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Wednesday, October 22, 2008

The valuation trade

I'm finding it really hard not to buy tech. I look at EMC, for example. They report 20 cents, better than expectations. They guide next quarter to 30 cents with the street at 24 cents. This company is trading at an extremely low multiple. I don't know who is selling it here at 10.20. It doesn't make sense to me.

I'm starting to see stocks find levels off bad news. Broadcom lowered guidance and is up a dollar and change. I was short this stock 3 months ago at 29 and if anything numbers have gone up since. The market multiple contraction seems very extreme in tech.

Admittedly, the data just stinks right now. Retail has fallen off a cliff and theres a lot of enterprise caution out there -- with good reason. I find myself buying, though. I'm still short stocks... just not tech.

I wonder if I'm just falling for the valuation trap.

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