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[qi:053] Predictions — like a fatty snack at a New Year’s Eve party, or that last glass of champagne in the wee hours of the morning, you are almost sure to regret them, yet sometimes you just can’t help yourself.
So although I can do without the trans-fat and am willing to forgo the bubbly, this year I can’t pass up a few lingering minutes at the crystal ball. To that end, I’ve taken seven of the more interesting stocks of 2007 and ranked them according to how I think they’ll perform in 2008. They are all stocks that inspired a good deal of passionate discussion and, for the most part, a good deal of capital gains.
First, listed in order of their 2007 price gains, the seven stocks I’ll look at are:
- Research In Motion (RIMM), up 166.3 percent
- Amazon.com (AMZN), up 134.8 percent
- Apple (AAPL), up 134.7 percent
- Google (GOOG), up 50.2 percent
- Microsoft (MSFT), up 20.9 percent
- eBay (EBAY), up 10.4 percent
- Yahoo (YHOO), down 8.9 percent
Before I make my forecast, the usual disclosure: As investment advice, this list is worth exactly as much as the money I’m putting in them: zero dollars and zero cents. The only advice implied here is not to confuse a year-end parlor game with trading ideas. And as always, feel free to leave your own list or your thoughts in the comments.
1. Google. Time and again, it’s been a mistake to bet against this stock. It may have an off quarter now and then and it may draw bad press, but the company still rules search. A slow economy would dry up ad dollars in general, but search ads might benefit as advertisers seek out the cheapest way to get their message to consumers. And if Google Apps make an impact, 2008 could be the year when Google brings in non-search revenue.
2. Yahoo. Yes, good ole black-and-blue Yahoo. 2008 will be a make-or-break year for the company, but 2007 was so hard on the stock that even a moderate recovery in profits could propel it higher. Like Google, it could benefit if weakness in print and television ads end up driving more ad dollars online.
3. Apple. The only thing standing in the way of this company’s path to even more fortune are its own potential missteps. Notably, William Safire predicted today a “pod push-back” that could damage Apple. I don’t see it, but it is interesting to note the meme of an Apple backlash is drawing mainstream mention.
4. Amazon.com. The stock has always been on a rollercoaster: $5 in 2002, $60 in 2003, $25 in 2006 and $95 just last week. The pendulum-like pattern suggests a selloff in 2008, but I think it’s more likely to see a merely moderate year. For a compelling longer-term argument in favor of Amazon, see this post from Fred Wilson.
5. eBay. Another flat-ish year for the company, I suspect, with growing investor impatience if it continues to merely tread water. Bears have been grumbling for some time that eBay would be better off split into three. That idea could gain steam if earnings start to disappoint.
6. Research In Motion. I don’t have anything against the company or its outlook, but I think this is a case of solid financials distorted by speculative enthusiasm. The stock’s 3 percent drop on the last day of the year could signal that investors are ready for a pullback.
7. Microsoft. Despite Steve Ballmer’s success in turning around this battleship, Microsoft remains most vulnerable to a slowdown in corporate IT spending. Beyond 2008, the company will do fine, but I think there’s a risk of a setback before then.
The wild card in all this is the overall economic forecast, which is as uncertain and hard to call as it’s been in a long time. Still, even though nobody knows how bad or how long the credit crunch will hurt, so far it hasn’t come close to curbing consumer appetite for innovative tech gadgets, which is good news for companies like Apple. And as long as it doesn’t slow overseas growth, that’s good news for companies like Google.
So there’s my list. Now to make it even more interesting, I created an entirely random list to compare to my own. Similar to tossing darts at a newspaper’s stock pages, I assigned each of these seven stocks a random integer, then ranked them (as I did the two lists above) in descending order. Here’s the outcome:
- Research In Motion
As much thought as I put into my own list, I have to say the contrarian in me is rooting for the randomizer.