Stock Watch: GOOG Competitor? Cuil

July 28, 2008 10:52 PM

Former employees of Google have launched what may prove to be the stongest bid yet to make serious inroads into GOOG’s strength - search. The company is named Cuil and is pronounced “cool”. They claim to be a far superior search than GOOG in both pages indexed and quality of output (this begs the question why MSFT cannot do this, but that’s another topic). They claim that they will index 120 billion web pages. The last count of GOOG’s index was just over 8 billion, but they will not disclose how many pages they index currently.

An article on Cuil can be read on CNN Money by clicking HERE.

If any of this pans out, GOOG investors are likely to get very nervous, but that is way too early to know. GOOG clearly is the king of search. My concern - long term - is even is Cuil is not the answer, there will be more comers. Someone will eventually make an inroad, most likely. The chart clearly says avoid it anyhow for now. But longer term, this could be an issue if another player takes significant share. I would personally run from GOOG stock as the chart clearly says avoid. Long term, who knows.

Cuil’s site is: Here

Written by Tom@StockBlade.com · Filed Under GOOG | Leave a Comment

GOOG: Open High Was Sold

July 18, 2008 10:18 AM

It looks like GOOG would have to clear the open high to have any chance of improvement here. I am not going to look at it intraday, just giving a heads up. The problem in this range is the gap higher from previous earnings has now filled. So not certain how much lower it will trade. It “might” be in a tight range here, not sure. But my personal “guess” is traders will short strength near the open high unless it clears, but will be cautious shorting near the lows, but would have to watch it intraday to see whats going on. If you notice, the gap from April has been slightly filling and has made me skeptical of GOOG, but earnings were coming, so there was no way to know what would happen.

The market is in a tight range here. It never has cleared yesterdays highs, so the fear factor on selling is likely to be reasonably mild. If we can get over yesterdays highs and then reverse, we would likely see pressure late, if negative. But no dice. So the volatility is mild early on. Oil has driven the markets lately, so that could be the key as the day wears on.

Also, it is “possible” that if we can clear yesterday’s highs late AND hold, more shorts may cover. The direction here is marginal, at best and it is expiration day, so there may be moves that do not seem to make any sense as traders are squaring positions. Not a fan of trading on expiration days because of this.

Written by Tom@StockBlade.com · Filed Under GOOG | Leave a Comment

RIMM, AAPL And GOOG: Are They Really Overvalued? The Answer May Surprise You

July 6, 2008 1:40 PM

I have been looking into RIMM, AAPL and GOOG lately to see if they are truly “grossly” overvalued. I assumed all three were before looking at the data, and the answer is not as clear as one may think. The answer is yes, and no. If the economy holds up then RIMM is possibly undervalued, for instance. But will the economy hold up? That is the thing we do not know for certain. My personal view has long been no.

RIMM’s PE is high at 42, but the forward PE is less bubble like at 30. More importantly, according to SmartMoney.com, the PEG ratio is .81. If you recall, Peter Lynch’s mantra was that the true value of a stock was a PEG ratio of 1.00. Therefore, if you believe in his reasoning, then RIMM is undervalued at $115, believe it or not, by a whopping 20%. It would be considered a VALUE stock using his valuation methodology at this price.

This is why I have long cautioned against trading based upon “valuation”. RIMM could easily go to $90 here, or it could reverse and go over $150 just as easily. Which value is correct? The answer is that either is correct if that’s what the market says it is worth.

Let’s look at another “high flier”, AAPL. SmartMoney estimates AAPL’s PEG at 1.44. Therefore, according to the same valuation theory, AAPL is overvalued by over 40%. Should AAPL be shorted based upon this metric? Absolutely NOT. It was trading at a PEG of near 3.00 last year. Shorting on valuation is not only dangerous, it is begging for bankruptcy. Wait for a signal to short stocks that appear overvalued, not blind short them. On the other side, should RIMM be long here because of the low PEG? Absolutely NOT. It could go far lower. Wait for the market to signal a bottom.

Another stock that always “seems” overvalued is GOOG. Looking into the numbers of GOOG, it has a PEG of 1.03. That surprised me as I have always “assumed” it seemed pricey.

Point being, the market can trade stocks at PEG ratios of .75, 1.5 or even 3.00. There is a HUGE difference between these numbers, rather obviously. If RIMM had the same PEG as AAPL it would be about $180 currently. Is the stock worth $90 or $180? I have no idea. It is worth what the market says it’s worth. In addition, if RIMM had the same peak valuation as AAPL, it would be well over $200. Blind shorting these stocks is very dangerous because of this possibility. If you want to be short them, wait for signals.

On the other side of that, I would personally never buy a stock just based upon the PEG. The reason for this is that analysts tend to extrapolate data into the “forever”. Huge earnings growth rates never last forever, but the PEG ratios always assume they will. Look at PEG for indications, but also, and more importantly, look at what the market is telling you. The market will decide the value of a stock, each and every time. Like it or not.

