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.

AAPL, AMZN, GOOG, ISRG: Momentum taking hold of growth stocks? originally appeared on BloggingStocks on Tue, 09 Oct 2007 09:30:00 EST. Please see our terms for use of feeds.

Continue reading Is it ever OK to forget valuation?

Is it ever OK to forget valuation? originally appeared on BloggingStocks on Tue, 17 Jul 2007 14:59:00 EST. Please see our terms for use of feeds.

He said up and it went straight down! He said down and it jumped back up!

Anybody suspect a reverse "Cramer Effect" now?

James Cramer of TheStreet.com has been bullish on NYSE Euronext Inc. (NYSE: NYX) for quite some time and made it one of his picks of the year. Unfortunately it is his worst pick and hurt his overall average, riding this one all the way down from a November high of $112 ($97.80 to start the year) to a recent low of $73. That's a tough one because the stock may not be all that bad in time but it is never a good idea to go and pay just any old price.

Last week when I wrote Cramer retreats from NYSE Euronext: Fundamentals anyone? several people called me out because they felt that I was badmouthing a stock with great potential. Well, I still maintain that investors should look to buy stocks based on the value proposition and not just because they like it, or are worried about "missing the boat." Most investment advisers worth the time of day will tell you not to try and time the market. But Cramer followed EURONEXT down to the low $70's and then got weak in the knees, suggesting that it might be better to get out and perhaps back in at the low $60's. In my post, I chided traders for chasing a dream and not fundamentals -- a practice usually called "speculating," saying the stock could just as easily trade down even lower.

After Cramer's change of heart and my post, the stock did not trade down. Instead, it started to move up with the overall market and last night closed at $81.31 -- that's over 10% to the good in one week. So the most important lesson for me still remains: DON'T TRY AND TIME THE MARKET which I will continue to scream from the highest rooftop.

Cramer was wrong to push this stock when it was at an all-time high, and apparently, he was wrong to suggest the idea of bailing out last week. Whatever fundamentals (besides his gut and street noise) he is using looks all the more like playing momentum and a hunch rather than a long-term strategy. Perhaps long-term for a trader is one quarter.

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 principal for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

Euronext follow-up: Cramer timing out of step on NYX originally appeared on BloggingStocks on Fri, 13 Jul 2007 17:53:00 EST. Please see our terms for use of feeds.

If you are bothered by the down-turn in the stock market perhaps you need to think longer term when you invest. In the long term the market will be up. If you are hit with a cold sweat by rapid downward movement in stock prices perhaps you have not set aside enough reserve capital to ride out the storm. You should increase your cash reserves or invest a greater amount in a mix of bond funds. You should not put long term money in short term investments, nor should you put short term money (needed in the next six months) in long term investments.

Momentum can move a market up and it can move a market down very rapidly and good companies can get caught in the "group think" which may be very irrational. If your tolerance for volatility is low then you should increase your investment diversification, trade less, use index funds and continue to adjust your portfolio using a proven asset manager if you do not have the ability to do it yourself.

Any good investment company or manager will ask you to assess your risk tolerance early in the process of setting up an account, but you should ask yourself this question even if you do not have an adviser. If you are feeling anxious about the current market you were not honest with yourself when you considered this question, or you did not address the issue at all.

At times like these I am reminded of what the economist, John Maynard Keynes, said, "The market can stay irrational longer than you can stay solvent." If you foresee potential liquidity problems in your future you should address them now; you should not hope for a turn-a-round to save you. Yes, the market will turn around, but when is the question, and you do not want to be worried about when. This is where long term thinking and value investing have a great advantage over momentum investing, technical analysis, growth stories and of course day trading.

If the down market bothers you... originally appeared on BloggingStocks on Fri, 02 Mar 2007 11:00:00 EST. Please see our terms for use of feeds.

Apple and Google: Don't bet against the momentum originally appeared on BloggingStocks on Wed, 29 Nov 2006 12:42:00 EST. Please see our terms for use of feeds.

Google shmoogle. Don't waste your time or your money! Consider the following as I ramble on about investor speculation.

1.  It's overvalued by almost every metric you can think of; price-to-earnings, price-to-sales, price-to-book value, price-to-cash flow. It can only hold up if you think its gross margins and profitability will continue unabated regardless of competition, R&D costs, new unprofitable enterprises, and its size.

2.  Too many shareholders are momentum investors and will run for the doors in panic with their feet on fire when momentum shifts downward.

3.  Expanding into China will be difficult no matter how many compromises management makes. The Chinese will do everything in their power (which is a lot), to make sure it is a Chinese company that eventually rules this space.

4.  Competition from Microsoft (MSFT), Yahoo (YHOO), eBay (EBAY), Amazon (AMZN), Time Warner - AOL  (TWX) , News Corp. (NWS), InterActiveCorp (IACI), and a multitude of others is substantial and growing. They are not standing still and will create obstacles to Google at every turn.

5.  Management insiders are selling shares. Yes, it makes sense for them to diversify. But if they are playing it safe, shouldn't you? By the way, Warren Buffett has never sold any appreciable shares in his company Berkshire Hathaway since he thinks it's the best thing you could possibly invest in.

6. Google had a great idea, it paid off, now what? All the added features are just that, features. It has no incremental value at a scale that will expand the company at the rate of the initial search concept.

7. Almost every highflyer in the Internet age has had to get real or get out. We may still be playing a game of quick buck traders hanging on until the first sign of weakness and thinking they will be smart enough to beat the rush to the door. If so, than see item #2.

8.  Market history over the past 80 years has favored small cap stocks over large, dividend paying companies over non-dividend paying companies and, low price-to-sales (P/S) value investments over growth.

9. Trees don't grow to the sky. See my post, "Google me this, Batman."

10. Does not pass the equivalence test. Google closed today with a capitalization of approximately $122 billion. To give you some perspective, that is the equivalent of Anheuser Busch (BUD) $35B + Federal Express (FDX) $34.5B + Starbucks (SBUX) $28B + Harley Davidson (HDI) $14.5B + Black & Decker (BKD) $6.5B and Intuitive Surgical (ISRG) $3.5B combined. In my opinion, if someone offered you all six of these companies for all your shares in Google and you told them to take a hike than you are nuts. (Disclosure: I own many of these stocks. Read more about me here.)

I'm sure you could come up with your own equivalence test but these are time tested, well managed, valuable enterprises with strong brands and to me owning Google instead is folly. I can't say it in any simpler language than that. 

10 Reasons I think Google is going down originally appeared on BloggingStocks on Wed, 21 Jun 2006 18:10:00 EST. Please see our terms for use of feeds.