I think you all have gone mad if you are buying stocks today just because the market is moving up, or you are planning on federal rate cuts yet to be announced, or Hilary Kramer or James Cramer said so, or you are afraid the train is leaving the station without you, or your stock broker or palm reader has become bullish. There is only one reason to buy stocks and that is to make money and secure your future for the long run. To do that you need to have solid reasons that can be accounted for and demonstrated to have a high degree of probablity. I did not see that today.
A friend of mine asked me today whether they should sell their shares of Google Inc. (NASDAQ: GOOG) and take profits after it's recent runnup. I told them I had no idea whether to buy, sell or hold. There was no concrete data that has been released since it's last quarterly report (after which it dropped by $50 in one day) so to me it is all wild speculation. If you believe that the rate cuts are good for the overall market which includes Google then perhaps you can hang your hat on that -- I won't be.
I have been touting Huaneng Power ADS (NYSE: HNP) for a long time and those that paid heed to my comments made a ton of money with me, but even though I love this stock I am not promoting it today after it's 45% jump in the last six weeks Volatile Market picks: Huaneng Power (HNP) is my pick for the next 50 years. I like to buy on dips as I wrote when it was down 20% off its high not when it is screaming forward to new highs. I think patience is in order.
I think Apple Inc. (NASDAQ: AAPL), Valero Energy (NYSE: VLO), Aluminum Company of China (NYSE: ACH), and Intuitive Surgical (NASDAQ: ISRG) are all unbelievable stocks but all of them have been on fire for quite some time. My last buy recommendation among this group was ACH at $22 per share and it closed at $73.90 today. I have made 236% in six months and I am telling you this is nuts!!! I would love to buy some more but only when there is value not just momentum.
My last word of caution which is a historical fact, not just a popular saying: Those that play with fire will get burned. I think the market is getting a touch giddy. One reader with similar thoughts responding to Hilary Kramer's pumping Google today quipped tongue-in-cheek that "Trees do grow to the sky". I know there are those that will tell me "your supposed to buy on the rumor and sell on the fact". My response is that there are stocks that are values in today's market but most are not, and it is a big mistake to run into a mob!
Disclosure: I own ACH, HNP, ISRG and VLO.
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. He is on the advisory board of internet start-up CircleBuilder.com.
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Reader Comments (Page 1 of 1)
10-01-2007 @ 11:20PM
Matthew Ash said...
There seems to be a bit of short term speculative froth in the market over the last few days as people almost seem to be buying simply because it seems the thing to do.
No question to me that this type of short term froth will be worked off to the downside before we can make a substantial move higher.
I must say that I agree with much that you say and please carry on the great work!!
10-02-2007 @ 12:45AM
Beltway Greg said...
Consumer confidence is down, for me that's as bullish as it gets. If Apple does what I think it's about to do we'll see $175.00-180.00 by Oct. 20. No magic, just a company hitting on all cylinders. It rarely gets this good. Could it end? Considering the
fear and the drop of a month ago, most definitely. The drop in the dollar has made American products a bargain. We've seen a change in the way the market responds to news both positve and negative. The internet has democratized the markets making the efficient market hypothesis more than just a hypothesis. Investors can react to good news almost instantaneously; they can do the same when the news is bad. What happend to Microstrategy on or about March 11, 2000. Closed at $328.00 opened at $111.00 the next day? What about Harmon? Should it really have dropped so much just because the PE folks want to take a non-random dash down 5th Ave? We live in the information age. Investing used to be a closed end game with returns reserved for the rich and the well connected. Now the idiot sons have to work for their money or risk losing it to hungry folks like myself. Don't worry, Rothschild had it down centuries ago, get the information and move fast. Let's lace up the sneaks and take a run shall we?
Beltway Greg
"Long or short I really don't care, just as long as I get out before the house collapses."