It pays to be bearish
In this market, going long has been a tough game to play.
February 22, 2002: 5:59 p.m. ET
By Adam Lashinsky
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SAN FRANCISCO (CNN/Money) - Since I started spilling bits and bytes for CNN/Money last October, I've been a pretty surly sort.
Last fall, even after Sept. 11, there was a sense that the Fed rate cuts would fuel an economic rebound stocks and that stocks had crashed enough. But I felt that though the bubble clearly had burst, there wasn't enough evidence to warrant a sustained market recovery. Weak corporate earnings and the ever-growing accounting mess have only made me more skeptical.
A look back at some of my columns provides some good perspective on what's been going on -- and where we may go from here.
The communication-equipment stocks, for example, are a great illustration of how wishful thinking played a big part in the market's post-Sept. 11 rally. Consider Applied Micro Circuits (AMCC: up $0.37 to $8.01, Research, Estimates), which makes chips for telecommunications equipment.
Its CEO, David Rickey, waxed bullish here on Nov. 8, but I noted that it was unclear "whether Applied Micro's sales will ever get back to a level that justifies its still-lofty valuation." The shares were worth $12.05 that day. Now: $8.)
On Dec. 20, I quoted fund manager Paul O'Neil suggesting JDS Uniphase (JDSU: down $0.28 to $4.98, Research, Estimates) could fall 50 percent from its close that day of $8.20. It's well on its way, ending the week at $5, a drop of 40 percent.
"Cisco (CSCO: up $0.13 to $15.24, Research, Estimates) can't deliver the old magic," I opined on Feb. 6. The stock, sliding toward $15, is down nearly 20 percent since then.
The two topics that have generated the most, and angriest, e-mail have been PayPal and AOL Time Warner. I suggested here just last week that PayPal, the online payment company, had an unfriendly future. I simply focused on the absurdity of a billion-dollar valuation for an unprofitable company with about $100 million in sales, a tiny float and insane competition.
I had no clue last week that eBay, whose customers account for a majority of PayPal's revenues, would buy out Wells Fargo's interest in BillPoint, eBay's in-house competitor to PayPal, signaling a new era of competition.
Ending their first day at $20.90, PayPal's (PYPL: down $1.77 to $13.24, Research, Estimates) shares are now back roughly to where they were offered, $13. I doubt it will break $20 again any time soon.
As for AOL (AOL: up $0.75 to $23.75, Research, Estimates), my employer, I basically argued that there just wasn't any hurry to invest when growth was slowing and too many questions remained. The shares were at $26.40 then. They closed Friday at $23.75, and the good news still doesn't appear to be on the horizon.
I have been bullish as well, offering airlines as a contrarian buying opportunity on Feb. 8. The American Stock Exchange Airline index is up a healthy 5 percent since then. Another downtrodden stock that saw some kind words here on Jan. 28 was defense contractor United Technologies. It's up about $2 to nearly $70 since then, a gain I'll take in this kind of market.
Not everything has worked. IBM is off 15 percent since I wrote the unfortunate headline "Blue Skies for Big Blue" in November.
Another blooper, so far, was highlighting three picks of Sanford Bernstein analyst Paul Sagawa on Jan. 10, when he liked 3Com (down 23 percent), Lucent (down 23 percent), and Nortel (down 33 percent).
Hey -- no one's perfect.
Send e-mail to Adam at adam_lashinsky@timeinc.com.
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