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Home Builders, GM, Google, Microsoft, IBM: No Dwarfs Here

Read more articles on Internet and Investing.

October 31, 2007

Posted by neillevine

About This Editor: I am a writer. Have been writing for other sites, but expect to do most of my future work HERE! My expertise extends from the esoteric such as burning hydrogen to the unpredictability of the stock market and my writing makes me a jack of all trades and exasperated master of none. I have had some influence over national wildfire and water policy and there are hints of a change in energy policy, BUT as Samuel Goldwyn once said, "A verbal promise is not worth the paper it is written on."

         

While the domestic economy grew 3.9% in the last quarter, The Federal Reserve, America’s central bank, has decided to reduce interest rates one quarter of a point, the second consecutive cut in rates, presumably in an effort to correct a slump in the housing market.

Actually, a lower interest rates will help the entire domestic economy so not only will builders and home supply companies do better, but most other sectors impacted by high interest rates such as cars, major appliances, and business loans should fare better in the months to come.

This should be reflected in the stock price of most major home builders, the auto companies and the like.  General Motors is now closing in on $40 a share, a nice uptick from the $25 neighborhood it was languishing in.  With the same holding true for home builders, it pays to research their fundamentals and see where they stand vis-a-vis their sector and the economy in general.  While there are already big gains, with so much ground to make up there is still a lot of upside potential for the patient investor.

Stocks that I have previously covered here are also doing well.  Netflix, NFLX, for example, is now $26.47 on increased earnings.  But there are more film offerings available on the internet with Hulu, a television site just going up, and even Walgreen’s, the national drug store chain getting in the act with on demand dvd pressings for sale next year.

Google, a favorite of mine, has blown through the $700 a share barrier on news that it is making cell phone software deals with a new source of income from advertising in that sector.  A New York Times comparison of GOOG with Microsoft in the first four years after their initial public offering shows Google outperforming Microsoft by a wide margin with the reminder that Microsoft was up 6,118% from its IPO to its 1999 internet bubble peak.  Currently, Microsoft is over $35 a share, down from over $100 during the internet investment mania,  on strong earnings from its Vista software and Halo game, with its internet division lagging and having earnings potential is an economic patch can be found.  Sometimes it pays to buy a stock, put it away and  wake up happily surprised in the end, although fairy tales only come true in the movies.

In comparison is around $114, up 17% for the year, but while I believe they will be doing more business in the future I do not think they will be able to sustain this pace of growth in the foreseeable future.

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