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Bonds Are a 'Safe' Investment: A Big Lie Gets Even Bigger"The momo crowd is at it again," says Toby Smith. The editor of ChangeWave Investing and panelist on Fox & Friends explains, "Momentum buying (or momo investing) strategies always tend to bid the price of the stock up as it goes higher."
But once the stock starts to sell off, he notes, "sell triggers are pulled and the momo players begin serious selling -- and that selling feeds on itself." But for those not caught up in the momentum craze, he adds, "For us, this just presents a great buying opportunity."
In his view, one such situation in which momentum-selling has created a buying opportunity is Sigma Designs (NASDAQ: SIGM), a maker of processors for markets such as high-def and Internet protocol TVs.
He notes that in Sigma's case, there were two primary factors that caused momo investors to sell. First, he notes, the company recently brought out 'limited' financial results for fiscal fourth-quarter and full-year 2007, ending February 3.
He explains, "SIGM's quarterly revenue was up 197% to $31.2 million, from $10.5 million in the year-ago period; for the year, revenue grew 174% to $91.2 million, from $33.3 million in fiscal 2006.
"But amidst the good news was word of a delayed announcement of further financial results pending the completion of a review of Sigma's stock-option-granting practices." That, he says, was "strike one."
Second, in addition to the options concerns, he notes that Sigma saw a downgrade from American Technology Research analyst Jeff Schreiner, who cut his rating on the stock to 'Neutral' from 'Buy' and lowered his price target to $28 from $34.
Toby Smith notes, "Schreiner thinks Sigma faces competitive threats from Broadcom Corp. That are 'accelerating faster than prior expectations.' Hey, there's no doubt Broadcom covets the Internet Protocol Television (IPTV) set-top box chip market.
"I mean, who can blame them? This market is going to be gigantic going forward. But at this stage of the game, I think there is plenty of room for Sigma and other players."
The result of this selling, the advisor believes, is a buying opportunity. Overall, he states, "Let's grant the momos their wish and buy what they no longer want. In the end, I'm confident that we'll be the ones left smiling."
For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free daily website, TheStockAdvisors.com.
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