During the course of 2007, I read on many occasions that we were in a "Goldilocks" stock market, meaning that while some stocks might be too hot and some too cold, most in the overall market were just right. The overall market had a great run from early winter to mid-summer before it took a big dive.

We saw some recovery from those low points until the credit markets tightened up and billions of dollars in losses and write-downs occurred, bringing down any stocks related to banking, lending, housing, construction and the like. Now consumer debt and consumer spending are frightening the market in the midst of the holiday shopping season.

I started to think about all the fear and doubt forming like dark clouds, speculating on a possible recession in 2008, though I am not convinced of that outcome. I happen to believe that even in the worst markets there are good stocks to buy, maybe even more of them. So I offer up a new metaphor for our current market --- the "fluff & fold" market, when almost nothing is just right.

Continue reading We're now in a 'fluff & fold' market

We're now in a 'fluff & fold' market originally appeared on BloggingStocks on Mon, 17 Dec 2007 18:04:00 EST. Please see our terms for use of feeds.

Yes, I remain deaf, dumb, and blind. I am not impressed with the Amazon.com (NASDAQ: AMZN) earnings report. I am sure the amazonian shareholders will confirm my ignorance. What is all the excitement about? So what if it almost quadrupled it's earnings. That is not hard to do when you barely have any. Nineteen cents a share -- oh my gosh!

So now if they can keep it up and earn perhaps $1.00 in the next 12 months Amazon only has a forward P/E of 100. Are you kidding me,100? Are we to believe that a dollar invested in Amazon is worth 3 times what Google is worth? I don't think this makes any sense at all. There must be a few folks out there that are equally unimpressed. After Google Inc. (NASDAQ: GOOG) and Apple Inc. (NASDAQ: AAPL) reported earnings both stocks shot up. Amazon on the other hand is off over 10% in after market trading.

Maybe I'll feel different in the morning after further thought or the enlightened commentary of one of our readers. In the mean time I'm left thinking, is this all there is?

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.

Amazon's (AMZN) earnings not so impressive originally appeared on BloggingStocks on Tue, 23 Oct 2007 21:20:00 EST. Please see our terms for use of feeds.

Every day we hear business reports speak about consumer spending. Is it up or down? Will consumer confidence remain stable? How will the economy hold up if consumer confidence dips? A lot is riding on these numbers and it remains a symbol of our economic strength.

Among stocks we follow closely on this site Apple Inc. (NASDAQ: AAPL) seems to be heavily dependent on consumer confidence based on the premium pricing and perceived value in its product line. Yes, Apple just cut prices on the iPhone by $200 but it still costs $399. While the phone seems to be a technological wonder and consumer hit, if times get tough you still can get four free phones with a family plan through the major vendors; for a multi-phone family that is a lot of money. Apple's share price was up notably on Friday, closing at $161.45. While I admire just about everything this company is doing, I think the stock price has advanced passed what I can deem reasonable unless the next 12 months can produce a 50% increase in profits from their current lofty levels. That will not be easy.

Amazon.com (NASDAQ: AMZN) would seem less susceptible to weaker consumer demand since it offers an extremely broad base of products, and offers discounts on many items all the time. It also has very deep data on consumer buying patterns and can adjust to changes relatively quickly in a way Apple cannot. Apple has to deal with design, manufacturing, and lead times that leave it much more vulnerable to a downturn in the economy. Amazon's share price was up with the overall market on Friday, closing at $93.43. Having a P/E of 127 (TTM) Amazon's valuation has long since left me behind.

Continue reading Consumer spending: Apple (AAPL), Amazon (AMZN) & Wal-Mart (WMT)

Consumer spending: Apple (AAPL), Amazon (AMZN) & Wal-Mart (WMT) originally appeared on BloggingStocks on Mon, 08 Oct 2007 12:00:00 EST. Please see our terms for use of feeds.

Plenty of investment guru's have suggested buying on fear and selling when greed reaches its pinnacle. Well I think the fear side is self evident but I'm not hearing about many analysts who are brave enough to buy right now. As a matter of fact I only hear that this would be a very foolish time to invest in the financial sector, in particular, any stocks with sub-prime or "Alt-A" mortgage exposure.

For this reason, contrarian that I am, I thought I would speak out about my recent BAD CALLS, or at least very premature calls, and start tracking them for all to see -- accepting the ribbing, tomato-throwing and blunt comments about the error of my ways.

I own four of the five stocks I will be following for the next year, Bear Stearns (NYSE: BSC), IndyMac Bancorp Inc. (NYSE: IMB), Popular Inc. (NASDAQ: BPOP), and Washington Mutual (NYSE: WM). I wrote favorable comments on each and in the case of WM, more than once. Needless to say, I am under water on all of them. I do not own Countrywide Financial (NYSE: CFC) but it will make for a fine pace car in the middle of this storm.

Continue reading Buy on fear today? Bear Stearns (BSC), Countrywide (CFC), IndyMac (IMB), Popular (BPOP), Washington Mutual (WM)

Buy on fear today? Bear Stearns (BSC), Countrywide (CFC), IndyMac (IMB), Popular (BPOP), Washington Mutual (WM) originally appeared on BloggingStocks on Fri, 10 Aug 2007 15:15:00 EST. Please see our terms for use of feeds.

