Ignore the Rumors, Find the Bargains
08/06/07 - 12:05 PM EDT
Brett Arends
BOSTON -- A lot of rumors will be flying in the next few weeks.
Another bank is in hot water with subprime mortgages, we'll be assured. Another hedge fund has blown up. A pension fund is in crisis. A homebuilder has gone belly-up. Some of these may turn out to be true. Stranger things have happened. It's the law of averages. But here's a prediction: Many of these hot tips will turn out to be hogwash. Keep some salt handy. You'll need a pinch to go with every market whisper you hear. Look at just the past few days. A week ago Wall Street was buzzing with talk that Rupert Murdoch's bid for Dow Jones & Co. (DJ Quote - Cramer on DJ - Stock Picks) was poised to fail. Street "sources" had heard that enough members of the Bancroft dynasty had decided to reject his $60-a-share offer. Dow Jones shares sank to nearly $50 as investors jumped on this hot tip and rushed to get out before the shares completely collapsed. The rumor, of course, turned out to be complete nonsense. Murdoch's News Corp.(NWS Quote - Cramer on NWS - Stock Picks) won. Anyone who had rushed to get out got burned. The stock is now at $58.25. On Wednesday came the rumor that homebuilder Beazer Homes (BZH Quote - Cramer on BZH - Stock Picks) was about to file for bankruptcy. The stock collapsed in short order, to just more than $8 from about $14. And those who listened to the rumors and sold ... got fooled again. Beazer denied it was bust. The shares now trade at around $10.50. At the end of the week it was mortgage giant Countrywide Financial's (CFC Quote - Cramer on CFC - Stock Picks) turn. Again, rumors swirled of financial difficulties. The company came out with a statement reassuring investors it had adequate liquidity. Bizarrely, it had little effect: The shares closed down sharply anyway.
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