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Optical/IP

Stock Rantings

4:30 PM -- I enjoyed Craig Matsumoto's most excellent 2006 Top Ten: Stock Gains & Pains. Though, due to no fault of his, the story left me wanting for more data and perspective on the performance of the communications sector in the stock market in 2006.

Why's that? Because 2006 was a veritable cornucopia of telecom stock explosions. In short, along with emerging markets and precious metals, telecom ruled the world.

2006 was the year that proved 99% of pundits wrong. First of all, stocks went up. Second of all, there were some real shockers in the mix: Telecom was hot! It's the year that showed why "contrairian" often works in investing.

For example:

  • Who in 2005 would have told you that the gloom-and-doom global telecom services market would be the No. 1 gaining sector among Dow Jones' Global indices, gaining an astonishing 29 percent, according to The Wall Street Journal. Blue-chip incumbent AT&T was up 46 percent and Verizon was up 28 percent, for Christmas sake. What on Earth is the world coming to? The next thing you know, people will be eating at Bob's Big Boy again.

    I don't recally anybody predicting this. No, to pound the table in December, 2005, saying that AT&T would be one the leading performers in the Dow in 2006 would have smacked of insanity. You might have been institutionalized. But you would have gotten rich.

  • Do you recall any famous gurus touting emerging market telecom stocks as the big gainers for 2006 (prior to the move)? Certainly not the ubiquitous stock guru Jim Cramer -- who seems to prefer to wait until a stock moves 20 percent and gets listed in Investor's Business Daily before he hops on board. Some of these moves ambushed everybody: Russian provider Rostelecom : up 233 percent in 2006. China Mobile Ltd. (NYSE: CHL), the Hong Kong-based telecom company, was up 80 percent. Our much loved VimpelCom Ltd. (NYSE: VIP) flew 90 percent.

    Now, you could have looked at Rostelecom in July, when it was only up 112 percent, and thought you were too late to buy it. You would have been wrong.

    After all the hemming and hawing, Google, meanwhile, hit $500 a share in November, but ended the year at $460.48, up only 11 percent -- hardly a barn-burner when compared with Rostelecom. Was I right on my prediction that Google hype has peaked? Not quite, but then again, with a yearly gain of only 11 percent when AT&T is moving nearly 50 percent, the hype/earnings (H/E) ratio still seems majorly out of whack. (See Google Is Overvalued and Google Hypometer in the Red.) No, those fancy Silicon Valley dudes didn't have nuthin' on the Ruskies in 2006.

    — R. Scott Raynovich, Editor in Chief, Light Reading

  • digits 12/5/2012 | 3:17:13 PM
    re: Stock Rantings So what would be a mad stock prediction for 2007, akin to backing AT&T at the beginning of 2006?

    What would seem like madness now, but could end up being a stroke of genius come January 2008?

    Re-mortgaging the house and piling the proceeds into optical components?

    :-0
    Scott Raynovich 12/5/2012 | 3:17:07 PM
    re: Stock Rantings Good point Ray, I am working on it.

    I will have one for you by the end of the day.
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