Get back in the game
Commentary: Don't let woes disguise 10-bagger prospects
By John C. Dvorak
Last update: 12:33 p.m. EST Dec. 26, 2008Comments: 175BERKELEY, Calif. (MarketWatch) -- So, what do we have to deal with as we enter 2009?
An expensive war in Iraq, with no end in sight and no real exit strategy.
A new president who wants to expand the war in Afghanistan.
A financial crisis that will take what some estimate at $8 trillion to resolve.
Falling home prices and a dead real-estate market.
Money flow and credit to actual borrowers at a standstill as banks hoard bailout funds.
The beginning of an all-Democrat, tax-happy government with control of both houses and the executive branch.
Financial crises looming for major cities such as New York and states including California.
Unemployment increasing every quarter.
Decreasing U.S. productivity.
Stock market generally depressed.
All the American auto manufacturers are suffering and close to bankruptcy.
I suppose I could make this list longer, but it raises a question: Exactly how can it get worse than this? I suppose you could have a complete economic collapse, with every business going broke and unemployment reaching depression levels of over 25%.
No, let's face it. While 2009 could continue to be rocky, it can't get much worse than this, especially if Obama and the Democrats work some magic with a smoke and mirrors act to get people thinking positively.
Right now everyone is thinking negatively, and none of it is helped by our panicky government and its talk of economic meltdowns, food riots, martial law and other comments to freak out the citizenry.
Personally, I think the smart investor needs to get back into the game by looking for the rare, but obtainable 10-bagger -- as it is affectionately called. Yes, this is that normally rare stock that goes up by a factor of 10 within a short period of time.
Ideally a 10-bagger will go 10X within 24 months, but it can happen faster than that, too.
In a moment like this, when many major companies with good earnings, profits and growth are underpriced by all indications, the 10-baggers lurk.
And this is the time investors have to go to their scorecards and take a hard look at the reality of the numbers. Let's take a few of the best indicators and ratios and try to identify a stock with 10-bagger potential.
I'd like to find a stock with a high beta so it moves faster than the market so when the market turns around (and it always does) this stock will move fast.
Next, I want a stock selling within close range of its book value and with an enterprise value higher than its market cap. This would mean the company is intrinsically valuable and not deeply in debt.
In fact, using this criteria and confirming that the stock has been priced 10X in the past, you'll find dozens of matches, many to an extreme. The one that stands out in the tech sector is Advanced Micro Devices (AMD:Advanced Micro Devices, Inc
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Last: 2.18+0.19+9.55%
4:00pm 12/26/2008
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AMD 2.18, +0.19, +9.6%) . The stock is now selling below book value and has been as high as $40, with its $20 (10-bagger) price having been reached within the past two years.
The downside risk is minimal. AMD is not going out of business anytime soon. It could be a buyout candidate at some price north of $8 perhaps. But it has 10-bagger written all over it until then.
While the market has mostly drifted since the dot-com collapse of 2000, this recent drop-off is the final exclamation point.
So it's time to go hunting for 10-baggers. I personally cannot see waiting much longer for even better prices.
As a disclaimer: I do not own any AMD. But I am drooling over the idea.
Commentary: Don't let woes disguise 10-bagger prospects
By John C. Dvorak
Last update: 12:33 p.m. EST Dec. 26, 2008Comments: 175BERKELEY, Calif. (MarketWatch) -- So, what do we have to deal with as we enter 2009?
An expensive war in Iraq, with no end in sight and no real exit strategy.
A new president who wants to expand the war in Afghanistan.
A financial crisis that will take what some estimate at $8 trillion to resolve.
Falling home prices and a dead real-estate market.
Money flow and credit to actual borrowers at a standstill as banks hoard bailout funds.
The beginning of an all-Democrat, tax-happy government with control of both houses and the executive branch.
Financial crises looming for major cities such as New York and states including California.
Unemployment increasing every quarter.
Decreasing U.S. productivity.
Stock market generally depressed.
All the American auto manufacturers are suffering and close to bankruptcy.
I suppose I could make this list longer, but it raises a question: Exactly how can it get worse than this? I suppose you could have a complete economic collapse, with every business going broke and unemployment reaching depression levels of over 25%.
No, let's face it. While 2009 could continue to be rocky, it can't get much worse than this, especially if Obama and the Democrats work some magic with a smoke and mirrors act to get people thinking positively.
Right now everyone is thinking negatively, and none of it is helped by our panicky government and its talk of economic meltdowns, food riots, martial law and other comments to freak out the citizenry.
Personally, I think the smart investor needs to get back into the game by looking for the rare, but obtainable 10-bagger -- as it is affectionately called. Yes, this is that normally rare stock that goes up by a factor of 10 within a short period of time.
Ideally a 10-bagger will go 10X within 24 months, but it can happen faster than that, too.
In a moment like this, when many major companies with good earnings, profits and growth are underpriced by all indications, the 10-baggers lurk.
And this is the time investors have to go to their scorecards and take a hard look at the reality of the numbers. Let's take a few of the best indicators and ratios and try to identify a stock with 10-bagger potential.
I'd like to find a stock with a high beta so it moves faster than the market so when the market turns around (and it always does) this stock will move fast.
Next, I want a stock selling within close range of its book value and with an enterprise value higher than its market cap. This would mean the company is intrinsically valuable and not deeply in debt.
In fact, using this criteria and confirming that the stock has been priced 10X in the past, you'll find dozens of matches, many to an extreme. The one that stands out in the tech sector is Advanced Micro Devices (AMD:Advanced Micro Devices, Inc
News , chart , profile , more
Last: 2.18+0.19+9.55%
4:00pm 12/26/2008
Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
AMD 2.18, +0.19, +9.6%) . The stock is now selling below book value and has been as high as $40, with its $20 (10-bagger) price having been reached within the past two years.
The downside risk is minimal. AMD is not going out of business anytime soon. It could be a buyout candidate at some price north of $8 perhaps. But it has 10-bagger written all over it until then.
While the market has mostly drifted since the dot-com collapse of 2000, this recent drop-off is the final exclamation point.
So it's time to go hunting for 10-baggers. I personally cannot see waiting much longer for even better prices.
As a disclaimer: I do not own any AMD. But I am drooling over the idea.
