Experience has taught me to respect the price action the day after earnings. So when I see LDK trying to break out of a now 5-month old range, pretty much between $30 and $40 -- yes it was up to $50 in January and $20 in March, but those are outliers -- this is a very bearish sign. It's so bearish that I suspect that unless solar plays really heat up again, this stock will need many more weeks or months to break $40, and even then, it's got a ton of resistance all over the place due to bitter buyers in at much higher prices who will be looking to cut their losses.
TheStreet.com's Jim Cramer says FedEx exposed three market fictions with its news on Friday.
Sometimes you have to wonder why some stocks just don't stay down after bad news.
Take FedEx (NYSE: FDX) (Cramer's Take). Earlier this year, the stock shed about 10% of its value when it forecast worse-than-expected earnings, citing lower volumes and higher fuel costs. It then proceeded to rally 25% from that dismal forecast even as oil went up dramatically and business in the U.S., particularly retail business, got softer and softer!
Now we get pretty much a simple extension of what the company said last near the end of March, and people are acting surprised and furiously dumping the stock.
FedEx cuts to a couple abiding fictions in this market. The first is that all valuations are cheap, so it is OK to buy them. FedEx has long-term growth of 10% and sells at 14 times earnings, but I question both the growth and the multiple as being too high in a world where energy just won't quit. But that brings us to the second fiction: People have been buying this stock with the idea that oil just has to level off somewhere. Considering it didn't, how could anyone be surprised at this news? And the third fiction? The turn in the economy is right around the corner.
While researching GPS maker Garmin Ltd (NASDAQ: GRMN) -- whose stock has lost two-thirds of its value in the last six months -- I can't help but pity those long-term shareholders who reject trend following and technical analysis in favor of investing for the long term. To them, it seemed like only yesterday that GPS was one of the hottest technologies around and this industry leader could do no wrong.
Well, that's usually the time to sell, just as I posted on Apple Inc (NASDAQ: AAPL) in January this year and on Google Inc (NASDAQ: GOOG) in November last year, both before they each dropped 40% in just a few months. Because the truth is these popular technology stocks are all expectations. We're not talking Berkshire Hathaway (NYSE: BRK.A)-type value investing here.
Sure, GPS is still hot, somewhat, but due to intense competition, margins have been evaporating, forcing analysts to lower their earnings estimates. In their latest quarter, Garmin further strengthened the bear case with spiking inventories and accounts receivable. None of that looks to change anytime soon, and even though it's got a P/E of 10, book value is all the way down near $11 per share!
TheStreet.com's Jim Cramer says they can't be profitable with this huge cost – it's time to move on.
Here's a revelation. The airline industry is disappearing right before our eyes. And it doesn't even matter. They can merge all they want, they can try to cut costs through synergy, but the business can't survive $120 oil. The variable cost is 35% of their expense. That's not tenable and it is going higher. Fares have to double to make it up. That's just not tenable. The Dreamliner's a nice savings, but this American industry won't get there in time to be saved by it.
Last week we saw the big give-up, the departure of even the longest-term investors. The stocks are signaling that most of them will have to restructure through bankruptcy. They have done it before, but this time it doesn't matter. The fare increases have to occur, and they are such that the airline structures can't be profitable. It is one of those industries that can't stay afloat without massive federal subsidies, and that can't happen.
I have hated the airline stocks ever since 1985 when I recommended Delta (NYSE: DAL) (Cramer's Take) and my clients promptly dropped 50%. I reiterate that after the tremendous declines these stocks have, they are still worth avoiding. Don't be tempted to pick up these stocks if oil "swoons" down to $115. The airlines will rally, but they will need to do every bit of financing possible if a rally occurs.
The New York Times reports that Americans in the economic middle are eating pasta instead of meat and staying at Hampton's Inn instead of Hilton as they try to keep their families together in the face of flat income and skyrocketing costs. As a result, some companies are suffering and others are benefiting. Let's look at two that are benefiting and 10 that are hurting:
Here are two companies that are doing better thanks to their lower prices:
Damn, it feels good to be right! Back in mid-February, when I warned investors not to buy Crocs Inc (Nasdaq: CROX) after its "big" drop, I had no idea they were going to warn and get crushed again so soon (see, Steven Mallas' post from last night). But the stock's chart pattern told me the odds favored the bear case.
So, you know what? I'm not particularly surprised. Because I play the odds based on what the charts tell me. Sure you're probably sick of hearing that from me, but for better or worse -- and considering my 21% return in the first quarter of 2008 by staying true to the charts, it's been mostly better -- this is my my experienced-based belief.