PEG Caveat: In this economy you cannot rely on PEG ratios, PE’s or any valuation mechanisms. The reason for this is if we enter a severe recession, all numbers are inflated. PEG assumes growth rates will continue. PE’s assume earnings will not fall. If we enter a severe recession, obviously both growth rates and earnings will fall. The big question is how bad a recession and how long.

Lastly, if you want to simply make decisions on so called “valuation” you are on the wrong site. I make calls on 3 day trades, not long term investing. I do make fundamental calls when I am reasonably certain the market is wrong, but in general, my calls are trades, not 5 year investments. I cannot predict 5 years down the road.

Written by Tom@StockBlade.com · Filed Under AAPL, GOOG | Leave a Comment

GOOG Blew Out Number, Now What?

April 17, 2008 11:07 PM

Google is up …wayyy up after they released. Last trade was around $525, up $76. Caution is in order not much higher here. It would need to clear $541.04 to be long up there. I won’t have an answer on future direction until I see tomorrow’s gap, and the reaction in the “real” world market.

Keep in mind I strongly consider GOOG a trade, and not an investment These high fliers skyrocket and plunge, all in the same year. Can be great, or brutally bad, depending on which side you are on, and when.

Written by Tom@StockBlade.com · Filed Under GOOG | Leave a Comment

Stock Updates: XOM, AEM, XLF, CHK, AAPL, JOYG, GS, GOOG

April 3, 2008 4:51 PM

Most stocks are set up to break either way consistent with the overall market.

CHK is long above $42.15, nothing has changed. I said over a week ago it would have an issue near $48, and it has, and also said it wa likely to trade between $43-48 for quite some time, and it has. It has been in about a $2.00 trading range for 8 trading days. My bias is still long above $42.15 and caution near $48. Same story, different day.

XOM: Exxon took out a couple of key levels, but it has has issues inthe $90 area, repeatedly and I am not a fan of it up here. There is no hard number to be leary of except the all time high however.

AEM: This stock will be sold the second the trend breaks or gold falls off. This stock is a little more difficult to predict as it is traded as a “proxy” for gold prices, which in turn trades inversely to the dollar. This is a short waiting to happen up top however….so better have a quick break pedal if you are long this…

XLF: Not a fan of the financials up here unless we clearly take out the $27.50 range…too many brokers/banks have key points up in that range, and is why i said sell XLF yesterday at $27.10. It dropped a quick buck off that early today.

AAPL: Apple technically is all clear once we took out $151.20. There is caution up here though as I mentioned. Plenty of people that have been long Apple for 4 months…and sweating bullets every day would love to escape even. i also think people are far too optimistic on the Iphone as a competing product against RIMM. It isn’t even in the same class. The IPhone competes against personal use phones - not business - and RIMM is coming out with a touchscreen soon…. But the chart still says long….but have a quick exit if trouble…

JOYG: JOYG is an avoid up near $70.00, IMO. It has to clear $72.00 to be long in that area.

GS: I mentioned to be very careful Goldman above $180 the other day….and it backed off $182 range yesterday and slid all the way to a low of $172.88 today. It has to clear $184.52…and even then I am not a huge fan as it will have more issues near $200.

GOOG: Goog was an easy short today. it had to clear $475.74 to be long. Going forward, if it clears $432.01 there will be additional pressure put on. I said the other day I am simply not a fan of GOOG and expected it to reverse. Bingo.

Written by · Filed Under AAPL, AEM, CHK, GOOG, GS, JOYG, XLF, XOM | Leave a Comment

StockBlade’s Numbers for CHK, AEM, JOYG, VLO, DE, XLF, GOOG, EK, AAPL, XRT

March 28, 2008 8:35 PM

Our numbers to be long or short/avoid long each stock were just updated. See Current SB Numbers on the main menu for the chart.

Written by · Filed Under AAPL, AEM, CHK, DE, EK, GOOG, JOYG, VLO, XLF, XOM | Leave a Comment

Multi- Year Tops are Building

March 16, 2008 1:27 PM

Many stocks appear to be building multi-year tops in the charts. This is a little scary for long term investors, especially in those stocks. Some of these highs may never be broken.

One stock that most likely has hit multi-year highs, possibly a”forever” high, is GOOG. Once $616 cleared, my charts strongly said sell any and all strength in GOOG, and clearly they have.

I also believe NOK has hit a multiyear high at $42.22.

Some that I could list, like GOOG, are reasonably obvious and far too late to take that trade, so let’s look at some where “trouble is brewing” and are currently Wall St. darlings and everyone alive loves them.

DE: The possibility exists that we may have seen a multiyear high in Deere. While the chart has not confirmed this, as of yet, extreme caution is in order above $90 here. There will be great caution near the highs on DE and you should avoid it near the highs or even consider shorting it below the high, unless it clears. The key number for DE is $71.20. I would look to be long this stock above that number for a one time bounce. If $71.20 clears, big trouble is likely for Deere.

I will be looking at some others, and update when I find a “darling” in trouble….

Written by · Filed Under DE, GOOG, Investing Topics | Leave a Comment