Editor’s note: This article was first published in November 2013; its market calls, Snapchat’s figures (30 employees, no revenue, a $3 billion Facebook offer) and the Nasdaq and IBEX levels are from that time. Gowex later collapsed in July 2014, and Banco Popular was sold to Banco Santander for one euro in June 2017. These November 2013 calls are kept as a historical record and are not investment advice. Banco Popular, one of the picks, was resolved and sold for one euro in 2017, wiping out its shareholders.
Little has changed since the last time we talked about my personal feeling about the markets. In fact, I have stopped listening to the news so that I can stick to my initial view.
The tech bubble
The tech bubble is under way. The problem is that nobody can know when it will burst or how, because this time it will not be like 1999. We are still valuing companies not for what they are worth but for what they might one day be worth, and that is very dangerous, because some of them could end up being worth nothing.
Twitter is overvalued right now, and as I said in my previous article, even if it is the platform of the future (which, in technology, you always have to doubt given how constantly things change), I still see it struggling to generate sustainable revenue over time.
The data point that confirms the tech bubble has begun is Snapchat, the famous app that turned down a $3 billion takeover by Facebook. Put another way, this app, which is mere entertainment for teenagers, has 30 employees and is not generating any revenue at the moment, and yet it turns down 3 billion because it expects to be worth more. “When madness shows up in the markets, you have to tread very carefully.”
Yesterday’s fall in the Nasdaq may be down to all this news, and even to some doubts that are emerging about Facebook.
It may also be due to a failed technical assault on the 4,000-point area on the Nasdaq. Remember that the last time the Nasdaq reached 5,000 points, the dot-com crash followed. And yes, this time may be different, as people always say, but the madness is similar.
We are sticking with the stocks we have already recommended on Wall Street: Apple, Microsoft and Intel, for conservative, long-term investors. We could add Lenovo to our portfolio, because after taking a look at it, the company looks promising.
I would even venture to take advantage of the sharp falls in Tesla Motors to buy into the stock as a way of diversifying a Wall Street portfolio.
Spain
As for the Spanish market, I don’t mean to be a pain, but while large companies are still weighing whether or not to file for insolvency proceedings (concurso de acreedores)… I still say I would not buy with the IBEX 35 above 9,000 points, and I would be very careful when picking stocks from the mercado continuo (the Spanish continuous market).
I want to stress the great danger hanging over Quabit and Urbas.
If the property crisis spreads (and nothing suggests it won’t), the situation of Quabit and Urbas will be critical. Both companies remain among the favourites to end up disappearing, because they barely have any business and they have the worst equation a listed company can have: shrinking business and growing debt.
Banks
We are still clearly backing mid-sized banks for the long term: Banco Popular, Sabadell and CaixaBank. In Popular’s case, though, if you are not already in the stock I would not buy above €4.20, because the bank is very overvalued at the moment. I would wait for corrections.
Our recommendation
The usual one. Our biggest long-term bet is still Ezentis, and I am starting to consider selling Gowex if there is a correction.
And as always, this is only a personal opinion, which may or may not turn out to be right.
Featured image: User:ed g2s , User:Soluvo, Public domain, via Wikimedia Commons.
