Is your favorite stock on fire? Has it gone up in the last couple of weeks on no or limited news? One of my favorites, Intuitive Surgical (NASDAQ: ISRG), has already gained more than 100% this year and continued to fly over the past month reaching yesterday a 52-week high of $256.76 from a 52-week low of $95.00.
This is not the only high flyer. Apple Inc. (NASDAQ: AAPL) finished the day at $167.91, up $6.46 and Amazon.com (NASDAQ: AMZN) closed out the day at $95.85, another 52-week high, and both are up over 100% this year also. Adding to the momentum picture, Google Inc. (NASDAQ: GOOG) finally topped $600 closing at $609.62 or nearly a 3% gain on a day the market was down. Are there Ghosts in the Machine?
I can name many stocks that just won't quit. What's going on? Are we building up towards earnings reports that won't sustain these numbers just to watch profit taking or disappointment cut these stocks down to size? I have no idea, but I'm sure that stocks rising on no news day after day have either become speculative momentum plays or inside information is running through some brokerage houses. I believe the former, not the latter, but would love to hear some facts from anyone who has some. Otherwise, while I'm enjoying the ride, my skeptical side is telling me the music has to stop soon.
To find potential opportunities and verify my track record, read Chasing Value or Serious Money.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
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Reader Comments (Page 1 of 1)
10-09-2007 @ 1:20PM
Zaphodbee said...
Disclosure: I own AAPL.
I agree with its over-valuation at this time, but even if there is a pull-back around earnings, long-term i think its okay. The iPhone so far has only 'scratched' the high-end of the market and only in US. They made something people 'want' and it seems they have plenty of room to play with margins. This is just like how they entered the MP3 player market with the iPods. Plenty of room to grow.
Also, its still amazes me that with a ~150B market cap, the Mac market share is barely anything to talk about. On a side-note, Intel is making some amazing processors, and APPL will be one to benefit the most with their high-margin Macs. Plenty of growth opportunity here too.
The 'pure' MP3 player market is definitely saturated. Unless AAPL is pushing this hardware in a big way (more agressive with pricing, advertising, etc) outside of US, i don't see a lot of growth left here. This is the only weakness I can imagine at this time.
As you mentioned in one of your earlier articles, even if the stock pulls-back by a solid 10%, its just not worth timing the stock, and easier just to gain on taxes. This works really well if you think the company has good prospects in the long time, and i think AAPL is one of those companies.
10-09-2007 @ 2:23PM
Sheldon said...
Zap,
Long term investors will be fine. But recent investors following the momentum might be unhappy because they could see more than a 10% drop. Hitting 40% to 50% earnings growth going forward on top of very high comparables is too optimistic to me.
Of these particular four stocks I think AAPL and AMZN are more vulnerable than GOOG which has the lowest P/E (almost reasonable) and ISRG has the highest growth and lowest capitalization.
Peace