This is in response to Blogging Stock's "Ten high-priced bargain stocks worth the price tag" article. I'd have to disagree with Jim Wood's assessment on these stock recommendations especially most of these securities have already appreciated 50%+ or more during the past 6 months! Bargain? I think not. In fact, I think the performance of these stocks going forward will deteriorate once reality sets in. In other words, stocks cannot continue to go up when there is little or no earnings growth. Current stock prices for the most part are unsustainable given the economic backdrop.
Here is my rebuttal:
Stock #1: AutoZone (NYSE: AZO)
Without the Cash for Clunker program, I believe car sales will nose-dive and remain depressed for years to come. Suppliers like AutoZone will obviously be affected by slumping sales.
Stock #3: Priceline.com (NASDAQ: PCLN)
Companies are cutting back on business travel and will continue to do so to improve their bottom line. Consumers are worried about their jobs and traveling significantly less.
Stock #4: Goldman Sachs (NYSE: GS)
One word: FRAUD.
Stock #5: Apple (NASDAQ: AAPL)
In this economy, consumers will soon realize that they no longer need 5 iPods and upgrade their iMacs. The stock has already doubled in 6 months and I don't see the shares going any higher. In fact, I think AAPL will fall substantially from here. At $185, I believe this could be a good entry point for a short position.
Stock #7: MasterCard (NYSE: MA)
Rather than making more charges, consumers are overloaded with debt and are trying to pay down their balance on multiple cards. Less credit card transactions mean less profits for Mastercard. Same with Visa.
Stock #9: Google (NASDAQ: GOOG)
Companies are cutting back on advertising and I see Google's earnings getting hurt if this trend continues.
Stock #10: Berkshire Hathaway A Shares (NYSE: BRK.A)
Most of us can't afford even one share, so I wouldn't worry about it.
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Your autozone analysis sounds off-the-mark - what do new car sales have to do with this company? It is a store for fix it yourself types go for paint, parts and advice. When new cars are not popular, old cars still need fixing, and the consumer should spend their money doing it themselves.
ReplyDeleteYes, you are right that owners will be fixing their old car more often than not especially in this economy. But in order for Autozone sales to grow, we need more used cars on the road which is where new car sales come into play. With lower new car sales going forward, it will be tough for the company to grow its business and increase its share price.
ReplyDeletehmmh! some of the existing mac users may not upgrade but there are plenty of new users. Demonstrating this point is the fact that Apple's steadily shipping more MacBooks and iMacs than ever despite the glooming economy. Also keep in mind that personal computing contribute to about 50 percent or less of Apple's overall revenue. The growth is really in the handheld devices (iPod, iPhone) and software (iTunes, App Store) where Apple is dominating the industry by such a wide margin that it will be a few more years before anyone will seriously be able to compete. By then, Apple will have moved on to the next great thing. The bottom line is Apple has positioned themselves with developing the right technologies and business strategy for the current economic environment. They will continue to perform and out grow their competitions as long as they stick to their plan.
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