So there is no point to writing this thing without taking a stand and saying what I think will happen. Below are some predictions I made in my first few months at this. Of the 9 predictions I made, 5 were correct, and two are looking good but not quite home yet. Not a bad start.
Interest rate cut in November: I was wrong. They cut.
Oil over $100: Right and wrong. I said if November rate cut happens, oil would be over $100 a barrel within a week. I was wrong, but close… it got into the high $98 range before falling off. NOTE: On January 2, it got over $100 for the first time, which was well within the range I initially predicted.
Virtualization slowing hardware sales: So far, correct. The first real salvo is a downgrade for Red Hat. From Barron’s online on Dec 10:
Red Hat (RHT) shares are lower this morning after Jefferies & Co.’s Katherine Egbert cut her rating on the stock to Hold from Buy, trimming her price target ot $19 from $23. Her primary issue with the stock: the impact server virtualization has on Linux demand.
“In ongoing attempts to reduce the cost of maintaining their compute infrastructures, many companies have looked in recent years to the cost savings offered migrating legacy Unix systems to lower cost Linux servers,” she explains. “However, there is now a greater opportunity to reduce costs via virtualization, as technology from VMware (VMW) allows Unix and Unix apps to be run in a virtualized container on existing hardware, even alongside Windows. This direct-to-virtualization solution negates the need for new Lintel hardware to support legacy systems. New servers are also increasingly shipped with Windows + VMware, further robbing Linux of market share at the OEM level.”
Meanwhile, Egbert adds that to diversify away from its core Linux business, Red Hat has purchased other open source software companies; she thinks it is likely Red Hat will make further acquisitions, “potentially limited gross margin and operating margin expansion.”
The worst is over for Merrill Lynch: So far, so good. The stock dipped briefly, went up briefly, and has now dipped. But eve with the capital infusion, the threat of an imminent 10% workforce reduction, and the need to write down billions more and infuse billions more, the stock has leveled off. Perhaps it has found a bottom in the low 50’s.
The race for the Democratic Nomination would tighten: Correct. Yes, this probably would have happened to some degree anyway, but Obama went from 30 points down in Iowa to having a lead, and Hillary faded completely in New Hampshire in the wake of what I called Hillary’s “Howard Dean Moment.” Caucuses are coming soon.
The award to the RIAA for the music file sharing suit would not hold up: The lawyers for the woman asked the court to reduce the award from $222,000 to $150. This is getting very serious consideration. We’ll see…
Starbucks does not have room to grow: Correct. On Dec 11, Goldman Sachs agreed with me and downgraded the stock, saying: “Goldman Sachs analyst Steven Kron cut his rating on Starbucks Corp. to neutral from buy, and removed the coffee-shop operator from its Americas buy list. In a note to clients, Kron cited underperformance including slower same-store sales, declining new store productivity, margin erosion, stock weakness and concerns over competition and saturation.” {Bolding mine}
Apple Adobe and Best Buy strong into year’s end: All true. All were up going into the final days of the year, including a foray over $200 for Apple.
Disclosure: As of publication, I am long MER, though positions are subject to change at any moment. I am not a professional, but I am trying this at home. It is highly recommended that you consult a licensed financial advisor or broker before making any and all investment decisions.
Tags: Business And Life by HJ
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