This is setting up to be a contrarian's dream market

Posted Jul 22nd 2008 4:43PM by Aaron Katsman
Filed under: Earnings Reports, Good news, Apple Inc (AAPL), Texas Instruments (TXN), Technology, Earnings Transcripts

So the sky isn't falling.

Corporate earnings aren't that bad and are surprising analysts. Oil prices are falling just as quickly as they rose. If you are a contrarian investor, you must have a big grin on your face.

Common wisdom had it that markets were going to keep dropping, that the price of crude would hit $200 a barrel, and that bank after bank would go bankrupt. But what's happened? The opposite. Bank earnings aren't as bad a feared, crude has fallen to under $130 and suddenly investors are a bit more optimistic.

Even when we get bad news, like earnings from Apple (NASDAQ: AAPL), Texas Instruments (NYSE: TXN) and others, the market is able to hold up. Industries that just a week ago were being left for dead suddenly came roaring back to life. For investors who like to dabble in out of favor stocks, this market is a dream come true. Battered sectors such as financials, airlines, and even autos have surged over the last week. Who would have dreamed that airline stocks would actually stage a rally? What's interesting is that even with their recent move these sectors are all still trading significantly off their highs, meaning that potentially we have much more room to run.

Investors should approach investment decisions with some perspective. Markets tend to overshoot in each direction until a middle ground is found. With the battering out of favor sectors have taken over the last year, there may just be more upside before that middle ground is found.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 7/22/08.

Tags: AAPL, airlines, Apple, autos, contrarian investing, ContrarianInvesting, texas instruments, TexasInstruments, TXN

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Reader Comments (Page 1 of 1)

7-22-2008 @ 5:29PM

Zak Smith said...

"like earnings from AAPL" What was wrong with the earnings ? Guidance ? yes, but not the actual number

7-22-2008 @ 5:41PM

billy said...

umm what bad news from apple? they beat estimates and showed incredible growth. ????

7-23-2008 @ 5:57AM

Warren said...

"If you are a contrarian investor, you must have a big grin on your face."

Absolutely. I picked up a bunch of stock that was VERY on sale over the last few months. I hope that someone has written down the names of all the chicken littles crying DEPRESSION and RECESSION so we can remember to ignore them next time the market fluctuates.

7-22-2008 @ 9:18PM

Beltway Greg said...

Fire Peter Oppenheimer. If he can't do his job, and he has repeatedly proved his inability to predict Apple's growth, he needs to go. This isn't a joke. Material misrepresentation is material misrepresentation. Why doesn't one of the milquetoast analysts on the conference call take him to task for his repeated sandbagging. I didn't sell a share and I'll be fine in the long run but I hate it when small investors dump their shares because of his premeditated stupidity. Apple shareholders deserve better. He should go and work for a less taxing company like JNJ or perhaps a nice utility or a regional bank.

Beltway Greg

7-22-2008 @ 9:37PM

Sheldon L said...

Greg,

I don't have much to say about Oppenheimer, and you certainly are one of the more astute Apple guys I know, but it is not small shareholders that bailed on the stock it is large traders.

The stock is fairly valued. August is approaching and my guesstimate from last year (remember you owe me dinner my friend) of the stock being worth between $150 and $160 this August seems to be holding up.

Peace

7-23-2008 @ 12:19AM

Beltway Greg said...

After they jumped behind enemy lines they managed to find their way back to base camp pretty quickly. You've got to admit, the bounce today was pretty strong. Anytime dude, but, it made it to $203.00. Here's the deal. What would people rather have a healthy company or a healthy CEO? If the growth rate was down and they only sold IPods would you take solace that they had a healthy CEO? And now if reports are to be believed they've got both. Yes, Jobs suffers from control issues , but who amongst us hasn't from time-to-time. Give the guy a break he started the damn company in his garage so the simple fact that he's a little too over involved with it and is a little too closely identified with his creation is par for the course. If he must be replaced the pick of the decade? Board member Al Gore. Yes, kids you've read it here first. So someone can now pick-up the thread and write about the Al Gore idea and work the healthy company vs. the healthy CEO angle. I think that with some continued improvement in the economy
the next earnings pop will be positive.

Beltway Greg
$260 Dec. 31, 2008.

7-23-2008 @ 1:07AM