For some reason stock trading is still running rampant in the market despite all the evidence to the contrary that it is a bad idea. It is a bad idea to pay fees and taxes (or take losses, even worse) no matter how low because they eat away at your overall returns. It is a bad idea because the basis of the decision to buy or sell has little or no fundamental rationale except momentum, or charts, or news of the day, or analysts' calls, or a Cramer rant. But most importantly to me it is a bad idea because all of the most successful and wealthiest investors do the opposite -- Warren Buffett, Bill Miller, Eddie Lampert and Carl Icahn just to name a few.

Since history has proved over and over and over that day trading is a loser's game, why do it? The only reason I can think of is for the adrenaline rush. It's the sport of it. Just watch Cramer and you can see the crazed sports fanatic looking for a fix. He makes it exciting! He makes it an adventure! He needs something to talk about!

If he followed a process enjoyed by Buffett or Miller his show might be on the air monthly instead of several times a week. Instead of frantic or manic gyrations he would be making a few boring comments and calm suggestions about a few stock possibilities before encouraging his viewers to tune in next month. Cramer and other traders have built up business as a sport and as entertainment. But, if you want to get rich, follow the investors not the traders.

Continue reading Rapid fire trading is more sport than investing

Rapid fire trading is more sport than investing originally appeared on BloggingStocks on Mon, 09 Jul 2007 16:30:00 EST. Please see our terms for use of feeds.

I don't know. Maybe Enron has the dubious distinction of being the biggest shell game ever. But just try and find the little red ball under the shell with Amazon. It's easy ... yeah, right. Lots of sleight of hand here, folks. There is no ball under any of the shells, is there? Could it be in the hand of Jeff Bezos? With Over 1 Million Pre-orders For 'Harry Potter', Amazon Won't Make a Profit.

It's no secret that I have been very negative on Amazon.com Inc. (NASDAQ: AMZN) for years. In that time some folks have made money, plenty have lost money, and those who have sold recently after the huge run-up, maybe a few traders, have made a lot of money.

Still The CEO urged shareholders to be patient following several years of heavy investment in technology, new product categories and new locations such as China that depressed earnings and ate into margins. "We are very focused on the long term, but we also believe that the long term has to eventually come," he said. Bezos noted that in the past, periods of intense investment started to pay off in five to seven years.

Continue reading Is Amazon the largest shell game of all time?

Is Amazon the largest shell game of all time? originally appeared on BloggingStocks on Fri, 15 Jun 2007 15:19:00 EST. Please see our terms for use of feeds.

Every week there is plenty to write about that I find amusing or ironic in the business world or stock market, on and off our site. I missed the last couple of weeks not for lack of material but time. This week I must start with something old that just won't go away, Amazon.com (AMZN) which closed Friday at a share price of $73.24.

This week I posted the story Amazon - everyone gets it but me where I highlighted various Amazon stock metrics that made no sense whatsoever and pleaded with someone, anyone to explain them to me. Alas, not a soul chose to respond. And since I freely admitted "not getting it" I did not leave room for those that really have no explanation but like to tell me what an idiot I am. A decade old this company has a book value of less than 2 cents on the dollar and eeks out a profit margin of 1.77%. Yes, it's profits increased in the last quarter by 115% to everyone's surprise, however, a 1000% increase if somehow directly translated into Amazon's a book value would still leave it under 20 cents on the dollar - that's hysterical to me.

Since nobody volunteered any information to help me solve the riddle I did some homework myself and a friend at a major investment house gave me a hint that lead to Who owns Amazon.com - really? and a reminder that it is not the public pushing this stock to silly valuations. It may be insiders and major shareholders playing "a game of chicken" with investors shorting the stock, of which there are many. I think after the battle is over this stock is going back down.

In Fortune magazine, May 28, 2007 issue I came across Amazon's 7-year Itch where they actually make some comments similar to mine. After all this time and all the efficiencies of the Internet in relation to Amazon's business model, it is making a smaller profit margin than the brick and mortar retailers like Wal-Mart (WMT) and over the last seven years an investor would have made 3.1% on their money.

So this is no joke I would like to learn and so would other intrigued investors if someone has any answers.

Enjoy the day.

Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

Sunday Funnies: No Amazon answers -- just more questions originally appeared on BloggingStocks on Sun, 10 Jun 2007 13:40:00 EST. Please see our terms for use of feeds.

Two days ago I posted Amazon - everyone gets it but me wondering who the heck was driving the Amazon.com (NASDAQ: AMZN) share price up to such ridiculous levels. Then I spoke with a fund manager at a large investment company and he reminded me that Amazon shares were very tightly held by a few entities. So I looked it up on AOL Money & Finance and found the following.

• Jeff Bezos still holds 24% of the stock
• Legg Mason Capital Management, Inc. holds 20.25%
• T. Rowe Price Associates, Inc. holds 7.5%
• TCW Asset Management Company holds 5.5%
• ClearBridge Advisors 5.25%.

