as they tear by them
in their Ferraris, basking in their wealth that has come quickly and
easily, with no apparent root in rationality.
As in any euphoric bubble, the strong will survive, and the weak will have
to enjoy their millions in relative obscurity, sipping tall drinks with
umbrellas in them while they lounge on the beach of an island perhaps
renamed to bahamas.com or thegrandcayman.net.
A word of caution. Some one will pay.
And it will be the shareholders who bought into the dream or found self
actualization in greed and failed to find the exit door before the building
caught on fire. Do not worry too much about the future of the Yahoos or
Amazons of the virtual world, they have a recognized brand and a solid
future. But be wary when former gold miners or oilmen bring an Internet
story into their company. Due diligence should be easy, simply ask them
where to turn on the computer.
By the way, I am not a curmudgeonly old fellow jealous of the money being
made from the Internet. I'm pretty young, and pretty happy with the gains
that I have made from the Internet stocks. From Yahoo to the gong show
Internet stories, I have done well. But, let us be clear, don't invest in
the questionable for the long term. Trade, or die.
Enough Said.
Starfield Resources (SRU)
Perspectives Score - 7
Reference: starfieldres.com
- we called a bounce on this stock last weekend, but did not see it happen
until Friday. Good chance we will see it move higher in the near term,
traders should watch the stock for opportunities.
The Scores - What They Mean
---------------------------
A score of 7 to 10
This stock is worth considering as a buying opportunity. Our analysis
indicates that the stock has good potential to go higher in the short term,
and is worth taking time to consider. Complete your due diligence on this
stock so that you can make your own judgement on the quality of the company
before making a decision, and remember that our score is valid for the
price that the stock is at when we applied the score. Of course, a score of
10 has more potential than a score of 7, but all stocks in this range
deserve your consideration. In addition, if you are short this stock, you
should consider covering the short position.
A score of 4 to 6
We are neutral on this stock. It may be that the stock has an excellent
story, but much of the opportunity has already been priced in. Or, the
stock may have seen a great run and is now taking some time to catch its
breath. This is a stock worth hanging on to if you bought it at lower
prices or shorted it at higher prices. However, because it is in a profit
zone, you should be prepared to take profits on the stock if it shows signs
of heading against you. Keep a close eye on the stock if you own it, and
make sure you dance close to the door.
A score of 1 to 3
This stock is worth considering as a shorting opportunity. Our analysis
indicates that the stock has good potential to go lower in the short term,
and is worth taking time to consider. Complete your due diligence on this
stock so that you can make your own judgement on the quality of the company
before making a decision, and remember that our score is valid for the
price that the stock is at when we applied the score. Of course, a score of
1 has more potential to go lower than a score of 3, but all stocks in this
range deserve your consideration. In addition, if you are long this stock,
you should consider selling.
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