The question on everybody's mind this week was when will the declines end? Was that the so much talked about capitulation? Have the stock markets bottomed?
Well, I can't answer that, and suffice it to say that many market analysts, fundamental and technical, are still quite gloomy. Pretty much all we can do in this time is hope for flat performance from a few select stocks, which perhaps would yield good returns once the economy starts rebounding and the bear market has completed its course.
Here are some picks and pans from the past week from BloggingStocks contributors:
Research in Motion (NASDAQ: RIMM) -- Steven Halpern brought a recommendation from one of The Forbes Wireless Stock Watch advisors, Nikhil Hutheesing. In Hutheesing's words: "In the long run, smart investments today will lead to profits down the road. One of those companies, that I now think looks attractive, is the Canadian maker of the BlackBerry." Not only is RIMM's corporate business strong, it is also working on getting its phones to consumers. In addition, it has lots of cash and little to no long-term debt and great prospects, what the advisor is looking for in addition to value and fundamentals in this environment.
Lear Corp. (NYSE: LEA) is an auto parts supplier. Jamie Dlugosch bets on a bailout for the auto industry here. Today, Lear has a $110 million market capitalization, down from its peak within the last 52 weeks of $2.6 billion. If the bailout finally happens, owners of LEA could benefit greatly.
Sirius XM (NSADAQ: SIRI) faces a number of problems. Those caused the stock to drop to 20 cents yesterday, down from a 52-week high of $3.94.
Sirius is not only sitting on between $3 billion and $4 billion in debt. It has also never posted a net profit. There are still questions about whether its merger with XM Satellite will yield enough cost cuts to make the operation profitable.
But, none of those things are the final nail in the coffin. If one of The Big Three goes under, especially if it is GM (NYSE: GM), Sirius will lose one of its largest sources of new subscribers. Since some people who take the service drop it every month, which is normal attrition, those customers have to be replaced. For the company to grow, each month has to show net new additions which greatly outweigh cancellations.
Sirius cannot afford to lose its flow of customers from a major car maker. If it does, it debt service will overwhelm it, and finding new capital will be impossible. Who want to lend money to a company which is losing its most important sales pipeline?
As Jamie Dlugosch mentioned a few days ago, Sirius XM Radio (NASDAQ: SIRI) shares are trading for less than a can of pop at the local gas station. The company, which just completed its merger this past summer, saw its biggest customer -- automakers -- fall on hard times just as it was poised to try and grow as a combined company. Timing is everything; if Sirius were operating back in 2006, it'd be just fine. But it is almost 2009 and the economy is in a world of hurt. So are consumer spending dollars and just about any automaker you look at.
That's a one-two punch for satellite radio. Although I've used satellite radio before, the talk radio and interruption-free decade channels were about it for me. Sirius is now shuffling channels, trying to find a better mix that newer customers would be drawn to, as well as eliminating DJs on some music channels to save costs. When the difference between pay radio and terrestrial radio starts diminishing, that is a signal of the end. Sirius can't expect to have lackluster music programming and a lack of actual DJ personality to be perceived as "better" to existing customers, who could turn off satellite forever and create their own music service with a $50 MP3 player.
Note to Sirius: millions of consumers already do this. They download new music, podcasts and other entertainment directly (and in many cases, for free) and listen to what they want on their portable device over their car stereo systems. Although Sirius XM CEO Mel Karmazin acknowledged that MP3 players, iPods and the like were large competitors to satellite radio, this time his company is probably seeing it in force as it cuts costs and erases one benefit after another that are supposed to come with the $13/month radio service. Satellite Radio will survive the economic downturn, but who knows if it will be a shell of itself with a declining customer base and even more piles of debt after it is all through.
Following the week we have just endured, many would find it hard to return to the stock market any time soon, despite so many pundits calling the market bottom on Thursday. Bad news just keeps amassing: the Euro-zone is officially in recession, unemployment in the U.S. and globally is on the rise, the housing market is far from any sustainable recovery, the auto sector is a mess and so on.
But it is always in these hard times, when things are cheap, that bargains can be found. While cheap can be meaningless during these times as Jim Cramer said this week and Joe Lazzaro seconded, perhaps some value could be found after all. What, then, did BloggingStocks contributors find worthwhile this week?
First, let me start, not by gloating, but by pointing out that on more than one occasion, more than one contributor has suggested to steer clear of Circuit City Stores Inc. (NYSE: CC). The electronics retailer has filed for bankruptcy Monday and the NYSE has suspended the company's common stock immediately. The stock is now traded over the market under CCTYQ.
