My wife and I went to a Jackson Browne concert in Seattle on Sunday. Never seen so many 50-somethings in one place. Browne looked great and was rockin’ it, especially when playing with younger musicians from one of my favorite indie bands, Dawes. The lyrics of one of his most famous songs resonated as an anthem for today. “We may lose and we may win, but we will never be here again.”
Don’t blow your chance to be present as an investor this year, as it could surprise. So let’s go over what’s happening right now, and find out where opportunity is knocking.
Don’t Overreact to Apple Earnings
A messy, ugly, dreary earnings report from Apple (NASDAQ:AAPL) after the Wednesday close may set tech stocks back a bit on Thursday but probably not as much as bears would like. The consumer electronics giant’s problems are quite company-specific and as a result don’t provide a read-through on the space overall. Apple’s losses were mostly a result of its own innovation skid and the loss of market share to rivals like Samsung and even lowly Nokia (NYSE:NOK).
A better read on the value of tech generally at this moment in time was provided by IBM (NYSE:IBM) on Tuesday night; its report showed a pretty steady pickup of tech services activity across U.S. and global enterprises. In short, any weakness that results from the Apple blow-up should be seen as in part an excuse to take profits after a run-up and a rest period in which to let overbought stocks and sectors catch their breath, and not the beginning of a prolonged decline.
Strength in the Market
One of the groups of stocks that have beaten expectations regularly in this cycle are the media giants like CBS Corporation (NYSE:CBS), The Walt Disney Company (NYSE:DIS), Comcast (NASDAQ:CMCSA) and Time Warner (NYSE:TWX). They are all up 200% to 900% since the bear market ended in 2009, all more than double the broad market.
Disney owns the ABC network and ESPN; Comcast owns NBC and its cable network; Time Warner owns CNN, TBS, TNT and HBO; and CBS owns the CBS network.
In the early days of the Internet, the value of content was overshadowed by the value of the network, leading to the rise of the values of companies like Cisco Systems (NASDAQ:CSCO), JDS Uniphase (NASDAQ:JDSU), Alcatel Lucent (NYSE:ALU), Juniper Networks (NYSE:JNPR) and the like. But the tables soon turned, as the price of hardware fell dramatically. In contrast, the value of content has become more valuable as media firms learned to monetize it through print, broadcast, cable and web properties.
Recommendation: Keep Time Warner, CBS, Disney and Time Warner on your radar for opportunistic purchases over the rest of the year because, as successful as they have been, so far their story is not played out.
We’ve Adjusted to the Big Issues
Looking forward, the path of least resistance is still higher. The only real impediment is the possibility that too many people will realize it.
This could be cured with a few days’ spill and spike of volatility to restore a healthy measure of fear. But this is the first month in recent memory in which no clear-cut geopolitical or corporate problems lays in wait to undercut confidence.
That’s not to say that there aren’t evident problems afoot for individual industries, such as tepid growth for PCs in the wake of botched leadership by Microsoft (NASDAQ:MSFT) or the environmental restrictions on coal miners. Yet the big issues, such as sovereign credit in Europe, the U.S. election, the fiscal cliff, Chinese growth slowdown and Japanese monetary policy intransigence, have one by one been cleared away.
At the end of the day we are left with a maddeningly slow global and U.S. economic recovery, structural unemployment, a ballooning U.S. deficit and persistent recession in Europe, but corporations have adjusted and investors have discounted.
Companies Forging Ahead
Ignoring the macro picture, as well they should, are hundreds of companies led by smart and ambitious individuals who are just focused on painting their vision as big as possible on the world stage, whether they are creating insurance software at little Guidewire (NYSE:GWRE), creating a new brand of online training at Cornerstone OnDemand (NASDAQ:CSOD), building a smarter asset manager at Blackrock (NYSE:BLK), improving mobile communications coverage at SBA Communications (NASDAQ:SBAC) or just finding new ways to sell snacks at B&G Foods (NYSE:BGS).
The beautiful part of free-market capitalism is that determined individuals toiling in their self-interest can be rewarded handsomely by creating value for the community. The public markets are imperfect and leaky, but they allow us to bet alongside entrepreneurs for the benefit of ourselves and our families. Governments get in the way but we shrug, adjust and move on.
InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage which aims to capture profits of 15% to 40% and often as much at 100% to 200% in less than 90 days.
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