DAVE HARRIS: Welcome to Dave On
Stocks podcast #41. This show is for
Tuesday February 20th 2007. I'm Dave
Harris. I'm a long term investor managing a diversified portfolio of stocks. It shouldn't be too much of a surprise to Wall Street, but
XM (XMSR) and Sirius Satellite (SIRI) radio have agreed to merge.
Sirius' current
CEO Mel Karmazin will be the chief exec and Gary Parsons from XM will
be
chairman. I have a sell rating on
both stocks. Most likely share prices will go up a little on this news, but then I
suggest selling. I think the combined company has a way to go. Let's see
what they do about programming. I think the companies paid absurd amounts of
money for the likes of Howard Stern and Oprah & Friends. Many people get a
free trial run on satellite radio when buying new cars. The hard thing is to
get these people to actually sign up and pay for the satellite service once the
trial runs out. If I see the combined company is profitable in the coming
quarters with strong upside potential, then I would recommend buying the stock.
For now, this is not a good long term investment. This is the week to buy Microsoft
(MSFT). The company lowered investor enthusiasm over their new Vista system last week. Chief Exec Steve Ballmer said
analysts were overly aggressive in their revenue forecasts for the new
operating system. Wall Street brought the stock down. MSFT was over $31 per
share late January. Friday (2-16-07) the stock closed at $28.74. This is a
buying opportunity. I believe the company is lowering expectations here so they
can beat the revised forecasts later. Microsoft is a good long term core
portfolio holding in the tech sector. Operating expenses are expected lower.
Revenue and earnings beat expectations in the fiscal second quarter.A strong year with double digit growth is
expected. The servers and Xbox 360 are tremendously successful. MSFT is a buy here. Take advantage of this sell
off. I think it's going to $35 dollars. The market is speculating General Motors (GM) may buy Chrysler
Group (DCX). I would sell Chrysler
here. At this time, the car industry is not the place to invest. We just
heard from the Fed that factory output is slow partly because of autos.I don't like how demand is weak for
Chrysler's product. It's clearly reflected in their poor sales. There may be a
light at the end of the tunnel as the company will cut 13,000 jobs in a
restructuring. But until Chrysler reports favorable earnings and says demand is
strong, I suggest you sell the stock. I think we can put to rest ideas that our economy is slowing
too quickly, for the time being. Conditions are exactly the way the Fed wants
it. You head it from the chairman Ben Benranke's positive testimony last week
to congress. He expects moderate economic growth and lower oil prices to
control inflation. Yes, consumer sentiment is lower according to the University of Michigan's latest survey because of high
unemployment, but that's not too concerning in my view. We are not headed for a
recession. Inflation will be under control, and I think we're headed for a soft
landing. Housing starts have slowed down, but that shouldn't surprise
us. That sector will continue to decline this year. I think housing has not
bottomed and suggest you avoid buying home builders such as Toll Brothers (TOL), KB Home (KBH) and
Lennar (LEN). But, I'll let you know when it's time to start buying. It's a shortened trading week because of the President's Day
holiday on Monday. On Wednesday, the January CPI will be out. The market
expects a small .1% monthly increase in consumer prices. The core figure, which
removes food and energy prices, should show a .2% gain. I think the results
will support beliefs that inflation is under control. The index of leading
economic indicators is also on Wednesday. Fourth quarter earnings are wrapping
up, and I think the reports were generally very good. Today it's earnings from
the home improvement store Home Depot (HD) and Wal-Mart (WMT). Wednesday its
IHOP restaurant (IHOP), burger chain Jack in the Box (JBX) and Zale (ZLC) the jewelry
store. Tax services company H&R Block (HRB) and JC Penney (JCP), the
department store, reports Thursday. Home Depot's competitor Lowe's (LOW) has
earnings Friday. That's all for today's podcast of Dave On Stocks. I'm Dave
Harris. I'll be back soon with another show. Write me with any questions or
suggestions about the podcast use the "contact us" link on the web page.
My website is www.daveonstocks.com.
This is Dave On Stocks!