Sirius XM Radio, Inc (NASDAQ: SIRI) reported a quarter that caused Steven Mallas to pause and think. The only way he sees Sirius is as a very -- very -- speculative and risky play. Since the stock has been beaten so much and is so cheap, if it doesn't disappear by the time the economy turns, it could be interesting. But only if one has the cash to burn. Jamie Dlugosch adds a reminder about SIRI's debt, hoping it would earn a reprieve from its debt holders as it tries to operate as one company. "Just imagine what this company could do in a normal economy. It would be truly tremendous."
I've known for some time the risks inherent in owning Sirius XM Radio (NASDAQ: SIRI), but never in my right mind did I think the company would fail, leaving shareholders with nothing but a worthless stock certificate.
And yet here we are today with SIRI trading for 25 cents per share and a market capitalization of less than $800 million. Investors are expecting the worst with SIRI. All that remains is pure speculation on survival or failure.
It really comes down to that simple question: Will SIRI make it?
If the answer is yes, then investors can still reap a tremendous reward. If the answer is no, investors will lose everything.
How did we get to this point? The answer is quite simple. Destructive competition between two competitors in a race for supremacy that never did materialized resulted in cost structures that kept pushing profits down the road.
When it was realized that the industry could potentially lose both entities, a merger was announced. Oh, but wait, a government supposedly looking out for the interest of customers dragged its heels.
Losses mounted while both companies waited and waited and waited.
Reluctantly, the government finally approved the deal, but is it too late?
Whenever someone asks me if a stock can go lower, I reply "of course." As investors have learned the hard way over the past few months, a company's shares can go all the way to zero. Just ask holders of Circuit City Stores Inc. (NYSE: CC) (bankruptcy), General Motors Corp. (NYSE: GM) (near-insolvency) and Sirius XM Radio Inc. (NASDAQ: SIRI) (crushing debt load) whose shares are heading off a cliff.
The number of companies trading at or near their 52-week lows is staggering. Investors are faced with some of the biggest bargains they have seen in decades or the potential to get burned even further as corporate earnings deteriorate further. I am not sure whether to dip my toe further in the market or to invest in more Mason jars that I can fill with the remnants of nest egg and bury in my backyard.
One thing is for certain, stocks are getting cheap. The challenge for investors to figure out is where the market has thrown out the baby with the bathwater. Here are some examples:
Google Inc. (NASDAQ: GOOG). The largest search engine company is trading at near a three-year low. Chief Executive Eric Schmidt has said the economy is far worse than he expected. The company traded at $307.93, near its 52-week low of $300.52. CNBC's Jim Goldman is baffled by the market's reaction to Google, as am I.
Citigroup Inc (NYSE: C) has had more ups and downs than Cher. Shares of the big bank last traded at $10.80, near its low of $10.34. It is down more than 63% this year. Remember, sometimes stocks are cheap for a good reason -- like business is bad.
Kellogg Co. (NYSE: K) reported better-than-expected third quarter earnings and gave bullish guidance. The market, though, could have cared less. Shares of the cereal maker are trading at about $48, near their 52-week low of $45.25. They are down more than 8% this year.
General Electric Co. (NYSE: GE) has been in Wall Street's dog house so long it should consider a long-term lease. The conglomerate trades for about $17.73. Its 52-week low is $17.27.
Saks Inc. (NYSE: SKS) already has gotten its lump of coal from investors worried about a horrid holiday season. Shares of the retailer are down more than 77% this year. The stock is trading at $4.66, near its 52-week low of $4.23.
Okay, let me state clearly at the beginning here that Sirius XM (NASDAQ: SIRI) closed on Monday at $0.27 per share. Right from the start, you know we're talking about a risky stock -- a lottery ticket, as they say. And since our subject is the result of a recent merger, there's a lot of pro forma data located in the press release detailing the satellite-radio company's Q3 performance.
According to that pro forma data, revenues increased 16% to almost $613 million. The pro forma net loss was halved to $0.09 per share. It's funny, because when you look through the numbers, you almost feel compelled to come away with a good feeling about the story. Total subscribers increased 17% on a year-over-year basis, subscriber-acquisition costs decreased, cost synergies are manifesting themselves, and projections for free-cash-flow generation seem to be attractive.
However, one has to realize that an attractive cash-flow statement isn't around the corner. Positive free cash flow should begin on an annual basis in 2010. Plus, Sirius XM management must deal with refinancing its debt. And it did make a $4.8 billion write-down relating to goodwill impairment. Also, the economic problems of auto manufacturers such as Ford (NYSE: F) and General Motors (NYSE: GM) are not helping Sirius XM. If car sales are down, then adoption of the satellite-radio company's programming is challenged. It's a simple relationship.
