Analysts Fear Buying of Overvalued Stocks

[American Tragedy]

NEW YORK - Even as market experts forecast modest returns for 2005, investors have snapped up shares of stocks that appear overvalued — a troubling sign that suggests people are pinning their hopes on short-term momentum instead of long-term fundamentals.

The broader market sagged during the year's first two weeks of trading, but even on days when the major indexes were weak, investors showed great interest in stocks like Sirius Satellite Radio Inc., Taser International Inc. and other issues with questionable potential. The fact that so many are so excited about companies offering so little makes some more conservative analysts nervous about a rise in speculation.

"The momentum monkeys are back. 'It's going up? Let's buy it,'" said Jeffrey D. Saut, chief investment strategist at Raymond James & Associates. "This is very reminiscent of what was going on in some of the bubble years. Most people have not accepted the fact that we're in a low-return environment."

Saut considers Sirius, Taser and other issues that have developed strong followings despite minimal earnings, or even losses, to be "cult stocks." Since their gains are driven by momentum, these stocks tend to be quite volatile. Shares of Sirius, which needs to quadruple its subscribers to become profitable, were trading around $2 during the August lows, surged to more than $9 last month, and are now hovering near $6.50 — despite the company's lack of earnings.

[TahitiNut]

1. With P/E's over 20 and rising like hot air balloons, not a surprise.

:shrug: The equities markets are in full Greater Fool mode.

[mhr]

2. Well Since We Know Which Part Of The Country Is Home To Greater Fools

Let's hope they loose their money and blame it on Bush.

[havocmom]

3. Everybody must've upped their meds.

Then there was that study back in the early 90s about depressed people having a firmer grasp of reality ;)

Many must have their hopes pinned on the prospect of forced investment of payroll taxes instead of $$ dropping into the SS trust fund.

[TahitiNut]

10. Bingo. Nothing like a flood of stupid money to boost the market.

Especially if it's got almost nowhere else to go. Hell, the insider options players make out like bandits. (Did I say "like"?)

I'd love to see a 1% sales tax on equities. It is property, isn't it? :eyes:

[gottaB]

4. link

http://www.boston.com/business/articles/2005/01/15/analysts_fear_buying_of_overvalued_stocks?mode=PF

[brokensymmetry]

5. Gee, they want us to put our Social Security money into stock.

Why ever could that be? Not so they could dump their overpriced garbage on us, surely? :eyes:

[gottaB]

6. It definitely has the feel of a pump and dump

Should we tip off the SEC?

[w4rma]

9. Exactamundo. (nt)

[cascadiance]

7. A big part of Sirius's demand is progressives...

They are really the only real alternative to Clear Channel owned radio every place in the U.S., since XM is partially owned by Clear Channel.

It shows in their programming too, with more NPR stations, more left wing talk stations (2 instead of 1, with Air America full time instead of only part time like it is on XM).

Not sure I'd buy stock in it yet, but if all of us put our money where our mouth was to help put down Clear Channel and bought their service (I already have a year ago or so), they'd have some pretty significant growth.

Probably doesn't hurt with Howard Stern signing on and pushing them too.

[Straight Shooter]

8. I'm saving money, bit by bit, to get a Sirius satellite system

Believe it or not, I've been trying to save money for two years now to get Sirius, but repairs and maintenance on other items keep getting in the way. x(