Questions on Technology Stocks

I wanted to post my high level thoughts on three technology stocks that I was asked to consider.

Applied Micro Devices (NYSE: AMD) - I am nervous about this stock because they’ve never been able to get over the hump. I tempted to call them a dog with fleas. There is reason to be concerned as the Board of Directors (BOD) canned the CEO because they thought he wasn't built for the next wave in the PC industry… tablets. It is mind boggling that the CEO may not steer the company in the right direction. How hard is the chip sector to understand, smaller devices (phones, tablets, netbooks) is the direction to go.

URB Recommendation – Pass on this pup



Coinstar (NASDAQ: CSTR) - I have really liked this stock for quite a few years now. This one qualifies as one that got away because I liked it back when it was in the $20 range. I won’t take any credit because a friend who is very loyal to Motley Fool uncovered this gem awhile back and has held ever since. Not many realize they are the brains behind Redbox, which everyone seems to be familiar with. There stock recently fell (roughly 25%), I believe out of concern that the company was being squeezed on their margins.

URB Recommendation – Need more research to identify buying opportunity


Netflix (NASDAQ: NFLX) – I learned from my Napster days if it’s so simple and convenient for people to adopt, then it will be a hit. And Netflix definitely qualifies for this category. I have not used the service but they took off and never looked back. This story definitely qualifies as one that I left get away and I’ve been watching closely. I don’t necessarily like what I see at this point: Plump valuation, hedge funds taking the opposite position, and new competitors popping up everyday. I see this now as a crowded space. They are facing new competition from Hulu, Apple TV, Google TV, DVR's, Redbox, etc.

URB Warning – The Chief Financial Officer (CFO) recently quit, which is strange?!?! Also, when the hedge funds came out shorting and talking bad about the company…the CEO responded….ODD, as CEO don’t you have anything better to do?!?!?

URB Recommendation – More tempted to short this stock, but don’t feel bad about doing nuthin!

The Hype

The hype comes in all shapes and forms. For most of us avid Wall Street fans we may read or hear about it through our favorite shows, blogs, or newspapers. And the hype reminds you of the teams like the New England Patriots. A great team that was poised to win it all. Many people overlook the fact that there were a number of games that New England could have and should have lost during the regular season and post season before the let down loss in the Superbowl. A number a games would have told you not to believe the hype like the Indianapolis Colts or New York Giants regular season games that exposed the Patriots. Now lets take a similar view to the market right now. Yes, people are excited because the markets are moving up and the Dow even touched 13,000 recently. But how quickly we forget what brought us to this point. The market is still suffering from the stuff that that gave it upset stomach in the first place. The hype is people like Henry Paulson coming out recently and saying that the market turmoil or upset stomach could soon be over. That's like saying that you can give the markets Pepto and this will all be over. Sorry folks, that is not the case and unemployment is now at levels that mirror the last recession in 2001 and many economists believe that it will continue to deteriorate. The financial markets are still a mess...don't believe me, as Citigroup who is throwing up and selling businesses left and right. And I am sorry for the analogies but I want this point to sink in, the markets are don't with us yet.

I won't change my stance at this point and like most of the stocks that are on our radar or that we have recommended here at Urbanomics. Take Ricks Cabaret (NASDAQ: RICK) which is up rough 13% today, H&R Block (NYSE: HRB) which took out new 52 week highs, and Coinstar (NASDAQ: CSTR) which exploded after their earnings announcement as proof that we are picking timely market plays. Ricks Cabaret is a great small cap stock that probably continues to do well even during a recession catering to big wigs who spend big bucks at their "higher-end" (no pun intended) establishments. And H&R Block should probably be coming of a strong tax season as people are eager to file and qualify for the great tax rebate check that our government came up with to stimulate the economy. It will do one thing and that's stimulate bill paying and retail business. Lastly, Coinstar is doing well after a great earnings season and they are benefitting from increased sales in their DVD kiosk business through a big contract with Walmart. I hope you also love the sector specific plays and REALIZE that high commodity prices are here to stay for awhile. Clayton Williams (NASDAQ: CWEI), AK Steel (NYSE: AKS), the exchange traded fund OIH (AMEX:OIH), and others are all great plays and make you feel a little bit better when you buy gas at the pump or buy something made from steel.

Enjoy the weekend and holla back!