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August 25, 2009
Sold Half of CBS
On Monday, I sold half of Northlake's positions in CBS in each account that holds the stock. My reasoning is that the stock has risen 80% since purchasing it just 7 weeks ago. This spectacular rise caused CBS positions to approach 4% of equity portfolios. That is a high threshold for me, especially in a volatile stock.. At a 4% position, the lost performance if the stock took a hard hit would be meaningful. Given that my stretch upside target for the next 6 months is $15, not hugely higher, I wanted to capture some gain and reduce risk. The market has come a long way and an extra 2% cash position seems prudent.
CBS rose so sharply because 70% of its revenue is from advertising and advertising is highly sensitive to the economy. The market rally is partially based on the improving economic outlook so it is no surprise that traders flocked to CBS. Two other factors have helped CBS. Cash for Clunkers and the health care reform debate have led to an unexpected boost in advertising. In addition, CBS converted its ratings strength into a better than expected outcome in the upfront TV ad market.
If the economy is on track for recovery and growth in 2010, CBS can reach $15. I want clients to have some exposure to the possibility of a stronger than expected economic. CBS fits the bill.
Posted by Steve Birenberg at August 25, 2009 02:36 PM in CBS
1 WHAT DO YOU THINK OF CETV'S DOWNGRADE BY MORGAN JOSEPH ANALYST?
2. WHAT DO YOU THINK OF THE PRESENT MARKET DROP WITH GOOD NEWS- CORRECTION OR START AGAIN OF THE BEAR MARKET?
I have not read the Morgan Joseph report but given the still uncertain outlook for the timing and strength of an ad recovery in Central Europe, I think a downgrade at $0 is completely understandable. My expectations for a sold recovery make the stock look fully valued on traditional measures but if a recovery kicks into gear, the stock will quickly look ahead to 2011 on which I can see it trading at $40-50.
I think the market is due for a correction but I do not think we are in for a retest of the lows or anything even close. I like how the economic statistics are shaping up but investors are going to be more sensitive to weak numbers than strong numbers for awhile. I plan to be a buyer on weaknesswith 975 onthe S&P the first key level.
Posted by: Steve at September 2, 2009 08:10 AM