A time to make money again?
This equity market has been impossibly frightening.
Do those descriptive words work together. They feel right. The attraction of nibbling at incredibly beaten down stocks has been, as they say, a fool's errand. There has been no way for someone other than a professional trader and, to be polite, professional "networker" to do well, unless just by luck. Maybe, that is, until just recently.
At this point there are many stocks at levels where the only pertinent question is whether they will survive outside of bankruptcy. If the answer can be at least 50% yes, then the risk reward could be huge. Buying a stock that traded for $50 18 months ago for $1 today does carry the risk of losing all of one's money. If the company can survive, however, it's reasonable to assume that the stock will be at $3, $5, or $10, maybe higher, over the next three years. Or in the next six months. This short term game is fascinating. AIG traded at 36 cents at the beginning of March and by March 20th it was at $1.52(now it's back down to 99 cents last I looked). That price shows that the company is still sick as an old dog but for investors going in at 36 cents, an almost what can you lose proposition, it was a 300% return at the high and still a large one today. Citibank was at 98 cents a few weeks ago and rose as high as $3.75 in no time before falling back to around $2.50 now, another tidy return at that price and much higher for anyone who decided to trade out at its peak. Are AIG and Citi too big with too many tentacles in the derivatives and trading markets to go under. If so and they have a few years are they worth jumping on now. Is Etrade too minor from the Fed's point of view to survive another market meltdown should it come, or are they interconnected with too many customers for the government to want the intensity that would boil over to come about. What about the gambling companies like Wynn and Las Vegas Sands with their huge interests in Asia. These stocks traded well above $100 over a year ago and they now are around $15 and $3 respectively. It's telling that I mentioned the gambling companies isn't it.
This is just interesting to me. Are tech stalwarts and leaders in their fields like Akamai, Sycamore, Ebay, EMC and others going to be around in what will almost certainly be a more technologically intensive future barring some type of complete market and societal meltdown. Wait a minute, I forgot, have we already had an almost complete market meltdown.
It's easy for anyone to find their own examples of stocks that fit their criteria of "are they going bankrupt" and if probably not is it worth the risk and the anxiety. Peter Lynch, the former Fidelity star and low key pundit when he infrequently speaks or writes, said the other day that in a market with so many stocks beaten down severely "you feel like a mosquito in a nudist colony". It would be nice if the patience and former wisdom of Lynch, Buffett, Grantham, Bogle and others would begin to carry the day.
Do those descriptive words work together. They feel right. The attraction of nibbling at incredibly beaten down stocks has been, as they say, a fool's errand. There has been no way for someone other than a professional trader and, to be polite, professional "networker" to do well, unless just by luck. Maybe, that is, until just recently.
At this point there are many stocks at levels where the only pertinent question is whether they will survive outside of bankruptcy. If the answer can be at least 50% yes, then the risk reward could be huge. Buying a stock that traded for $50 18 months ago for $1 today does carry the risk of losing all of one's money. If the company can survive, however, it's reasonable to assume that the stock will be at $3, $5, or $10, maybe higher, over the next three years. Or in the next six months. This short term game is fascinating. AIG traded at 36 cents at the beginning of March and by March 20th it was at $1.52(now it's back down to 99 cents last I looked). That price shows that the company is still sick as an old dog but for investors going in at 36 cents, an almost what can you lose proposition, it was a 300% return at the high and still a large one today. Citibank was at 98 cents a few weeks ago and rose as high as $3.75 in no time before falling back to around $2.50 now, another tidy return at that price and much higher for anyone who decided to trade out at its peak. Are AIG and Citi too big with too many tentacles in the derivatives and trading markets to go under. If so and they have a few years are they worth jumping on now. Is Etrade too minor from the Fed's point of view to survive another market meltdown should it come, or are they interconnected with too many customers for the government to want the intensity that would boil over to come about. What about the gambling companies like Wynn and Las Vegas Sands with their huge interests in Asia. These stocks traded well above $100 over a year ago and they now are around $15 and $3 respectively. It's telling that I mentioned the gambling companies isn't it.
This is just interesting to me. Are tech stalwarts and leaders in their fields like Akamai, Sycamore, Ebay, EMC and others going to be around in what will almost certainly be a more technologically intensive future barring some type of complete market and societal meltdown. Wait a minute, I forgot, have we already had an almost complete market meltdown.
It's easy for anyone to find their own examples of stocks that fit their criteria of "are they going bankrupt" and if probably not is it worth the risk and the anxiety. Peter Lynch, the former Fidelity star and low key pundit when he infrequently speaks or writes, said the other day that in a market with so many stocks beaten down severely "you feel like a mosquito in a nudist colony". It would be nice if the patience and former wisdom of Lynch, Buffett, Grantham, Bogle and others would begin to carry the day.
posted by John Borden at 3:00 PM
1 Comments:
The gaming industry is worth looking at seriously. If these companies have the balance sheets to survive, and Wynn surely does and Adelson is so competitive and stubborn that he may pull it off no matter what it looks like today if he doesn't croak, then these companies could be great investments when the economy of China settles down. If this financial crisis does not create a political crisis in China, they will almost certainly be the first ones out of this mess. Wynn and LVS would start printing money when that happens.
Remember, gambling is an addiction for many of the most consistent players and the Chinese with their concept of luck are obsessed by it. Think of tobacco companies, performed well and paid dividends forever despite big settlements and serious restrictions. Addiction is a powerful force and gaming companies benefit.
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