My Take on the Obsessive Stocks

 | Dec 14, 2012 | 3:16 PM EST
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Are we too obsessed about certain stocks? Are there some stocks, stocks like Apple (AAPL) or Google (GOOG), that strike our fancy, that captivate us and are so important, psychologically to the stock market that they blind us to all others, including far less risky opportunities that should be the focus?

I think a lot about this because I spend a huge amount of time researching companies that don't tug at our heart strings and aren't household names, stocks like Eaton (ETN), PPG (PPG) or Briggs & Stratton (BGG) or Honeywell (HON) because I think they represent good value at a reasonable price. These are not sexy stocks. They aren't consumer plays, although you might at some point in your daily travels see a Cutler Hammer fuse box or a Honeywell thermostat or a Briggs & Stratton engine of some sort, a lawn mower, a portable generator or maybe a snow thrower. PPG just spent a billion to buy Akzo's household paints unit today and like so many moves that CEO Chuck Bunch makes, you caught a quick 5 points on top of an already-amazing market run. 

I like these kinds of somewhat mundane ideas, because these are superior companies that do so many things to make themselves valuable and are always finding ways to make the top and bottom lines more lucrative. I bet most of you don't care about PPG, but that terrific company has generated a 56% return this year by continuing its march toward being a more proprietary and less commodity-oriented chemical company.

But I know that for every one person that wants to learn about PPG, there are a hundred people who want information, any information, and a viewpoint of how the company's doing at this very moment.

So, with that preamble of what I think you should be looking for, let me give so many of you what you really want, a rundown of what's happening with the most asked about stocks, the ones that come up every moment the stock market gets mentioned in a conversation.

Last night, while I was at the AARP concert -- oops, I meant the Rolling Stones concert -- as I was working my way to my seats I was asked not once but twice about what to do with Apple.

You get these questions all of the time when you are in my shoes, typically when they are losing, not when they are winning. And, oh, is Apple losing, with the stock down 20 points on very heavy volume. The guy next to me at the will-call window said, "Hey, what's the matter with Apple?" and I answered, "It's going down, that's what the matter," and I put it like that because stocks acquire an overtone that determines the fact and Apple's one that's swirling in that particularly toxic soup.

As exciting and fabulous as the run-up was, this decline from $700 to $500 has a sickening fascination of its own.

So, here goes. First, I think there are a host of reasons why Apple's going down. The first is just an embarrassment of riches as a time when capital gains taxes are about to go up. Put simply, it makes too much sense not to sell and lock in gains now rather than later. Second, I think when a stock gets sold down like this there's always a kernel of truth about why it might be tanking. Today we heard that Apple's cutting back its ordering for part for phones and tablets. That means an inventory glut could be developing. We heard that the iPhone's not selling well in China and it doesn't have the right carrier sponsors. We heard that Samsung's device is much more loved. That means numbers might have to come down. So, why not take them down, do it simultaneously with taking a price target down that's become an absurdity, a high-$700s target, say, that one analyst slashed today as part of concerns about earnings.

My take: I am not dogmatic. I think the stock's going down for a whole host of reasons, including the one I said caused me to sell some of the stock for my charitable trust about some 100-odd points ago, the lack of an OMG product because of the death of its founder, who's regarded as the brains behind every single successful invention.

But the trust holds on to the rest because I think Apple's a good investment that is not expensive even after the analyst number shave we got today. Can't trade it. Way too hard.

Now, Google. Here's a company that's in our face every day because we all use Google. It's rallied big lately because Apple's offering Google maps to replace its own map product now. I think that Google recently had a terribly disappointing quarter and even though it has a huge number of good long-term ideas and trends going for it, that disappointment's still with me. I would be scaling out of Google, especially because I see no end to the decline in advertising margins.

Then there's Research In Motion (RIMM), which has a new phone out and remains endlessly fascinating to its users. I think that RIM's taken out a lot of costs and recently said it is now cash-flow positive. It's had a huge run, which worries me, but it is down a great deal from its high. To me, it's more of a sell than a hold because if the new device gets a negative welcome, a la the Microsoft Surface, you are going to lose money rather quickly.

How about Netflix (NFLX)? This one's got a quality that's like Research In Motion, a gigantic client base. I believe that those 27 million names are worth something to someone but it, like RIM, has run a lot and I have to believe that the company would like to raise money given the hefty price tag on a deal with Disney (DIS). I sense that the shorts are really panicking here. I don't want to be a part of that.

People obsess about Amazon (AMZN). I think this company's spending and building to lay the groundwork for being the most convenient, lowest-price department store in the world. That matters. I think Amazon will go higher.

Then there's the fascination with two retailers, J.C. Penney (JCP), because of the attempt to turn the company around by Ron Johnson, and Best Buy (BBY) because its founder, Richard Schulze, seems hellbent on taking the company private.

I think Penney was on the ropes until recently when we have learned from Manny Chirico, the terrific CEO of PVH (PVH), that Penney's is starting to order a ton of merchandise for its stores within the store. At $20, I think it can go a tad higher even without any new news. Best Buy? I think the fundamentals are on the decline here, it feels terminal. So, it seems a little ridiculous to own the stock, just as I think it is a little ridiculous that Schulz will get the financing it needs to make the transaction occur.

Let me close by saying I totally understand the predilection, if not the obsession, here with these. But I also have to say, though, that they have become total battlegrounds and I get no pleasure from stepping on the battlefield. Which is why I like the mundane plays. Not as good a reward but certainly a lot less risk.

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