Topic: How To Invest

What is Pat's commentary for the week of July 10, 2012?

Article Excerpt

Our first item raises an interesting question: How does LinkedIn compare to Facebook? Neither one has immediate appeal as an investment. After all, both are good examples of in-the-limelight stocks. That is, both trade at high prices that reflect excessive investor expectations. Prices of in-the-limelight stocks can rise substantially if they remain in the broker/media limelight and continue to generate news that maintains investor enthusiasm. But when the news turns negative, these stocks can drop like stones. Stocks can drop out of the limelight and experience steep stock-price declines yet still go on to great business success. Some wind up like Microsoft. It has more than tripled its per-share profit in the past dozen years, but its stock price is within the same trading range as it was 12 years ago. At both times it was well below the peak it hit in the Internet boom of the late 1990s. Other formerly-in-the-limelight stocks wind up like Nortel—as utter business failures if not bankruptcies,…

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