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Hot Topics
A look at the topics our bloggers are tackling this week:
Louis Navellier highlights one theory on sports and investing. Should you trade during the Olympics?
Restaurants are taking a hit in this economy. ChangeWave asks, "Is there hope of a turnaround?"
Don Moncrief reminds us that just because a stock is "broken" doesn't mean the company is.
Start your own discussion and see what your fellow InvestorPlace blogs members have to say about a particular stock or investing topic in our Stock Talk section. Or jump in with your own thoughts and answer someone else’s question. click here
Articles
The Bull/Bear Report - American International Group, Inc. (AIG)
Insurance and financial company American International Group, Inc. (AIG) took its turn at the credit crisis whipping post by recently reporting larger losses than expected. The bigger problem than the losses was the apparent lack of understanding of when and if the crisis will cause further damage to an already wounded balance sheet.
At one point in its history AIG was the glamour boy in finance attracting some of the best and brightest minds to its shop. The company led the way in structuring and trading complex derivative securities that are now causing so much trouble.
Of course when times are good and profits are rolling in, nobody stops to notice that maybe the company was succeeding due to its own version of the pyramid scheme. It sure seems like it to me.
Now the bill is coming due erasing billions of dollars in capitalization. Investors reacted accordingly by sending AIG shares below already discounted levels.
Once trading for over $70 per share AIG lost more than half its market cap to current levels in the low $20's.
Does such a state provide an opportunity for investors?
I'd be skeptical.
Get more of Jamie's take on AIG, and find out what two of our top bloggers think when you continue reading this week's Bull/Bear Report here.
Bull/Bear Report: Should you put the brakes on GM?
There sure has been a ton of destruction in the market this year. A credit crisis, high oil prices, and a recession have conspired against stock values. It would appear that no sector is immune to the carnage although some are getting hit much harder than others. One space that has been absolutely crushed this year is the auto manufacturers with the American companies, General Motors (GM) and Ford (F) leading the way down. It should be no surprise given the emphasis on gas guzzling trucks and SUV's, but to lose market share to foreign car makers makes the current state all the more troubling. All of this could have been avoided with a little planning. Oil has been rising steadily for many years and yet neither GM nor F made any effort to transition to higher fuel economy vehicles or alternative vehicles. Ask Toyota how they feel about making their hybrid car today. They are laughing all the way to the bank. The demise in Detroit has been of epic proportion, but maybe that is the time to get interested.
I made GM our stock of the week after having a great discussion about the company in our InvestorPlaceBlogs chat with Jim Jubak (read a transcript here). While it is fashionable to bash the company, it very well may be a good time to buy. From my perspective the opportunity to compete with a line of vehicles that the market seems hungry for will be just the right tonic for GM. The bad news is out of the way and things can only get better. Or can they get worse? Indeed, without a successful turnaround the company may very well blow through the remaining billions of dollars of available capital. That seems a stretch to me as the company has appeared to endure the worst of it. That capital base should help the company turn the corner to a new era of car making. Lower operating expenses should help as well. I would be a buyer of GM at current levels, but what do you all think.
Read on for two opinions on GM from our bloggers.
Bull/Bear Report: Build a Bridge to Chicago Bridge and Iron (CBI)
They say what comes around goes around. Enjoying the fruits of an unprecedented global economic boom that resulted in historical rises in oil prices, Chicago Bridge and Iron (CBI) saw its business grow substantially over the last few years.
Highly leveraged to the oil and gas industry (despite the name, CBI is not a bridge builder), CBI is a global engineering and construction firm that builds refineries, liquefied gas terminals, and pipelines. The company is involved in some of the biggest projects in the industry around the world.
Coinciding with the rise in oil prices, shares of the publicly traded company tripled in value or more since 2003. A strong backlog of projects with no end in sight gave investors comfort that cash flow and profits at would be steady and strong for the foreseeable future.
Ah, but wait a minute. These are huge construction projects that we are dealing with here that require tons and tons of raw materials and labor costs. What happens to the profitability of these projects when inflation hits?
Continue reading to find out...
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Updated each week, Top Stocks is where you’ll find links to the stocks our bloggers are talking about now:
Sometimes, to find a hot stock, first you have to find a hot sector. The Top Sectors section will steer you towards sectors on the move.
Here is a look at some of the most widely held stocks in the Strategy Lab Open.
| Ticker | Company Name | Profile |
|---|---|---|
| POT | Potash Corp. | View |
| GE | General Electric | View |
| AAPL | Apple Computer | View |
| GOOG | View | |
| MSFT | Microsoft | View |
Find InvestorPlace bloggers writing about the stocks, sectors, and topics that are splashed all over the news – and on everyone’s mind – right here.
Not all emerging markets are the same...
"Every beginning is a consequence - every beginning ends something"
Paul Valery
As I mentioned in my previous post, it does certainly appear as if the unstoppable outperformance of emerging markets has hit an invisible wall recently and is now coming to an end. But is it a logical result of slowing global growth, or rather simply a short term trend that is likely to reverse itself during the next several months?
Unfortunately for the global market cheerleaders, I believe that era of worry-free investing into emerging markets is coming to an end, and only those, who actively manage their allocation to specific markets/securities instead of relying on a bunch of broadly diversified international mutual funds, have a chance of repeating the solid double digit historical returns from the past several years. Market does not seem to really care about the blistering short term financial results, as was the case in the past, but instead actually is now paying attention to "formerly unimportant" quality of earnings, political risks and longer term macroeconomic projections.
So is the recent severe under performance of emerging markets at all unreasonable? Isn't Chinese GDP still growing by 10%+ a year, and Brazilian and Russian consumers are still willing to pay insane amounts of money on the bunch of unlocked 3G iPhones? Or how about the simple fact that even after a recent 20% haircut in prices of most commodities, virtually every tangible resource out there is still trading at prices much higher than a year ago? Shouldn't the cost cutting efforts of virtually every financial institution in benefit outsourcing titans of India and Eastern Europe? Not so fast.
An Innovative Solution to the Housing Crisis
In an interview with The Wall St Journal, former Fed chairman Alan Greenspan offers the most innovative solution to the national residential real estate crisis that I have seen. It's wacky but clever: Change immigration rules to let in a lot more skilled immigrants, who will form new US households and buy excess housing inventory.
He tells the Journal the only sustainable way to increase demand for vacant houses is to spur the formation of new households. Admitting more skilled immigrants, who tend to earn enough to buy homes, would accomplish that while paying other dividends to the U.S. economy.
Find out if and how this plan could help the current housing crisis when you continue reading...
What Gilead Can Teach Us about Wall Street
I'm always amazed at how irrational Wall Street can be. This is why I emphasize diversification so much, because one stock alone can often hop around without any good reason.
A perfect example is Gilead Sciences (GILD) which is one of my favorite Blue Chip Growth stocks. Last month, Gilead reported earnings that were two cents shy of Wall Street's expectations. The next day, Wall Street panicked and Gilead lost $5.67 a share which was a drop of over 10%. All that for a miss of just two cents. Think of it this way: A miss of two pennies caused a loss of 567 pennies. That loss valuation has a P/E ratio of over 280!
I saw no reason to panic because Gilead is an excellent stock. Here we are less than one month later and Gilead has made up everything it lost, and it's even a little higher than before the earnings report. All that panicking was a waste of time. In fact, as I write this post, the stock is inches away from another new high.
I first recommended Gilead in Blue Chip a little more than two years ago and we're currently sitting on an 80% profit.
Get more great stock pick like these from Louis Navellier on his Growth Blog.
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