How can one explain the behavior of AAPL investors? It's a mystery. On one hand, investors seems to be imagining the bright future and thus paying a high premium (second only to Google in tech industry); on the other hand, the same group of investors can easily be scared and fled in seconds. I clearly remember same thing happened last year when the first quarter result is announced and a lower-than-expected forecast is made. This time, the magnitude is enlarged by the general market and we saw a share price slide in after-hour trading.
Anyway, I will have a quite sizable paper loss for days/weeks/months to come. It won't change my opinion about AAPL in next 5 years. I do worry about my options, some of which will expire in one year. I may need to convert them to 2-year expiration to cushion for such crazy investor reactions.
To say I wasn't feeling bad is not true. Paper loss is still loss. Yet I'm confident AAPL is on its way still, it will weather through the storm.
Tuesday, January 22, 2008
Sunday, January 13, 2008
A Drying Fishing Pond - GS/LEH/C/JPM/MS
It's getting hard to pick a future winner in this confusing investment environment. There are contradictory information everyday, each day's information negates yesterday's information.
There are two types of opportunities, one being individual, the other being environmental. The credit-crunch starting with sub-prime mortgage crisis presents a challenge to the financial industry, especially the investment banking industry. This industry contains some big names that normally would remind people of white-collar high-pay and highly-respected professionals. Yet all has changed after the crisis began to unfold in the latter half of 2007. There is no reason to believe things will get better until maybe late 2008. Before that, the tides will still be retreating regardless how hard those naked people try to cover themselves, until they are all exposed.
GS/LEH/C/JPM/MS are within the same pond, yet with different wisdom and positions. GS has proven itself again truly the best of the best.
If individual investor want to get some result, the only logic that'll work is based on two things: 1. one needs to believe the investment banking industry will still exist and will still prosperous; 2. if one cannot understand the complexity in the industry, the most efficient way is parallel comparison.
I don't think I have the capability to compete with investment corporation's analysis force to understand every bit details of, say, GS' income stream and client base and future growth, etc. All I can do is to compare GS with other folks in the same pond. And with that, I'll stick to what Warren Buffet would be happy to begin with: balance sheet (financial statements) in the previous 5 years.
Preliminary Result:
Banking industry is highly leveraged since their cost of product is “borrowed money”. Thus for, liquidity can be measured for its sustainable life symptom and any ratios related to equity can be measured for its performance.
GS/LEH stands out with consistent high ROE and high current ratio.
MS is most highly leveraged with D/E ratio above 30 in 2006. Combine with the news we know, we can feel how greed is driving their revenue and back-fired on them. Yet, if without the sub-prime mortgage crisis, figure wise it should be comparable to GS and LEH.
JPM is hopelessly struggling with liquidity. For every dollar of sales, in 2006 it has almost $2 short of current asset when compared to current liability. I don't understand how it can live that long! Even before the sub-prime mortgage became apparent, its “health status” is coming down.
C feels big and slow and conservative (this, however, is not equivalent to shrewdness, C still is tainted with sub-prime mortgage)
GS/LEH should and will survive the current financial crisis and keep going.
GS 198.74 as of 1/11/08
LEH 58.15 as of 1/11/08
Subscribe to:
Posts (Atom)