1/14 newsletter
The layoff has finished here. It was done quite cleanly. It was completed before I noticed it in our group. Now the task as an investor/insider is to find out whether the management has done the right cut or not. It seems to me they have done the right thing. Older, therefore more expensive and less productive, employees (>49) were bridged to let go. I heard the package is quite generous. Several younger employees were let go due to the intent to offshore their jobs. They also seem to be less skilled developers.
*** Market
The market is full of optimism because Dow touched 11000, a phsychological level marked the peak of dot com bubble (11500). Even my coworker mentioned it during the lunch. This is a bad sign from contrarian's point of view, that when a street person who is barely in the market, suddenly pays attention, it is an indication of overheated market. We will see if the market can manage to get that heat off a little bit.
My portfolio has done nicely, reaching +23% compared to SP500's 10.3% since 12/2004. The underlying market is still healthy. Companies are handful of (repatriated) cash. We will see what they do with it and maybe give some action in the large-cap sector in 2006.
*** Comment
I want to touch on a tricky issue of value investing with MRK as example. Although MRK was full of bad news in 2005, did you notice that it closed at the same price as beginning of the year? That means it performed in par with Dow in 2005. You would've thought it should close somewhere in the negative territory. How come? This is because the value investors have fully discounted the negative impact of everything you know (Vioxx, pipelines) in the 4th quarter of 2004 when it dropped 40-50%. Therefore, when the bad news actually hit the media in 2005, the public bailed out, the value investors bought in. And they made sure the price they bought was so low ($25-$30) that it could even sustain a small amount of capital gain. And comparing it to other Dow/SP500 companies in 2005, it actually did quite well... Strange, Hummm!
--Steve
--Steve
*** Market
The market is full of optimism because Dow touched 11000, a phsychological level marked the peak of dot com bubble (11500). Even my coworker mentioned it during the lunch. This is a bad sign from contrarian's point of view, that when a street person who is barely in the market, suddenly pays attention, it is an indication of overheated market. We will see if the market can manage to get that heat off a little bit.
My portfolio has done nicely, reaching +23% compared to SP500's 10.3% since 12/2004. The underlying market is still healthy. Companies are handful of (repatriated) cash. We will see what they do with it and maybe give some action in the large-cap sector in 2006.
*** Comment
I want to touch on a tricky issue of value investing with MRK as example. Although MRK was full of bad news in 2005, did you notice that it closed at the same price as beginning of the year? That means it performed in par with Dow in 2005. You would've thought it should close somewhere in the negative territory. How come? This is because the value investors have fully discounted the negative impact of everything you know (Vioxx, pipelines) in the 4th quarter of 2004 when it dropped 40-50%. Therefore, when the bad news actually hit the media in 2005, the public bailed out, the value investors bought in. And they made sure the price they bought was so low ($25-$30) that it could even sustain a small amount of capital gain. And comparing it to other Dow/SP500 companies in 2005, it actually did quite well... Strange, Hummm!
--Steve
--Steve
posted by Steve at 4:22 PM
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