The Economist
takes el jefe to task.
"The deepest flaw in Mr Greenspan's policy towards asset prices is its asymmetry. If the Fed always cuts interest rates when asset prices tumble, but never raises them when they soar, then investors will be encouraged to take bigger risks. That makes bubbles more likely. The Fed was right to ease when the stockmarket bubble burst, to avoid repeating the Bank of Japan's mistake in the 1990s. But such “mopping up” should be a last resort, not a concerted strategy that cushions the bursting of one bubble by inflating another—since 2002, in housing."
As I mentioned before, I'm not willing to chuck all the research that I do to follow Mr. Greenblatt into the promised land. But I'm not willing to dismiss his high ROC/high earnings yield formula, either. Here are two stocks that I find interesting that pop up at magicformulainvesting.com
Holly (HOC) is an independent refiner ($2B market cap). It processes heavy crude and has had very strong spreads in recent years. Basically, the bet here is that spreads will stay wide and HOC might eventually be taken over by a giant like VLO. Here's a
presentation if you're interested.
Hewitt Associates (HEW) is a business services co., another midcap ($3B). What intrigues me here is that HEW is the leader in HR BPO, that is Human Resources Business Process Outsourcing. HR BPO is an area that is expected to grow smartly over the next five years. Just think about all of
IPO's I'm following at 2006-03-22 12:07:02
If you have some time on your hands, check out these two S1's from
traffic.com and Chipotle Mexican Grill. I wouldn't be surprised if
Chipotle, in particular, spikes 20% on day 1.
PSPT on a roll at 2006-03-22 12:07:02PeopleSupport (PSPT) has been on a tear of late. The analysts all have good things to say (see
here,
here,
here and
here) about the Philippines based outsourcer. Plus the co. recently made a smart
acquisition of a transcription co. to better utilize their new corporate facility.
{Note that I am long shares of PSPT}
the Bear Case on Tweeter (TWTR) at 2006-03-22 12:07:02I have previously mentioned Circuit City (CC) as a short opportunity around $25 but I think Tweeter (TWTR), in the $6's is a more compelling idea with a medium term (6m-2yr.) time frame in mind. Tweeter is a consumer electronics retailer that caters to the mid-high end shopper. Market cap of ~$150mm, FY05 sales of $795mm.
Before we get to the bear case, what do longs hang their hats on?
Gross Margins have increased nicely over the past 3 FY's (34.3% in '03, 38.9% in '04, 39.5% in '05). GM improvement is due in part to a greater focus on installation services and parts & accessory sales.
Q4 of FY05 saw SSS up 10%
Recent positive analyst comments -- JPM sees SSS gains up mid-upper single digits in 2006 and expenses coming under control. The analyst also notes that TWTR is cheap compared to Best Buy or CC on a price/sales basis. Finally, JPM sees the HDTV upgrade cycle as a big benefit to TWTR.
Before I start with the bear case,
