Sell stocks after gains of 10% to 20%
Interview: Laszlo Birinyi --- President --- Birinyi
> laszlo birinyi says investors must be prepared to sell stocks after gains of 15% to 20%. the president of birinyi and associates and one of the most watched investors on wall street explained his thinking to brian sullivan on why it's a different market now.
>> what you're seeing the last couple of years is a compression of moves, and people ask us about how long we hold stocks, and my answer in this market is 15% to 20%. and if you can get those kind of gains, don't be scared to take them. most people shy away because of taxes, but i think the market where information is instantaneous and people act so quickly, that you've got to recognize that the the landscape has changed. >
> if you got to go in and out of stocks relatively quickly, does that mean that you are negative or bearish on the market as a whole? for the next year or so.
>> no, no, i think, again, you have to play a different game, if you will, under these conditions than you did in the 1990's where corrections were few and far between. this is a very choppy market , but there are opportunities to make money, significant amounts of money, but you've got to recognize that the whole environment is different than it was 10, 15 years ago.
>> all right. let's talk about a few of those opportunities as you see them. yesterday on our program, we chatted with michael price, pretty well known, pretty widely followed investor, invests mostly all of his own money. he said ebay, good company, brian. he thinks it's way overvalued. you like the stock. tell us why it's not overvalued.
>> there's a real disconnect, you think, between the market and the outside world. john cane's famous economist, actually a very good investor, once suggested that the reality of the stock market is that it's not based on fundamentals, it's based on psychology. and right now, the psychology continues to be very positive on ebay, and people have made a lot of money. but we've always got to be aware the psychology can change. but the important thing is not what people are saying, what's they're doing, and they've been buying ebay.
>> have they been buying it a lot. in fact, ebay shares have gone from 30 to 90 in just about a year's time. doesn't that kind of gain scare you off?
>> you know, again, i think it's kinds of a market where there are so few opportunities so that everybody jumps on the few opportunities that does exist, and that's why you have some of these stocks move 10%, 20% in a week or so. it seems to be that most stocks are doing nothing, but stocks can doing something, and they're doing a lot of that something.
>> so do you like ebay for the fundamentals? it sounds like you like it more for the momentum.
>> absolutely. the fundamentals, i've never personally found it that enticing business. but there's a new book out called "the wisdom of the crowd," and the crowd has liked ebay for a long time, and i respect the opinion of the majority.
>> well, the crowd has not necessarily like amazon.com. in fact, amazon shares went from about 15 to 60, but since then, come back down to about 40. so you can't argue amazon is a momentum play here. why do you like it?
>> you go back to the first quarter this year, and we did the same thing. i traded under 40, went back over 50, and did the same thing last quarter. so i still think that the pattern will repeat itself, take a little longer this time. but amazon is one of those unique situations. and then make sure everybody understands it. i'm not sure i do. but the crowd doesn't always act that quickly. but i think amazon is a significant long-term hold. >> well, again, this may not be a fundamental story for you, because the way amazon used to grow in the market , it would announce, we're getting into a new business, sell electric accident, garden tools, equipment, etc. the company is maturing, so dupe care about the long-term growth rate, laszlo? do you care about the p/e rash yo, or is this purely another momentum call behind amazon?
>> it's not so much momentum. you know, we have a tool called the announcement of order flow, and this is the old ticker tape reading, and what we tried to do is be ahead of the curve. i don't wait for the fundamentals. i wait-i look at what the market is saying, and the market has been saying from amazon, it's a company that people are buying, again, for a longer term situation. this is a took that belongs in most people's growth portfolio.
>> all right, folks, just one house keeping note on that interview, laszlo better than why i owns the stocks he recommended, including google, ebay and amazon. as they say, he eats his own cooking. u.a.l. is seeking $500 million more in annual cost cuts to help it exit bankruptcy and attract new financing. the parent company of united airlines earlier this month announced plans to trim expenses by $655 million. u.a.l. hasn't identified where this additional half billion in cost cuts will come from. it does-it says, however, that the cuts are required in part by rising fuel costs and "an unforgiving pricing environment." united filed for bankruptcy protection in december of 2002 and was forced to revamp its business plan after the government refused to guarantee a loss. well, ford cutting costs and cutting out of the formula one racing. that and many more topics in our "money and sports" segment, next.
