[Jul 1: Cutting Apple] I wrote
That chart of Google (GOOG) still strikes me as ominous and Google *is* tech nowadays. There is about a $60 gap that looks to be filled there - again I think this could be a wonderful short (I can't do it but I would if I could) Set that stop loss over $540 and a wonderful low risk trade awaits - current price is $530.
[Jul 15: That's More Like It] I wrote
I am using 2 proxies - Google (GOOG) and the S&P 500. When the former fills its gap (remember I said it was an excellent short in the $540s range) at $460, or the S&P 500 falls to 1170 we'll deploy more to the long side.
I'm looking to add to either our best of breed names at the top of the portfolio or some of those Haynesville natural gas plays when/if we reach either of these levels. I might even go and get some Google (GOOG) back into the portfolio @ $460.
Judging by the after hours reaction to Google (GOOG) earnings it looks like that gap has a good chance to fill (down to $490s after touching down in $470s).
Once again, I cannot be short individual names in this simulation, but I can still call them out until I can actually profit from them. I actually was worried about the economy (especially financial firms slowdown) hitting Google (I don't know if this *is* or is not the "reason" for the "miss") but I was way too early in calling it, if it is the reason for this "slowdown". [Aug 30: Google (GOOG) Can't Get Any Traction - is this Why?] Generally I'm thinking a year ahead of time and it takes time for morass to spread ;)- Google Inc (NasdaqGS:GOOG - News) posted a 35 percent rise in quarterly net profit, missing Wall Street's consensus forecast, showing the Internet leader may be suffering from a weakening global economy as rivals have.
- The company said it earned $1.25 billion, or $3.92 per share, during the three months ended in June. That represented a 35 percent increase from net income of $925.1 million, or $2.93 per share, at the same time last year.
- If not for costs incurred for employee stock compensation, Google said it would have earned $4.63 per share. That figure missed the average earnings estimate of $4.74 per share among analysts surveyed by Thomson Financial.
- Investors quickly expressed their dismay as Google shares plummeted $36.14, or 6.8 percent, in Thursday's extended trading after closing at $533.44, down $2.16.
- Google's second-quarter revenue fared slightly better than earnings, rising 39 percent to $5.37 billion from $3.87 billion at the same time last year.
- Google offset some of the economic weakness in the United States by showing more ads to Web surfers overseas. International markets accounted for $2.8 billion, or 52 percent, of Google's second-quarter revenue. (this last point is a reoccuring theme - we'll see it over, and over, and over until we are sick of seeing it)
Microsoft (MSFT) is also giving poor guidance and is down 5.5% after hours (which for a slow moving stock like that is akin to 20% for a fast mover) - a theme we've been warning about ---> 2nd half analysts expectations are way too rosy and simply a fantasy. As these expectations are ratcheted down once people own up to the fact this economy is not rebounding anytime soon (and much of the rest of the world will be slowing along with us), stocks must adjust (downward) to this reality. Every place people are running to the past 72 hours as an alternative to commodities is at grave risk on future guidance as economies slow and profit margins get squeezed. Are commodities immune? No. But items such as food and heating your home are tough to give up in a slowing economy. For a simple contrast need I point you back to this morning's posts about fertilizer?
And for the 100th time technology is a safe haven - your money is fine there (along with health care) - don't forget that. (ahem) It makes a lot of "sense" that every time crude drops $5, hedge funds go and fill up on semiconductor stocks. A lot of sense. Mmmm.
A lot of earnings to read through tonight; already Merrill Lynch (MER) confirms they are not Wells Fargo (WFC) or JP Morgan (JPM); Citigroup (C) should do the same mess tomorrow morning as they have been the ringleader in this financial disaster. The beat goes on - back at it tomorrow.
No positions but perhaps Google soon if it falls enough
8 comments:
A lot of the Google "miss" was actually due to interest income and higher taxes. Of course I'm not sure if that really matters since its only the "headline" number that counts this day in age.
sdk,
hmm, so you mean there is something other than the Reuters headline?
