The Market Is Alive! When To Buy. Cablevision, IAC, Microsoft, Yahoo
Read more articles on Finance and Investing.February 11, 2008
Posted by neillevine
February 11, 2008
Posted by neillevine
315 Views
The Dow Jones Industrial Average of thirty industrial companies is dropping two companies, Honeywell, HON, a diversified manufacturer of power systems and other industrial supplies, and Altria, MO, now just a tobacco company, and replacing them with Bank of America, BAC, a large bank, and Chevron, CVX, a big oil company.
Personally, I like this change, since as anyone who has read my articles knows I have been writing about both the price of oil and high interest rates. So I find this change interesting, very interesting.
Anyone who follows the Dow or any of the other widely cited indexes knows that the stock market, on average, is comparatively low because the sub-prime problem and the high interest rates that went along with it has led some market commentators to talk about the possibility of a recession, motivating selling. In order to correct the problem, the Federal Reserve has cut interest rates and the Congress is almost finished working on a stimulus package. Yet instead of rallying on such comparatively positive news the market has been dawdling because there are other economic problems that need solutions. To start, Hugo Chavez, President of Venezuela, has been raging at America, threatening energy supplies, and rebels in Nigeria are causing problems and that government wants to renegotiate. But that’s just what fuels this economy.
There is, of course, stock stories to tell. Cablevision, CVC, is now around $25 a share, as a result of the rejection of the Dolan’s $36 a share offer. In some ways, this is a decline in line with the rest of the market and it is not clear what will be the future fate of the company: Another stock offer? A merger of some sort? Since such events are confidential until made public, it is hard to predict how well the stock will do in the future, but if the overall market rallies Cablevision should go up too.
Then there is IAC InterActiveCorp, IACI. Barry Diller, the chief, decided to change his strategy from conglomerate built through acquisitions to a five company parlay of HSN, LendingTree, Ask.com, Ticketmaster and so on. This led to a legal dispute with Liberty Media, a large share holder that gone to court to see that changes are more to its satisfaction and protects its rights. InterActive was around $22 and clearly has also fallen with the rest of the market.
Finally, there is Microsoft’s, MSFT, offer for Yahoo, YHOO. Future developments should make interesting financial reading since buying Yahoo helps Microsoft shore up its internet revenue big time. I would say this should help Microsoft’;s stock price in the long run, making it a safer buy if you are willing to settle for large cap returns and risk.
Of course, since the market is comparatively low, buying at the bottom, which is hard to do, could increase gains on better stocks by ten to fifteen percent right from the start. Figuring things wrong, on the other hand, could lead to losses.
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