This whole investing game is quite easy and predictable.

A hot new company goes public, attracts investors and its stock goes through the roof. Everyone wants all-in until the price reaches an unsustainable level, and then the selling begins.

Eventually either the hot company crashes and burns, or recovers to provide more rational returns in the future.

Whole Foods Market (NASDAQ: WFMI) is a great example of this evolution.

Five years ago, this alternative grocery store was all the rage. The stock appreciated as investors believed that shoppers would be more than willing to part with more dollars in order to get food that was naturally raised without chemicals and pesticides.

Continue reading Time to get long Whole Foods (WFMI)

Time to get long Whole Foods (WFMI) originally appeared on BloggingStocks on Mon, 09 Feb 2009 19:00:00 EST. Please see our terms for use of feeds.

The company had been on a run of exceeding Street expectations by quite a bit. The shares were hit very hard on Thursday coming down from $74 to $47, exacerbated by a 360-point decline in the Dow.

The numbers that Crocs reported were actually quite impressive as revenue were up 130% over last year's 3rd quarter and earnings were up 144% for the same period. The gross margins expanded from 58% to 60.4%, while the ever-important operating margin actually hit above 30%. Young growth companies are not supposed to hit operating margins of 30%. It is virtually unheard of.

The other important piece of news was the company raising its 2008 guidance for earnings in the $2.65-2.70 range. With 2007 looking to be at $1.96, the growth for 2008 would be 35-40%. The stock market reaction was a tremendous overreaction, and the shares are now selling at quite a discount to its growth rate and operating margin level.

Typically, the market is comfortable assigning one P/E point to one point of growth or one point of operating margin. With the growth rate and the operating margins north of 30%, Crocs could support a 30 PE of its 2008 earnings expectations or $81 per share. Assigning a premium over the 30 PE would lift the shares even higher.

Continue reading Did Crocs croak?

Did Crocs croak? originally appeared on BloggingStocks on Mon, 05 Nov 2007 13:16:00 EST. Please see our terms for use of feeds.

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.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

CDC Corp. (NASDAQ: CHINA) is a favorite speculative idea for 2007 from momentum trading expert, Kevin Kennedy. The editor of The Coolcat Report notes, "CDC operates companies focused on enterprise software applications and services, mobile applications, online games, and the Chinese portal China.com.

"The company's software solutions are used by more than 5,000 customers worldwide within the manufacturing, financial services, health care, home building, real estate, and wholesale and retail distribution industries.

"Its China.com unit is a leading Mobile Value Added Services (MVAS) provider and Internet services company operating principally in China. CDC Mobile is focused on providing MVAS products to subscribers in China. CDC Games Limited is one of the market leaders of online and mobile games in China with more than 37 million registered users.

"CDC reported blowout third-quarter results in November. Total revenue was $78.2 million, an increase of 26%. Earnings per share tripled to $0.09 per share. Future plans include an initial public offering of either CDC Software or CDC Games and a continued emphasis on acquisitions. The stock is on a five-month win streak, including a 41% surge in November."

Top Picks 2007: Coolcat goes online for China.com originally appeared on BloggingStocks on Wed, 27 Dec 2006 14:30:00 EST. Please see our terms for use of feeds.