31-Jan-08
Stuck in the mud
With little surprise, the Fed cut 50 bps yesterday. And, as quickly as the market rose over 200 points from its lows, we quickly gave most of it back and finished down on the day.
My portfolio has suffered immensely over the last 6 weeks, creating a double-digit loss for the month and, going back to the beginning of 2007, I've given away nearly half the gains in '07.
For some time I have been afraid of financials, notably the banks. And rightly so. However, at this point (after they have rallied 20+% in many cases), I should admit to being too backward looking. Banks and financial institutions, recently faced with countless headwinds, are starting to turn. They have been gifted with an ever steepening yield curve with historically low rates at both ends. My true feeling remains that stocks like Wells Fargo and B of A should not rally, and, in fact, should be trading at or near book value until they have shown to have weathered this credit storm. However, the market has proven this conclusion wrong, and I've no choice but to sit on the sidelines.
At the same time, the market has thrown away all tech. VMW, AMZN, EBAY, and AAPL, among others, have all disappointed and been crushed accordingly. Now, amazingly, several tech growth names are trading at a multiple similar, and in some cases below, the earnings multiple of the S&P 500. But because the market can be an irrational beast, I am not shouting out that tech will stage a meaningful recovery anytime soon. This is one situation that I am confident prices will normalize at levels far higher than the present. It just may not happen for several months. Market participants are craving safety and yield. Until that changes, the Dogs of the Dow should hold up well. Shorter term investors/traders should focus on names like PFE, ED, VZ, and DOW. Longer term investors can begin to slowly add to undervalued growth names with the expectation that performance may lag for the rest of the year.
Posted at 04:48 in Market Report | Permalink | Comments () | Top
Weekly Newsletter
The latest version of our weekly newsletter is available to ...
epicadv
Do You Have Any Con...
The image of Corporate America has surely taken a beating i...
20smoney
The Latest Bear Mar...
Nouriel Roubini | Nov 19, 2008
With major US...
pablo222
Marks & Sparks
Low price, combined with evidence that Directors are buying,...
mdunne
Categories
Holding Tags
Other Stock Tags
0 Comments on "Stuck in the mud"
You must be logged in to post a comment.
Top