No matter the stock -- whether you're talking Google Inc (Nasdaq: GOOG) or Wachovia Corp (NYSE: WB), the oil, technology or retail industries, the time of year when it pays to be bullish, analyst expectations (they only get it right 30% of the time) or the market cheerleaders promoting crazy price targets like this one on Apple Inc (Nasdaq: AAPL) --if the chart is too steep, I'm wary. If the chart is downtrending, I'm short-biased.
How in the world did they get into such hot water? I mean, it takes real talent to lose this kind of money. Buying at the highs, over-leveraging and using poor investment disciplines. Why does it all sound so familiar?
Perhaps it is because these are the phrases that come to mind when I think of the plight of the individual investor who rode the market rollercoaster of the early 2000s. Yet, what I am discussing is not about them at all. No, they learned a hard and costly lesson when March of 2000 came in like a lion Saber-Tooth Tiger and continued downward with a bloody vengeance for the next two years. No, no ... they learned their lesson.
I am referring to the scores of poorly run banking and brokerage operations that have managed to make all of the combined post-depression market catastrophes look like a Sunday walk in the park. Maybe it is not entirely their fault, but they need to take a good portion of the blame for much of our economy's problems related to their poor decisions and lack of oversight on the millions of mortgages and loans that were improperly underwritten.
We already know that though. It is the most recent bit of news that is causing me to wonder how deep of a hole we are really in. This weekend, news for both Wachovia (NYSE: WB) and Washington Mutual (NYSE: WM) tells of desperate attempts by companies with big problems looking to bring in life-saving cash infusions. Unfortunately, both deals have the potential to really hurt shareholders. If you hold positions in either one of these fine messes, maybe it is time to consider alternative opportunities.
Call me old fashioned, but the weekend business news releases are starting to get to me.... While it is well known that Washington Mutual is in big trouble as its business is suffering the after-effects of all sorts of bad business practices, it did appear as if the TPG bailout would provide some relief until the credit markets regrouped. But as reported by the WSJ today, that deal stinks to high hell. Shareholders may wake to an ugly pre-market quote for WM as it is now being revealed that part of the TPG deal includes giving away somewhere in the neighborhood of $1.8 billion ... give or take a hundred million or so in order to get the deal done.
TheStreet.com's Jim Cramer says that until we have some clarity on the way out, we'll have a tough road ahead.
This is a confusing moment, for the same reason as always -- the darned mortgage market. Dueling plans seem destined to go nowhere while defaults continue to go up. We need something to stabilize the house price depreciation and someone to take the hit: FHA, Fannie Mae (NYSE: FNM) (Cramer's Take), Freddie Mac (NYSE: FRE) (Cramer's Take)? I don't care.
The president's plan sounds like it tries to address who should take the hit -- a little bit bank, a little bit government -- but it is piecemeal, as is everything that has been done about this issue.
I am and have been banking on an expanded FHA plan that would put the onus on that organization to do long, low-interest-rate loan guarantees. It is a simple plan, and I bet the government would make money from it. It would end the madness of trying to figure out how to deal with each one of these stopgappers.
TheStreet.com's Jim Cramer says that absent any catalyst beyond "cheap," the sector looks set to disappoint.
When people say "tech" on TV, it is almost always followed with "cheap," or "low valuation." To which I say, "So what?" AMD (NYSE: AMD) (Cramer's Take) looked cheap until last night. Motorola (NYSE: MOT) (Cramer's Take) looked cheap and there turned out to be no there there. Cisco (NASDAQ: CSCO) (Cramer's Take) looks cheap but all I hear are earnings cuts. Dell (NASDAQ: DELL) (Cramer's Take) looks cheap, but who cares?
Lots of cheap out there.
Here's my question: where's the catalyst?
Shorts? Stronger growth in the second half? No, the only catalysts I look for in tech are product cycles, and other than Salesforce.com (NYSE: CRM) (Cramer's Take) (nice move there), Research in Motion (NASDAQ: RIMM) (Cramer's Take) and maybe Apple (NASDAQ: AAPL) (Cramer's Take), because we need a new phone there already, there are no new product cycles to speak of.
I do a weekly radio show titled Good Day Wealth with Doug Stephan and Georges Yared every Saturday morning coast-to-coast. It's a fun and hopefully informative show about the economy, stock market, etc. We take listeners calls both in email and live on the air. I got an email from one listener, William, who is thinking about putting 60% or so of his portfolio into Dell (NASDAQ: DELL) because "if Steve Jobs can do it with Apple (NASDAQ:AAPL), Michael Dell can do it with Dell."
My response to William is no way -- don't even think about it. Dell is NOT Apple.
Apple is a growth story with multiple legs to it. From the iPod to the iPhone, the new Mac and its attendant software, to, of course, the incredible retail store system that numbers more than 200 strong, globally, Apple is a true growth story for the next several years. Apple has another thing going for it: terrific and expanding margins.