Hmm... interesting concept you have there. ;) So why do stocks tank or jump 20,30,40% within 15 seconds of a press release. I can only assume I am a very slow reader of the body of the press releases (ahem)
We've built a gambling culture - I mean the stock market has always been a gambling culture but its now set up for hyper speed gambling. Many solar stocks were only making gains based on the back of 40% of profits due to currency gains - no one cared - all we heard was "blowout!"
Same with IBM last Q, and again tonight.
Trigger happy fingers, press release out at 4:01 PM; all analysis done by 4:01:30 PM - this is the Ritalin generation on crack stock market.
No time for breathing or thinking. =)
Could get ugly tomorrow, w/ GOOG, MSFT, and OPEX. Let's see if C can pull out a premarket surprise.
BD
Mark,
I have a feeling this correction i commodities is going to be longer and painful and will scare out even some of the smart money who is used to buying on dips....this iteration must offer something different than the past 5 times.
Oil can become a downside momentum trade which will destroy a lot of other unrelated names like what you said nickel=corn=gold=oil=wheat=coal
Mark,
I thought the beating VCLK took today after earnings was an extreme tip-off that GOOG might be in trouble. It doesn't surprise me a bit that GOOG is stumbling, considering the "gap" in GOOG's chart and the aforementioned VCLK earnings. Maybe it is just me, but I immediately thought GOOG was in trouble when VCLK tanked... Seemed like a very easy short, and I am confused how GOOG held up in the market despite the fact that VCLK is in the same business (or very closely related)....
BD,
it is funny how this market works. Since Citi reported LAST (this AM) and it was a "great number" only 7B in write downs, the mood is up. If the order was reversed - Citi reported last night and Google, Merrill this morning the markets would be in freefall.
Human psychology. Human psychology.
Efficient markets. Efficient markets.
Yup.
Bill,
I have no idea. This past year has been unfortunate because one has to guess the market every day/week/month more than simply picking good stocks. Guessing sentiment which changes now by the hour is not my expertise. I will just pick good stocks and go from there.
I did say give it to the end of July/early August as these rotations usually take 5-10 days to play out in the past. So this would be day 4.
And remember, I've written a few times when gas hits $3.50 we'll hear about how the American consumer is "back"! First chirping about that already this AM on CNBC. So predictable.
Tyler, I don't consider VCLK to be a competitor to GOOG - it's actually been quite a poor performer the few times I've analyzed it to see if it was a worthwhile investment. I don't follow it that close now - just too many things to watch. It just has never performed in the time I've watched it.
Mark when I see CLF bidding for ANR, and the CHK ceo backing up the truck on his own stocks even though he bought 80% lower and has so much over the years, I start to realize why you just stick to picking good stock, and let the rest be noise.
NOw there is real kool aid on the street because everyone thinks the earnings can be beat easily, but they don't realize how high the estimates are for later in the year (and they may be raised because of beats)
ie: woooo KO, IBM beat wooooo, they beat by 12% even though currency gains were 13%.
do you think there's lag with oil's effect on our economy..like our economy may be running now as if oil was $90 (6 months lag)
I wonder how bad the lag is.. ie: perhaps the $120+ oil will come into effect later this year (with stuff like dow chemical) i guess that's why you're so bearish especially on the 2nd half.
I will just say the consumer has not seen even 50% of the costs that produecers are facing
chart the somewhat faulty PPI versus the very faulty CPI
so either margins will be hammered or the consumer is going to get a hammer to them
Unless oil gets back to 100 or below and stays there, this winter is going to be tough for those of us not living in AZ, NV, CA, FL or a warm weather state.
Hopefully gas is $3.25 or less then and food stabilizes. I can see the former, but not the latter.
Again my theme is food inflation takes over from energy inflation as the 2nd half and early 09 story. Lag effects.
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