Just a Hated Asset Class
Posted at 3:03 p.m. EDT, Wednesday, Aug. 25
I hear it on the show all the time: What's the matter with this stock or that stock? I read it on Twitter, "Jim, what's the deal with ..." and then a name of a stock. The tone of the queries is, "Why did I buy this? What's the problem?"
Of course, the answer should be obvious, but that's only because I follow so many stocks: Everything is going down, which is why you need the conviction to sit through the pain and buy more, or use oversold rallies like today to lighten up if you can't take the pain.Let's take the case of Cirrus Logic (CRUS - Get Report), one I am asked about all of the time. Why is it going down? Well, heck, the Nasdaq is going down. Why can't it buck the tide? Nothing can buck the tide unless it has a nice yield with a dividend that can be boosted. "Why do I own it, then?" You don't have to own anything. People are selling like mad. The bull case for CRUS is that it is involved with Apple (AAPL - Get Report) and it has smart grid exposure. Both trends could last for years, and the company is not a large-cap company yet. The bear case? It is a stock. Stocks are going down. Now, periodically some stock without a dividend can fight its way through the gloom, as Salesforce.com (CRM - Get Report) did recently. But think about all of the following things that happened to make that work:
- The company had accelerated revenue growth (and I don't know any other tech company that had that).
- The company is the dominant cloud play, where every tech company wants to be. They all want to be CRM. They can't be.
- The new product rollouts are aggressive, and new products drive second legs of tech stocks. Always have; always will.