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Markets are called lower this morning. This is what's happening today:
We are seeing weakness in the markets and in my opinion it can get much worse than it already is, wiping out all the gains the markets saw in Q112 especially if the a Greek political party opposing the bailout package is elected in June. Investors are putting risk back on the table as the Greeks go to the polls increasing the probability of the country exiting the Eurozone. As volatility in the markets increase so does the value of the VIX index which came down heavily from its high in Sept 2011. My advice is to stay out of Europe and stay out of financials for the time being. Europe is fundamentally cheaper than the US though the future of the Eurozone is still a question mark. There is no visibility and when there is no visibility, it is hard to call a bottom.
It is true that the Chinese economy is suffering from the lack of demand and foreign direct investment from Europe. However, the Chinese economy is still growing at a healthy rate and it is only a matter of time before the Government carries out further expansionary monetary policy.
Moving on to the US, companies keep on reporting good results despite the weakness coming out of Europe. So it is good to monitor these companies and when we start getting some clarity out of Europe, start purchasing these stocks. If you stay long the dollar and are exposed to low beta stocks, your portfolio shouldn't be the victim of large volatile swings.
I wouldn't rush into selling stocks at this point in time especially if you took my advice and invested in US corporates and emerging markets ETFs. The strength of the dollar is acting as a hedge to your portfolio. Stay overweight the Dollar and US and Emerging markets stocks. Remain underweight the Euro and European equities for the time being. There will come a time when it would be wise to shift out of the US and into European stocks. Though this could take months or even years before we start seeing some positive news coming out of Europe.
BUY LINKEDIN before the Facebook IPO
Everyone is waiting for Facebook to come to the market so that they can get a piece of the action. It is true that in hindsight these types of IPO lead to a rally on the very first day of trading though keep in mind that valued at the upper end of the new range, Facebook would be valued at 26 times trailing 12-month sales, more than double Google Inc.’s valuation when the search-engine operator went public in 2004.
Ask yourself why do you want Facebook shares? I am convinced that most of you haven't gone through an extensive valuation model to try and determine an intrinsic value for the share but have just based your decision on gut feeling. My advice is to buy Linkedin instead of hoping for a remote possibility of getting an allocation for Facebook. Linkedin closed the session at $110.56/share yesterday. The company reported a strong 1Q, with continued 100+% revenue growth as well as EBITDA upside at 20% margins. JP Morgan are bullish on the stock. Hiring Solutions, Marketing Solutions, and Premium Subs all exceeded expectations and they are raising our outer year estimates considerably to reflect stronger than expected growth and continued secular shift. JP Morgan expect shares to respond favorably to LNKD's steady upside and margin outperformance, and they are raising our price target to $135. Goldman Sachs have a price target of $150/shares and Piper Jaffray have a price target of $145/share.
Main points from a JP Morgan report on Linkedin:
For further information on Linkedin or other stocks we follow, contact our offices on 25688688.
Good day and happy trading!
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