8 Safe Stocks to Buy Now These household names will hold up no matter how bad things get. They include General Dynamics, Google, J&J, American Tower, Oracle, Accenture, Thermo Fischer Scientific and Automatic Date Processing. http://www.kiplinger.com/columns/picks/archive/2008/pick1110.htm
The End of Dividends The big dividend was a hallmark of the big bull market. Now, the dividend is going the way of extinction. Among companies you can expect to see sharply lower dividends or no dividend at all in the future are Bank of America, Wells Fargo, New York Times, Gannett, CBS and General Electric. http://www.247wallst.com/2008/11/the-end-of-divi.html
U.S. stock futures were lower Tuesday morning as economic concerns increased. China, which boosted markets only Monday with its own stimulus plan, today showed signs of slowing growth as well. World markets responded, with Asia markets posting losses and European markets opening down as well. Oil prices declined again to as low as $60 a barrel. Gloomy corporate reports as well as housing and financial sector woes are weighing heavily on markets today.
[Note: Extended hours indications can change as news progresses, changes.]
American Express Co. (NYSE: AXP) applied to become a commercial bank on Nov 5. Monday night the Federal Reserve approved the request due to "emergency conditions." AmEX could now accept deposits, thus bolster its cash, and gain quicker access to Fed financing.
Starbucks Corp. (NASDAQ: SBUX), the once high flying company, reported Monday 97% lower profit in its fourth quarter. Excluding items, Starbucks earned 10 cents per share, below analyst estimates of 13 cents per share. Fewer U.S. customers and higher costs for closing poorly performing stores led to lower sales and profit. SBUX shares declined 2.75% in after-hours trade 7:56 p.m.
Crummy economic data from October ISM Manufacturing and September Construction Spending didn't manage to kill overseas gains that led to more mixed rallying in U.S. equity markets. Ahead of tomorrow's elections, it seems that the markets are just going into a holding pattern. U.S. auto sales were atrocious.
Boeing Co. (NYSE: BA) had its 27,000 union machine workers start returning to their jobs this weekend after a 57-day labor strike that shut down production of its jet manufacturing operations. The stock was up 1.3% at $53.12 in today's final minutes.
SIRIUS XM Radio Inc. (NASDAQ: SIRI) was down almost 9% at $0.30 right before the close. A class action suit was filed by a holder who has joined with over 500 shareholders to oust management and to protect holders by keeping the company from being taken private or from a reverse split.
As October -- what has been one of the spookiest ever -- comes to an end today, many will go home this evening to face the ultimate challenge: Trick or Treat.
In the market in the past month, heck, in the past year, it seems that no matter what we did we always ended with a trickster. Even some of the most stable, beloved stocks found it fitting to lose half their value. If it was market darling Apple, or whole sectors like oil and commodities, stocks in general sank, often setting new 52-week lows, multi-year lows, or even all-time lows during October.
So now, with so many stocks beaten down so much, we have to find which could be the next treat, and which the tricks.
Wal-Mart Stores Inc. (NYSE: WMT) is the only Dow Jones Industrial company that is actually up this year. Investors have assumed that as the recession hits harder shoppers will turn to lower-cost venues such as Wal-Mart -- a trend that has already started. WMT shares are up 15% year-to-date and 21% over the past year, after tumbling 8% during the tough month of October. Wal-Mart -- definitely a treat.
General Electric (NYSE: GE) has exposure to the financial crisis through its financial arm and has been punished accordingly with shares down 20% over the past month alone. But is it time to buy GE? The big conglomerate is cutting costs and keeps reiterating guidance and has also maintained its triple-A rating. Could there be losses hidden in its operations? Maybe, but if it could continue growing as it did, it seems pretty cheap at under $20. Mind you, this one has never been a high-flying stock, and the uptick in the share price could take some time. Still, I'd categorize it a treat now.
After setting a new 52-week low, which is actually more like an all-time low, this morning at 21.5 cents ($0.0215), Sirius XM Radio Inc. (NASDAQ: SIRI) shares have soared over 16.6% to 29.17 cents ($0.02917). Yes, it is still traded on the Nasdaq, for now.
It's been rather obvious why Sirius stock has been pounded: the weak economy, declining consumer spending, slowing auto sales, increasing debt combined with difficulty to raise capital -- cashflow problems -- and so on. But it's not that clear why the stock is rising today.