TheStreet.com's Jim Cramer says the downside for these stocks is smaller, but they won't be his first line of defense.
You should not get oil ramping and retail ramping. You can't have early-cycle running and commodities running, even though I know that commodities are a "rest of world" story.
I believe that Wal-Mart (NYSE: WMT) (Cramer's Take) can run, but the others? I have to say that if oil isn't going down, these stocks will have a failed rally and retreat again, but not below their recent lows.
The early-cycle rally of the higher-end retailers is the most problematic, because it is the least backed by the estimates. Look how excited everyone was about Best Buy (NYSE: BBY) and now look how poorly it is trading. Nordstrom (NYSE: JWN) (Cramer's Take) and Target (NYSE: TGT) (Cramer's Take) should get hammered again for a couple of points, because the numbers for March are going to be awful.
Even in these uncertain times, there are stocks that have far better odds of outperforming than others. Yup, for a minute, just forget about all the different industries, economic guessing games, earnings-valuation time lags and the rest of the market randomness that makes stock picking so difficult and "market gurus" so ineffective. Focus instead on the incredibly telling stock charts of these companies:
TheStreet.com's Jim Cramer wonders -- can we handle this giant's failure?
As always, it is Citigroup (NYSE: C) (Cramer's Take). My smartest guys tell me that Citigroup has billions in assets it can sell, that there is ample opportunity for the company to reliquify, that Vikram Pandit has things under control and the slow bleed cuts are going to work to get costs down.
Now I have total confidence in Treasury, particularly in Bob Steel, to take care of the shorts and to create brilliant shotgun marriages that reward the rich banks and punish the poor.
BUT, I have no faith in Citigroup, which because of the moronic acquisitions and bizarre off-balance-sheet liabilities may technically be insolvent. When you consider it is too big to fail, you have to begin to wonder -- what's the plan if it can't make it? How far can forbearance go? Will we tolerate this bank being majority-owned by the sheiks or the communist Chinese? Seems far-fetched, but when I read Meredith Whitney's words this morning over at OPCO I know that the losses are going to be too big for the current base of capital.
I'm glad all these "blue chip stocks" are blowing up. No, I don't enjoy seeing investors suffer, but as I've written about here, here and here, investors need to learn not trust any company or anybody in this business. Investors don't even have to remain invested all the time! Contrary to the advice of fee-earnings-professionals, the majority of whom continually fail to match the S&P 500's returns, you don't have to manage your money like a $500 million mutual fund. Diversification is for widows and orphans!
While it'll probably take me a few years to truly get through to all of you, if you've been invested for any length of time in any company listed below-considering what you've been through-you're probably more likely to believe me:
At a mere $276 million, celebrity talk-show host and entertainment billionaire Oprah Winfrey could afford to buy Bear Stearns (NYSE: BSC), which closed Tuesday at $5.91 per share and keeps on climbing to over $6.50 a share in morning trading. The story alone and the associated publicity would be worth at least that. Furthermore, she could at least make an offer and demand a meeting with the Federal Reserve Board to discuss the issue.
If her offer was rejected, she would still be able to generate millions of dollars of publicity and perhaps she might want to acquire the asset, in particular if the Fed is going to protect the acquirer from potential losses. She could really become an international mogul, the likes of which has not been seen. We all know that Oprah wants to do good. She is so giving, this could be the ultimate.
I could just see the headlines: Oprah Winfrey takes on JP Morgan Chase (NYSE: JPM) and the Federal Reserve to rescue John Q. Public.
LDK Solar Co. (NYSE: LDK) is one strange solar stock. Yesterday, on a day when other solar companies like Solarfun Power Holdings (NASDAQ: SOLF), Canadian Solar Inc (NASDAQ: CSIQ), First Solar Inc (NASDAQ: FSLR) and JA Solar Holdings (NASDAQ: JASO) were all strong and despite earnings coming in at the high end of expectations and guidance solidly ahead of estimates, their stock was down. Not only was it down, but it also tried rebounding, only to fail. Not good at all for the bull case. 
While researching GPS maker 
How in the world did they get into such hot water? I mean, it takes real talent to lose this kind of money. Buying at the highs, over-leveraging and using poor investment disciplines. Why does it all sound so familiar?
Apple is a growth story with multiple legs to it. From the iPod to the iPhone, the new Mac and its attendant software, to, of course, the incredible retail store system that numbers more than 200 strong, globally, Apple is a true growth story for the next several years. Apple has another thing going for it: terrific and expanding margins.
I'm glad all these "blue chip stocks" are blowing up. No, I don't enjoy seeing investors suffer, but as I've written about 
At a mere $276 million, celebrity talk-show host and entertainment billionaire Oprah Winfrey could afford to buy 
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
Oil hits record $127.43 on supply concerns, raised Goldman forecast
