- why tech stocks haven't finished their selloff;
- how to assess the impact of Japan's disaster on some top stocks; and
- why two investing safe havens don't look safe.
Tech Is Not Done Going Down Posted at 3:12 p.m. EST on Friday, March 18. Some stocks are inherently trading-oriented. There's just not much you can do about it. While they might have some secular tailwinds, there will be moments where you can't own even the best ones -- or at least you have to be willing to trade around them. That's how I feel about all of these tech names: the optical plays, the tablet plays, the PC plays, even the cloud plays. We are in a quadruple-whammy moment for these. First, they are all seasonally in jeopardy. I have always, always, always paid heed to the seasonality of tech. You want to own tech from August until February. You want to sell tech in the middle of February -- ahead of a traditional summer slowdown. Then you want to buy them back for the back-to-school and holiday season. Periodically, you want to buy something riding a huge secular wave - for instance, Apple's ( AAPL - Get Report) iPhone and iPad iterations. But for the most part, you can't buck seasonality. Second the implications of Apple winning huge in the tablet wars -- something that seemed inconceivable before the iPad 2 -- have eliminated the single biggest new product cycle story out there: the tablet onslaught. People presumed that the tablet market would be just like the PC market, with lots of players and lots of variety. No one thought it would be like the MP3-player market (a.k.a., the iPod market). The amount of inventory building in the system because of the glut could be staggering. The double-ordering of parts to meet high demand? Take that off the table. Could be disastrous. > > Bull or Bear? Vote in Our Poll Third, any hopes that the optical equipment world wasn't in inventory-correction mode ended this week with Sanmina-SCI's ( SANM) curiously bad preannouncement. I say curiously bad because while a lot of the shortfall was caused by delayed government orders, a lot of it was communications equipment-related. In other words, the problem, first flagged by Ciena's ( CIEN ) cautious guidance, and then prodded by Finisar's ( FNSR) inconceivably terrible guidance, is now a full blown fiasco.
Factoring Japan Into U.S. Stocks Posted at 3:51 p.m. EST on Thursday, March 17. It's so tough to figure out how much of a haircut is enough when it comes to Japan. And at what point is it a positive. For example, Freeport-McMoran ( FCX) gets 20% of its business from Japan, according to a terrific list from Reuters. Is that a positive? If you think that the radiation subsides and the rebuilding begins aggressively, I am calling that a positive. Same with Weyerhaeuser ( WY), which does 10% of its business there. Already established businesses just need to ship more into that market. But how about Coach ( COH)? The luxury retailer does 20% of its business in Japan, and its stock has gone south from $56 to $51 since the tragedy. I would say that's not enough, as I don't expect a real run on handbags when things get better, and we don't know the real extent of the damage specifically to Coach. We could say the exact same thing for Tiffany ( TIF), which does 19% of its business in Japan, but its stock has only dropped from $63 to $56. I think there could be more to fall. Then there is the huge number of tech companies that have exposure to Japan: Molex ( MOLX) at 28% (connectors), Analog Devices ( ADI) at 17%,, Altera ( ALTR) at 16%, Linear Technology ( LLTC) at 14%. Adobe ( ADBE) and KLA-Tencor ( KLAC) at 13%. IBM ( IBM), Corning ( GLW) and Intel ( INTC) at 11%, and Agilent ( A), Autodesk ( ADSK) and Texas Instruments ( TXN) at 10%. Of these, the only one I was truly interested in buying to begin with after the tablet glut/communication equipment collect/ Apple ( AAPL - Get Report) PC destruction, was IBM. But that's been a total rocket ship. Still, $165 to $154 isn't a gigantic decline. Tempting, though.
Two 'Safe Havens' Have Become Risky Posted at 1:56 p.m. EST on Wednesday, March 16. Earlier I said that I thought tech was a sale because, alas, it is too international with too many supply-chain issues and a big hole where Japan was. But amazingly, a couple of other areas are for sale that seem so wrong, but there's no denying that they are being crushed: health care and oil services. Oil service I can get, somewhat. We have Weatherford ( WFT) saying numbers are being hit by international turmoil. That means that usual suspects like Schlumberger ( SLB) and Halliburton ( HAL) and Baker Hughes ( BHI) are giving up the ghost. I disagree with the market's judgment on this, even as I think oil can go down to $90 if Bahrain calms down. I disagree because oil is still well above where it pays to drill, and I didn't think anyone would really be surprised that drilling could pause because of Middle East troubles. Doesn't matter -- the market's judgment is being made. Perhaps the best thing to do is to hang with a hugely domestic player, like Nabors ( NBR - Get Report), which is linked heavily to the new technologies that are being used to extract gigantic amounts of oil from the big shales in Canada and the U.S. We heard last night on "Mad Money" that Continental Resources ( CLR) is ramping up its drilling program, and it is not alone. Everyone has a desire to drill for more oil unconventionally, and Nabors will do very, very well. So go against the grain with that one. Health care? Anything but healthy. I cannot believe how not a safe haven this area has become. In fact, it is toxic. I am watching Johnson & Johnson ( JNJ) and Merck ( MRK) rolling over. I am seeing the health care maintenance and pharmacy benefit managers getting whacked. The generics? Oh man, take a look at the terrible action in Teva Pharmaceutical ( TEVA).