The most obvious reason for the jump in the stock price would be because even the smallest change at these price levels is a considerable percentage jump. That's partly why stocks are usually delisted from major exchanges when they reach, and stay in, penny stock territory. But for now, the Nasdaq has suspended the minimum dollar listing rules until January 16, 2009 as the number of stocks under a dollar has increased four fold the past month.
Another reason why there might be some optimism is a completely unsubstantiated rumor regarding a buyout. Over the years, Sirius has been rumored to be taken over by Microsoft, Apple, Google and CBS among others. Today, one reader suggested Disney is the one rumored to take over the troubled satellite radio company. Needless to say I put very little stock in this.
If a takeover is out of the question, what can Sirius do to save itself? That's been the question on many investors' minds. To meet its cash needs, Sirus needs to raise capital -- by borrowing more money if it can, or issue more stock, as well as cut programming costs -- yes, get rid of talent. Even then its future is somewhat questionable.
U.S. stock futures were lower Wednesday morning, indicating stocks may have a second day of declines. As money markets worldwide continue improving, attention has shifted to corporate earnings and concerns are growing how a global slowdown would slow them. Asian markets closed sharply lower and European stocks tumbled at the open as well. Meanwhile, oil veered below $70 a barrel again despite a probably OPEC production cut on fears the U.S. economy is headed into a sever recession that would crimp demand for oil. Today weekly crude inventories will be released.
Apple Inc. (NASDAQ: AAPL) is one company that is bucking the earnings trend. The consumer electronics giant reported results after the close Tuesday, surprising the Street with higher earnings as all three product categories showed improvement. Specifically it sold far more iPhones than expected, actually outselling market-leading BlackBerry from Research in Motion Ltd (NASDAQ: RIMM). The company, known for always lowballing estimates, gave a weak outlook that didn't affect investors sentiment much. AAPL shares, which jumped nearly 13% in after-hours trading, are up nearly 8% this morning in pre-market trade. Analysts liked in general iPhone sales with Calyon Securities upgrading Apple to Buy from Add, and Goldman Sachs recommending investors to buy shares. Still, UBS has downgraded Apple from Buy to Neutral.
Yahoo! Inc. (NASDAQ: YHOO)'s show, on the other hand, was quite different than Apple's. While the stock is also up in pre-market action -- 2.7% (it was up 7% in after-hours trade Tuesday afternoon) -- it is mainly due to the severe cost cuts the internet giant has announced during the dusmal earnings release. As it was saying profit plunged 64%, Yahoo! also said it is redcucing its workforce by 10% or some 1,500 employees.
7 Great Companies for $7 or Less These battered stocks are ripe for a rebound. They include Animal Health International, Build-a-Bear Workshop, Blockbuster, Global Cash Access Holdings, Great Wolf Resorts, Hackett Group and Spansion. http://www.kiplinger.com/magazine/archives/2008/11/7_cheap_stocks.html Biggest Losers: 15 Stocks That Have Plummeted This Year The following list is of selected familiar names and large stocks that have plunged significantly over these time periods. It does not include the obvious names such as AIG, Wachovia, GM and the likes, but decent stocks we all liked and knew over the years. Among them are Alcoa, American Express, Apple, Boeing, Citigroup, Dell, eBay, General Electric, Google, Merck, Motorola, Sprint Nextel, Research in Motion, Sirius XM and Whole Foods are all down significantly more than 25% which is what the Dow is off in 2008. http://www.bloggingstocks.com/2008/10/06/big-losers-15-large-stocks-that-have-plummeted/
The question on everybody's mind this week was when will the declines end? Was that the so much talked about capitulation? Have the stock markets bottomed?
As 
I've known for some time the risks inherent in owning 
Whenever someone asks me if a stock can go lower, I reply "of course." As investors have learned the hard way over the past few months, a company's shares can go all the way to zero. Just ask holders of 
Okay, let me state clearly at the beginning here that 
U.S. stock futures were lower Tuesday morning as economic concerns increased. China, which boosted markets only Monday with its own stimulus plan, today showed signs of slowing growth as well. 
Crummy economic data from October ISM Manufacturing and September Construction Spending didn't manage to kill overseas gains that led to more mixed rallying in U.S. equity markets. Ahead of tomorrow's elections, it seems that the markets are just going into a holding pattern. U.S. auto sales were atrocious. 
As October -- what has been one of the spookiest ever -- comes to an end today, many will go home this evening to face the ultimate challenge: Trick or Treat. 
Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ...
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