You can see that the top five shareholders control 62.5% of the stock. Looking further I found that the top ten shareholders own about 75% of the outstanding shares. This does not account for other insiders besides Bezos who hold 3% to 5% of the shares. If 15% to 18% of the shares are sold short that does not leave much play in the market and it allows for the potential manipulation of the shares.

Continue reading Who owns Amazon.com - really?

Who owns Amazon.com - really? originally appeared on BloggingStocks on Thu, 07 Jun 2007 17:00:00 EST. Please see our terms for use of feeds.

We use Amazon.com (NASDAQ: AMZN) all the time, almost everyone does. But there are many things we use just as much or more. So why does this stock have such a wacky valuation?

Why, when I ask for someone to explain these numbers to me do I just get rhetoric like "you just don't get it" screamed at me. That's a stupid response! Of course I don't get it - I know that. But I would like to learn why this stock is valued differently than all other stocks?

Here are some numbers I don't understand:

• Price/Earnings (TTM) 116.19
• Price/Book (MRQ) 53.16
• Price/Cash Flow (TTM) 61.38

These numbers would be ridiculous even if earnings were 400% higher. At Amazon's current P/B it is not worth 2 cents on the dollar - yes I don't get it at all. Is there anyone willing to explain it to me?

Let's look at two other high flyers I have written about often, for comparison:

Why in the world would it take so long for someone to create a natural version of the real thing. Healthier Coke? Only in Israel. While the motives of the Israeli Coca-Cola distributers involved making a version of the mixture for use on special occassions (it's already kosher) while still maintaining the same taste, there are many natural colas on the market and this was long overdue. If Coca-Cola Co.'s (NYSE: KO) marketing guys are smart, they will promote the natural formula next to competitors in health food stores everywhere.

It's only month four of my review of Chasing down 007 picks: Index beats Cramer -- value trumps growth. So now even Cramer is openly referring to his Mad Money TV show as more entertainment than investing advice -- good thing, because he is falling behind all of the major indices after four months. This could very well change, but Warren Buffett, he's not.

No one has yet to explain AMZN numbers to me after several posts last week pleading for an explanation. It turns out that there might not be a good rational because BWS Financial downgraded Amazon.com Inc. (NASDAQ: AMZN) to Hold from Buy citing valuation -- NO KIDDING! -- and corporate officers and directors are selling via the exercising of stock options en mass.

• Price/Earnings (TTM) : 106.10
• Price/Book (MRQ) 48.55
• Price/Cash Flow (TTM) 56.05

Those of you who are new to BloggingStocks.com can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

Sunday Funnies: Coke, Cramer, & Amazon originally appeared on BloggingStocks on Sun, 06 May 2007 16:10:00 EST. Please see our terms for use of feeds.

Not short as in, shorting the stock, although I'm tempted, but short and sweet answer. Yesterday when I shared my amazement Amazon.com: Everything but the kitchen sink...and the fundamentals about the price people were willing to pay for shares of Amazon.com Inc. (NASDAQ: AMZN) I got a response from somebody that identified themselves as 'dorothy'; that read as follows:

• For every $1 of Amazon revenue it makes .03 cents. For every $1 of eBay Inc. (NASDAQ: eBay) revenue it makes 0.26.
  
  Amazon Q1
  Net Profit of $111 million on total sales of $3.02 billion
  PE on 2008 earnings = 48X
  
  eBay Q1
  Net profit of $460 million on total sales of $1.77 billion
  PE- 21x

The emphasis is mine. Hats off to you dorothy, 'nuff said!

Disclosure: I do not hold any position in AMZN and never have, although I have held plenty of opinions.... For those interested in value investing check out Chasing Value and Serious Money.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

Amazon reflections: the short answer originally appeared on BloggingStocks on Thu, 26 Apr 2007 14:37:00 EST. Please see our terms for use of feeds.

Once in a while, out of curiosity, I check the metrics on various companies. Today I decided to fly by Amazon.com Inc. (NASDAQ: AMZN) given yesterday's upbeat earnings report. But despite all the good news, what did I find? Simple, the numbers stink! To paraphrase Shakespeare: A dog by any other name... would still smell.

What in the world is going on in the minds of investors that would bid up this company to a valuation over $22 billion and a trailing P/E ratio double that of Google Inc. (NASDAQ: GOOG)? As I write this post AMZN shares are above $56, up over 25%, adding $11.50 to yesterday's price.

The following is an excerpt from the earnings' release:

Net income increased 115% to $111 million in the first quarter, or $0.26 per diluted share, compared with net income of $51 million, or $0.12 per diluted share in first quarter 2006. First quarter 2007 effective tax rate was 23% compared with an effective tax rate of 47% in first quarter 2006.

Continue reading Amazon.com: Everything but the kitchen sink...and the fundamentals

Amazon.com: Everything but the kitchen sink...and the fundamentals originally appeared on BloggingStocks on Wed, 25 Apr 2007 14:30:00 EST. Please see our terms for use of feeds.