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Apple, Google Suffer from Hedge Fund Woes, Fear of High Multiples
Posted Sep 09, 2008 11:02am EDT by Aaron Task in Investing, Computers, Electronics, InternetAll eyes are on Steve Jobs Tuesday as he's slated to host Apple's "Let's Rock" event in San Francisco today. Speculation is swirling about whether Apple will unveil something more than "just" an upgrade to its iPod line, as is widely expected.
But Apple, and fellow tech titan Google, were in focus Monday for other reasons: Being notable laggards amid the broad market's embrace of the Fannie-Freddie bailout plan.
Todd Harrison, CEO of Minyanville.com and a former trader at Morgan Stanley, Galleon Group, and Cramer Berkowitz, said investors much separate "good stocks from good companies" when it comes to Apple and Google, which was also hit by news of a Justice Department investigation into potential antitrust violations.
Harrison says these and other high-beta stocks are suffering from:
- Multiple Compression: Which is a function of traders being less willing to pay up for high P/E stocks because of a lack of faith in their earnings growth or general economic concerns, or both.
- Hedge Fund Selling: For a long time, hedge funds were "hiding" in tech stocks like Apple and Google as a way to shelter themselves from the credit storms and rising commodity prices, Harrison says. Now those trades are coming off for a variety of reasons, including falling commodity prices and hedge fund blowups unrelated to tech.
For these and other reasons, Harrison is generally bearish on tech stocks, which he does not think has priced in the recent bad news from Dell, Corning, Ciena, and others.
12 Comments
Robert V - Tuesday September 09, 2008 12:32PM EDT
Todd Harrison, CEO of Minyanville.com and a former trader at Morgan Stanley, Galleon Group, and Cramer Berkowitz, said investors much separate "good stocks from good companies" when it comes to Apple and Google, which was also hit by news of a Justice Department investigation into potential antitrust violations. How about "must separate" instead.
Davanji - Tuesday September 09, 2008 12:41PM EDT
Stock market crash??? We'll see. Correction in progress, but crash?? I think it takes more faith to believe in the ever-predicted crash than it does in just believing this is just another in a long series of historical bear maket corrections that will work itself out as all bear markets do.
Davanji - Tuesday September 09, 2008 12:43PM EDT
LOL though, my energy cores are "crashing", I won't argue that. However, I'm guessing I'll be smiling down the road on even these current underperformers.
michael - Tuesday September 09, 2008 01:21PM EDT
Market fears aren't even close to being where it needs to be for bottom on these stocks. The $VIX is at 24. It needs to be in 40's for real fear and real bottom. That day is coming folks.
Davanji - Tuesday September 09, 2008 06:41PM EDT
30-35 on the VIX, then a bounce yes, that day is coming
James - Wednesday September 10, 2008 09:11AM EDT
Damn, who knew that just shorting Google this year would have made you great returns. I'd be ahead of Miller (not saying much these days). Throw in a Yahoo! short from just before the MS offer was rejected and you'd be looking at 50% returns with very low costs. The shorts are making out like bandits this year, while us long dinosaurs are thankful to beat the risk free.
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Yahoo! Finance User - Tuesday September 09, 2008 11:20AM EDT
"Fear of high P/E's"......translation: overpriced.