Stuff the Mattress

Raising oil prices, crashing housing market, skyrocketing inflation, tightening credit, increasing unemployment, weak dollar....

It is really hard to be bullish in this market, unless you are long oil or the euro. I unfortunately am not.

Apple and Google are trading at unbelievably low forward p/e ratios. Google was trading close to $750 just six months ago and today it closed at $473! Apple was up over 200 not long ago and is now trading around $120. Lets look at the fundamentals and see if this is a good time to buy or if we should go to cash and stuff the mattress. Apples forward p/e is around 19! That is incredibly low for a growth company like apple. Net income has increased from 1.989 billion in 2006 (fiscal year end 9/30) to 3.496 in 2007! That growth is unbelievable. Analysts were projecting a one year target estimate at $250 a share a few months ago. Jobs said yesterday that he believes apple will hit the 10 million iPhones in 2008.

Earnings

There are some big companies reporting this week with almost certain volatility. Long or short?

Monday-
Lowe's Corporation (LOW)
Nordstrom (JWN)

Tuesday-
DISH Network Corporation (DISH)
Domino's Inc. (DPZ)
DreamWorks Animation SKG, Inc. (DWA)
Home Depot Inc (HD)
Radio Shack (RSH)
Target Corporation (TGT)

Wednesday-
Dollar Tree Stores (DLTR)
IHOP (IHP)
Limited Brands (LTD)
The Washington Post Company (WPO)

Thursday-
Dell, Inc. (DELL)
GAP, Inc. (GPS)
Hansen Natural (HANS)
Kohls Corporation (KSS)
Omnivision Technologies (OVTI)
Sears Holdings Corp (SHLD)

Intuit

I finally got around to filing my taxes today! TurboTax makes it so easy to file a simple W-2 return, although it has it's limits. Intuit (INTU), the producer of QuickBooks, TurboTax, and Quicken, crashed on Friday (dropping over 9%) after releasing poor second quarter earnings after the bell on Thursday. TurboTax sales came in strong, but increased costs caused the bottom line to hurt. Increased competition from Microsoft's (MSFT) Office Accounting and Sage's Peachtree concerned Intuits management enough to cut earnings guidance for the remainder of the year.

Is this a buying opportunity or is this a turning point for a software giant? When Washington procrastinates on passing legislation to extend tax relief, the window to adjust, produce, package and ship the tax software shrinks. This process takes months of preparation so when a change comes in at the last minute the costs are going to be substantial.

Intuit has great products that are extremely user friendly. They are not for everyone, but for the average W-2 employee they do the job. I will keep my eye on this stock and if it drops down into the low twenties I may pick up a few shares.

Disclosure: No position

Valentines Day

Optimism

The market may be turning more optimistic with two days in a row with gains over 100 points. Buffett is buying and Yahoo is not selling indicates they believe the market is undervalued, or at least means there are some deals out there.

Retail led the surge today with both of my largest positions doing very well. AAPL & TASR both showed signs of strength today producing gains of 3.64% & 10.67% respectively. I am happy with the turn, but cautiously optimistic about claiming a turning point. Historically the market is very resilient, bouncing back quickly from downturns. My portfolio is still in the red YTD, but hopefully things will change in the second quarter.

Slopes

Sorry for the delay in posts, I just got back from the slopes! It was a beautiful weekend and we had a blast. Catching up on some reading. Should be up to speed soon.

Limbo

How low will the markets go? Super Tuesday was not so super if you were long the market. The Fed suggested that they may be done lowering interest rates for a while due to inflation concerns. The Fed should have spread out the interest rate cuts over a period of time. Why drop the rate 125 points within eight days? I bet they would have achieved the same results by cutting the interest rate by 50 points on the scheduled meeting date. When the Fed shows its hand they better be prepared for the chaos to follow. The Fed should calm the markets while keeping inflation under control. We may be entering a period of stagflation which would include slow economic growth with rising unemployment. Stagflation coupled with a recession could lead to more crummy market days like we have had this week.

So, where am I going to put my money? I have been advised to stick any remaining funds under my mattress by a trusted source, but where is the upside to that? There are some bargains out there if you are willing to ride out the waves. I have made money in the past with these companies and still like them all.

1. Adobe (ADBE) - Tech has been taking a hit recently but adobe has some great products and should come back strong whenever this market turns.

2. Texas Instruments (TXN) - whenever you can get this stock under $30 buy it and hold it. Easy 15%.

3. Southwest Airlines (LUV) - this stock has a lot of buzz around the office and it has historically been a good earner

4. Garmin (GRMN) - approaching its 52 week low, this may be a great entry point on a strong growth stock

And a couple to gamble on:

5. Baidu (BIDU) - taking a dive now, but if you can find the bottom you may be in luck

6. Dicks Sporting Goods (DKS) - Trending upward, should go higher

Have a great Weekend!

Let's Make a Deal!

Microsoft has made a bid to purchase Yahoo for 44.6 Billion! This could be the acquisition of the year. The purchase price of 44.6 billion values Yahoo shares at $31 a share. Yahoo stock closed on thursday trading at $19.18. Yahoo stock is up 59% in after hours trading while Microsoft is down 5%. Microsoft has been looking for ways to compete with rival Google for search users, and this acquisition would help them gain some ground. Google is down 8% in after hours trading.