In recent weeks Internet stocks have been on a nice run, with many investors hoping to cash in on the next Google. If you have not yet entered the game, don’t worry about it. These stocks are coming back, fast and hard.

The popular Chinese search engine Baidu.com (NAS:BIDU) has been at the top of investors’ buy list. Baidu’s stock is up over 70 percent since posting better than expected earnings a few weeks ago. Is this the next Google? Does Google have this company on their radar? A buyout is unlikely to ensue, and with shares trading at triple-digit multiples, the stock is grossly overvalued. I loved it at $110, 120 and even 150, but 195 is a little too rich for me (and many other investors). I would look for an exit over the next few trading sessions if you own the stock, and buy some shares when this stock trades around $160.

I have disliked Amazon (NAS:AMZN) for the past year and am not about to change my views. With the stock up over 70% this year, and currently looking a little overvalued, investors may start to ring the register before earnings are released. The company’s capex is most likely going to be higher than expected, and that will certainly be a concern for shareholders. Wait for this stock to pull back 10 to 12 percent before buying again.

Every week mortgage and homebuilding stocks are punished amid negative housing reports, but Bankrate.com’s (NAS:RATE) stock continues to rise. Now trading at roughly 45 times forward earnings, this ride is about to end with a freefall.I expect this stock to pull back with further negative data regarding consumer credit and mortgages.

If you own these stocks, be wary of how overpriced they have become.

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Filed under: Fundamental Research

Markets were higher this morning, then dropped mid-day. The NASDAQ has held strong throughout the day. A string of deals has helped keep the market up. Oil is trading lower today, the entire energy complex is down as well. However, we have seen the market correct mid-day once again. Lately the markets have not been able to keep strong gains throughout the day. This may mean the markets are getting tired.
We have seen this type of activity for the past week or so, this activity has me thinking that we may be close to the end of this bull move to the upside. I think we correct, but the big correction is not here as of yet. In my view, it will be a event-driven event that takes us down hard. For the better part of a year, I have been very cautious and downright bearish on the markets, even though the markets has been on fire since then.
Although I think we are a quarter or so away from a very large, sudden and swift crash, it appears that right now the markets may try to meander from these levels in the short-term. I am overly hedged some would say, but still profiting that of the overall market.

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Filed under: Economy & Markets

Over the past several years the shares of some of Americ’as largest exchanges have soared. Numerous initial public offererings have come to the public landscape including the Chicago Merc (NY:CME), New York Stock Exchange (NY:NYX), NASDAQ (NAS:NDAQ) and the NYMEX (NY:NMX).

The returns of all exchange IPO’s are impressive. When NYMEX opened last year the stock came public at around $58 and hit a intra day opening day high of $150. The most impressive is that of the Chicago Merchantile Exchange (cme). Since their IPO in 2003 the CME is up a whopping 1,100%. All of these exchanges have been on a M&A binge the past couple years. The NYSE finally got the Euronext this year after several further price tag raises.

The exchange area is one that investors love because of their pricing power and their ability to pick up more customers from more alliances and partnerships. In the case of the NYMEX record contract volume is occuring it seems month after month. New products are a big allure to the exchange companies because they tend to be products that institutions and hedge fund alike are wanting to get in on.

But is the sector showing sings of slowing? It remains to be seen but there are many on the street who believe even in the face of more M&A the stocks may be getting ahead of themselves. Many of these exchanges have a very small float, or the number of tradable shares on the public market. This creates the ability of the exhchange to somewhat control ownership of the shares. In many cases the members of the exchange control a large portion on the shares, which makes holders of the stock wary when the insiders have the ability to sell shares in the open market.

Many of the exchanges have ceased making new highs bringing to light the question are the stocks good investments. In my view with the overall market making new highs and the stocks of the exchanges trading somewhat to the downside I think the shares should be avoided at this time. If the overall market corrects which I think will happen sooner rather than later these stocks should continue selling off.

* Long shares of NMX at time of this write-up

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Filed under: Fundamental Research, Sector Watch

Investing is no simple walk in the park. There are all kinds of investors out there, long term, short term, buy and hold, swing traders, etc. You name it theirs a kind of investor or trader for it.

One area of investing I have found was investing in Canadian Energy Trusts. I have had great success so far investing in this area. The allure of these royalty trusts are the hefty yields each of these trusts produce. For instance I currently own PrimeWest Energy Trust (pwi). This company actively manages oil and natural gas properties. So far I am up over 6.5% on the position, but the real allure as I mentioned was the distributions, in which PWI currently yields over 13%.

There is of course risks with these trusts, as many of them are tied to price activity in the energy markets. Most notably oil and natural gas. The Canadian government last year threw the entire industry a curve ball as they are reorganizing their tax structure on the trusts. Regardless with the current prices of many trusts 10-20% cheaper than where they were pre government tax reorganization I believe they are great investments both for the long and the short term.

If you are a believer in higher oil and energy prices, Canadian energy trusts may be a great tool for your investment toolbox.

For more info on Canadian trusts visit the website below, or do more research on your own.

http://www.dividenddetective.com/canadian_royalty_trusts.htm

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Filed under: Commodities, Energy

We are in euphoric mode on Wall St. Stocks are once again flying high, adding billions of market cap in mere seconds on better than expected earnings. Dow has hit a record 13,000 and then some, S&P 500 is at newly minted highs. Global markets seem to be on fire, investors cant seem to get enough of stock, thus resulting in richer stock prices.

However as a cautious investor and trader I ask one question. Have we seen this before? The answer to that question is an unequivocal YES. We have been in bull markets before, and we have seen them end ugly, very ugly. Its wise to not fight the tape, something I have been guilty of, and currently have given up half my gains for the year (still up 10% ytd). Could we see a further rally, yes given the sentiment on the street right now. But all of this will come to a catastrophic end. In late February we saw global stock markets plunge on negative news. We corrected but have lately rocketed up since those levels.

Everybody seems to be positive about the market and where the market is heading. But if history is any indication we can see a huge fall in very short time. In late February the Dow was under 12k, today not more than two months later we are at 13K. If something huge happens on the downside, we can crater overnight. We are in a era of unprecedented liquidity, once that spigit turns off and fear enters the market in every corner of the globe glboal markets will sell-off. Institutions and hedge funds will get out so fast once again leaving the small investor holding the bag. That scenario is the way of life on Wall St.

There are still a plethora of bad issues out in the market, housing continues to fall, just after the bell two of the largest US homebuilders withdrew guidance, one of the most bearish and cautious things a company can do in the course of their operations. Oil continues to gain steam, with current prices above $65/barrel. The price of gasoline continues to climb higher, which correlates to the soft consumer sentiment numbers we saw just a couple days ago. Of course thats on the back burner, we just are hearing “Dow 13,000 and BUY BUY BUY from the biggest stock market cheerleader Jim Cramer.

We still live in a world where terrorists choose terror over peace, but if you listen to the news, especially the financial news you dont hear about that. You dont hear about the geo-political events occuring in the world as we speak. But if the players choose to pay attention to that we will see losses like we have never seen before.

Bottom line, be long with reckless abandom if you wish, but the odds of your holdings be higher than they are today are very low. At some point there will be a inflection point to the downside and when that occurs we will see sentiment changed. This liquidity train will at some point get derailed, dont be left standing next to the train!

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Filed under: Market Sentiment, Stocks