Pat Fitzgibbons chatted on AOL MarketTalk Wednesday, Feb. 14, at 10 a.m. EST.
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Good Morning everyone, hope everyone's having a swell Valentine's Day
What factor or factors initially make a stock attractive to you?
I think that as an investor, the first thing you need to be concerned about is what you want to get out of your investment. Are you looking for a long-term growth stock or are you looking for something with a quicker return. The ones with the quick return, of course, also carry the most risk. Stocks can always go down to zero.
Next, I'd look at the products the companies are making or the services they are providing, and lastly, I always like to know about the companies' managements.
Do you feel too many investors jump into a stock without thinking why it is they are buying it in the first place?
I think that with the huge amount of information that is now available for investors, sometimes people are hit with so much information it can all be a bit overwhelming and can sometimes shield the real important messages of a stock.
For example, if a company releases its earnings and puts an important fact in a footnote, often an investor won't know to read the whole release. It's important because it's your money and, ultimately, your security.
I take it the Internet is in part responsible for the investor being overwhelmed with information, so is the individual investor really better off alone than with or without a full service broker?
It depends really on an investors' needs.
There are certainly times when a full-service broker does do a better job for clients. However, just because the Internet has been partially responsible for some of the glut of information, the actual information is, on its own, good for the investor.
I think that investors merely need to be get used to what to look for. This is still a relatively young investing base and they are going to get more sophisticated over time.
Has the average investor learned a lot from the savage beating that tech- and Internet-related shares received last year?
I think they have.
The one thing that they have learned (take a look at your end-of-the-year 401(k) statement for proof of this), is that stocks do, in fact, go down at times. So many investors have only known bullish times, and I think this last year has proven that what goes up ... well, you now know the rest.
Seems clear that techs are in a bear market, and bear markets have always reduced stock
multiples significantly ... so even though we may like businesses and models like
... isn't there a lot of risk in buying in a bear market given its P/E?
P/E's are still historically high and yes, there is certainly a lot more risk in buying tech now then there was say, 18 months ago.
I think this has really become much more of a stock-picking market and requires a lot more discipline from investors and not just following blindly when
Do you feel investors are being overly pessimistic on the prospects for the technology sector?
I think in some cases they are. There are still a lot of very strong companies with solid business models that have been punished by what sector they are in.
But, you can't feel too bad for them, this is what happens in a bear market and the strong companies, with the really smart managements will be the ones that get through this.
Alan Greenspan's testimony, do you feel a
25-basis-point cut in March is the most likely current interest rate scenario?
I think we may have thought that another 50-basis-point cut was possible prior to his testimony, but now, I think that 25 is likely in March and then the
Fed will take a good long look at things maybe until May before doing anything else.
Is an intermeeting cut out of the question now?
I think it is. The reason I believe that is that Greenspan did give a few heartening comments about the economy in January vs. the weakness in December.
I think they'll show a little restraint until the next meeting
The Canadian dollar has a new look, resembling a peso. Considering that their dollar is so low, is this a coincidence?
I think it is a coincidence
It's not my understanding that the two governments have come to any sort of consensus on what their different currencies will look like.
On a separate note, pitchers and catchers reported today. Winter is over!
Is a buy-and-hold investment strategy still a wise approach for most investors?
I think it can be, depending on what you're buying and how long your holding.
I know that a lot of investors want to ride out the bad times with a stock they may have a lot of cash invested in, but the reality often is that companies just plain get broken and they're not going to come back. Everyone wants to believe that
is going to get its act together and get back to being a strong company with a solid stock.
But sometimes, good investing requires you to call a dog a dog, take your losses and move on.
Well if the Fed is slowing their rate reduction effort, and bear markets cause multiple compression ... isn't there no hope for technology stocks for many months as they slowly drift lower before rate cut effects are seen in the economy?
I think tech IS a risky place to be, maybe for the rest of the year. Don't kid yourself in this market, there's a lot to be wary of and there are still a lot of stocks with room to move lower.
How long do you think it will take for speculative excesses to be washed from the market?
I think there's a ways to go, actually.
As I mentioned earlier, PEs are still pretty high and I really think that for all of the excesses to be washed out, a major problem will have to occur in one of these hot names and a major correction of an entire sector will have to take place. Not that I'm rooting for that to happen, mind you!!
Considering the tech stocks have declined due to the market demand -- one of my concerns is their inventory -- the number of persons that are still working at these firms have not declined as needed. This will, as well, hurt the tech market. Please comment
I think inventory is a major concern and I think there's more job/cost-cutting to come at these companies. These metrics should be closely watched.
Thank you for joining us today, Pat! We have been speaking with Pat Fitzgibbons, markets editor,
Thanks very much for all the great questions and I'll see you at