Market did bulls a very bad week, month, year. Oh, well, I think it is fair to say that quite a few longs have been destroyed.
This is NOT a for-no-reason decline, but there are several reasons to be optimistic.
First of all, the driver of the recent slump seems to be very single-sided. It is credit crisis and oil. The financial services companies stocks are getting killed: from AIG to BAC. Airlines are down substantially; refiners are faring no better.
So, where is the light at the end of the tunnel? I honestly don't see the credit market getting to a worse-than-March low. Judging from the credit default spread, it is at least holding up quite nicely.
Where is the problem for those firms? Let's never forget that rumors can be self-fulfilling these days. Just several months ago, I believe that it is rumors that swallowed Bear Sterns. Can rumors again push another firm into the verge of collapse? Surely they can. That is why I stay away from LEH. But for the large money-center banks? I think they are good buys: BAC, JPM, C and WM. WFC is trading slightly below its book value (versus large discount like C); on the other hand you may have to pay for good management. Smaller ones? Let's just move on.
Airlines? Well, they are tough ones. But I still attempt to pick up the winning ones, as this industry is changing dramatically. I don't like LUV, yes, because of its 10 billion market cap. Ok, they are hedging oil, but for this kind of environment, I will pay a hell lot less for some possible winners:
No comments:
Post a Comment