Monday, April 7, 2008

Get Free Money at the Bear's burial!

Friday you had put buying and heavy shorting of Washington Mutual (WM 10.17) as rumors were spread about it's "demise" and a takeunder. Instead we find WaMu getting a cash infusion of $5 billion dollars, led by Texas Pacific Group. Private equity putting money in a thrift? Even these scaredy cats see the financial crisis is over. What can the bears do now?

They had better buy Wachovia (WB 27.21) which sold off in sympathy Friday. This number can rally to 33, and quickly.

Dry Ships (DRYS 65.67) has been leaned on by those who say that shipping rates will slow with the world wide economy. Whoops. What happened here? China is up 5% as this market, has now made its lows, and Barron's had a nice piece on this number. Here's what they had to say:

At its recent quote of 64, DryShips stock was trading at a price/earnings ratio of 3.5 times consensus analyst earnings estimates of $18.18 a share this year and about 5 times the $12.22 forecast for 2009. DryShips also trades at a more than 50% discount to its peers, although rivals generally seek long-term contracts, which are less volatile. DryShips sports a healthy balance sheet, with net debt equaling about 40% of total capital....

"It's a very cheap stock," adds Scott Black, president of Delphi Management, who notes that DryShips tends to trade in line with the volatile Baltic Dry Index more than with fundamental earnings changes. The index, a broad measure of the price of moving raw materials across nearly two dozen key sea routes, has dropped sharply, from above 11,000 in November to about 7,700.

"With a P/E of three, DryShips trades as if it were going out of business," says Black, a Barron's Roundtable member whose fund owns about 200,000 of the shares. "It's discounting the total collapse of dry bulk trade and [saying] that trade for India and China is over." Delphi has been buying lately as the stock has fallen.

Google, (GOOG 471.09) reports earnings a week from next Thursday, the day before option expiration. Forget ComScore and clicks; what is important is that Google didn't spend $5 billion plus bidding on FCC spectrum. They bid just enough for Verizon to spend their money.

Why the comparison with DRYS? Because both stocks are going up, and I want to show the fallacy of the bears flimsy reasons! DRYS supposedly was cut in half, because they spent $405 million on an oil-service firm Ocean Rig. Wall Street wanted a "pure play" on shipping.

Well, Google is still a "pure play" on search, now that they didn't spend billions on spectrum. What happened to the bearish argument now? Yahoo is falling apart, as Yang is more worried about not being bought by the "evil empire" Microsoft. His response is a power point presentation on how rosy the future will be. Remember the same one he gave on Panama? Irregardless, the market will pay more for Google, as any slowdown has already been more than discounted in its stock price! Buy them both!

Pure play? Just another useless expression on Wall Street. The financials were a "pure play" on Armageddon or a depression. Now it's obvious that reasoning was just a pure play on fear mongering.

The mantle has been passed to the bulls. And they are clobbering the bears on the head with it.

And the ones with the fears are those with the shorts. As Mickey Mantle said, "I don't care who you are, you hear those boos."

And the bears hear the stomping hoof-steps of the bulls!

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