Investors Ready for a Drop After Strong Rally
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The rally continued early this week with many companies hitting 52 week highs, but stocks slipped on Thursday, with investors bailing out of technology and consumer stocks. Investor jitters concerning disappointing outlook reports from Cisco and P&G overshadowed any relief felt by the government's weekly jobless claims report which showed a surprising drop. 550,000 initial jobless claims were filed in the week ending Aug. 1, down 38,000 from a revised 588,000 the previous week, according to the Labor Department's weekly report. The number of people requesting on-going benefits rose, confirming that even as job losses continue to lessen, job creation is not rising.
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The markets are on a real rally and it seems like a pull back is coming. Is the economic turnaround underway? More signs are pointing to yes, but the way that stocks are surging it looks like investors are building in more than just a recovery into expectations. The way we see it, value is hard to find and now is a time to stick to buying companies that have real products, good management and a potential for growth. Our Bullish pick has all that and is much closer to their 52 week low than their 52 week high. Our Bear pick is a tech company that is getting thrashed by its competitors on all sides, and it's managed to disappoint on estimates even as most companies in its space are thriving. We don't see a light at the end of this tunnel, just more darkness. |
 Hasbro (HAS) -Hasbro is not a hidden jewel anymore. Investors have seen the link between the success of Marvel's blockbuster comic book inspired movies and the Hasbro toys they sell. The company's revenue has fallen, like most retailers, but cash flow is still strong and delivering a profit of $0.26 a share was an unexpected surprise. G.I. Joe opens this week and it's another franchise that will probably come back with more than a sequel, adding to Transformers, Xmen, Hulk, Ironman and the rest of Marvel’s never ending library of titles, all promising to keep Hasbro making toys. Plus, there is a nice dividend to bookend the reasons to own this stock.
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 Advanced Micro Devices (AMD) - Every time AMD launched a promising new chip, Intel came along and topped it. Those were the good old days. Recently, the company that promised to pose a serious threat to Intel's market dominance is no longer keeping step with its mammoth competitor. In fact, it has increased its debt and looks slow to cash in on the Netbook market. Earnings and new product outlook are a concern, but Intel is not standing still, they have substantially increased R&D for 2009 and 2010 as well as boosted the advertising of their current products and overall image.
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