4 Predictions for 2009

2008 is so yesterday. It's time to start looking ahead, so let's dust off this crystal ball to see what the future may hold for some of your investments.

Naturally, going out on a limb can be a risky pastime. However, it's really the only way to invest since the best stock pickers are the ones who train themselves to see what others don't. 

So, in no particular order, let me go over a few of the financial news events that I see going down next year.

1. Yahoo! will trade higher in 2009
The answer you're looking for is 2005. That is the last year that found shares of Yahoo! (Nasdaq: YHOO  ) trading higher. The stock tanked 35% in 2006, slipped 9% in 2007, and is being hammered with a 48% drop so far this year.

The streak will end in 2009, as there are too many catalysts working in the company's favor:

  • Microsoft (Nasdaq: MSFT  ) can always come back. The bid will be substantially lower than the original $31 offer, but enough of a premium to put shareowners out of their misery.
  • A new CEO may prove to be the visionary that can spark market share growth and margin expansion.
  • Yahoo!'s Asian investments, including chunky stakes in Yahoo! Japan and China's Alibaba may become market darlings again, even if Yahoo! itself does not.

Even if none of this happens, Yahoo! is still a huge traffic magnet in cyberspace. Once ad rates stabilize, the Internet should bounce back stronger than more traditional advertising platforms.

2. Sirius XM won't file for bankruptcy
Wall Street is braced for the worst with Sirius XM Radio (Nasdaq: SIRI  ) . The stock has shed 95% of its value this year, trading for pocket change as if a Chapter 11 bankruptcy filing is around the corner.

It's easy to be fearful. The company has a third of its $3.4 billion in total debt due next year. Refinancing isn't easy when credit markets are tight, and a $0.15 share price makes a dilutive recapitalization unattractive.

CEO Mel Karmazin doesn't really have much of a choice, though. As a consumer-facing company, filing for bankruptcy reorganization could be fatal. Subscribers will back off from prepaying for long-term subscriptions, and automakers will want sweeter customer acquisition royalties. Either way, cash flow will take a colossal hit that is not offset by emerging out of bankruptcy with a cleaner balance sheet and wiped-out common stockholders. It won't be easy, but Sirius XM will do everything possible to avoid getting that far.

3. Tech will lead the market recovery
Some of this year's biggest laggards, like homebuilders, investment bankers, and banks are starting to bounce back. I don't buy it. It may be years before real estate developers have a reason to break ground on new homes or for investment bankers to underwrite deals. The one sector that will lead the country out of recession is technology.

It will be companies like Apple (Nasdaq: AAPL  ) and Google (Nasdaq: GOOG  ) , which were smoking hot leading into the meltdown, that will regain their sizzle. They have been gaining market share during the lull, even as analysts talk down their near-term earnings prospects.

4. Chinese stocks will outperform stateside equities
I took a look at the one stock in China that I believe investors should own next year, but they should fare well with just about any of them. China's economy is showing signs of cracking, but the government is taking a proactive approach in beefing things up to nip the malaise in the bud, unlike the reactive approach elsewhere .

There are bargains to be found everywhere you look. Online gaming leader NetEase.com (Nasdaq: NTES  ) -- growing nicely and with insane profit margins -- is fetching just 11 times next year's projected profitability. Leading real estate agency E-House (NYSE: EJ  ) is trading at just 13 times next year's bottom-line targets, and this is actually a fast-growing industry in China.

I am optimistic when it comes to the chances for the United States to bounce back next year. However, I am even more confident that the sturdier Chinese equities will lead the way higher.

Other stories to read before the ball drops:

Microsoft is a Motley Fool Inside Value recommendation. NetEase.com and Google are Motley Fool Rule Breakers picks. Apple is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz doesn't mind taking out the crystal ball from time to time, if only to dust it for fingerprints. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (188)

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  • Report this Comment On December 09, 2008, at 6:46 PM, kurtisj wrote:

    I like your tech and Chinese equities predictions.

    Not so sure on the 2009 Yahoo! bounceback. Not only is it poorly managed, but a WSJ article today additionally pointed out that a major source of advertising revenues for Yahoo is the auto industry. Those revenues will bleed away, and there most likely will not be another industry to pick up that slack.

  • Report this Comment On December 09, 2008, at 8:03 PM, prphil wrote:

    Recently you've been pushing SOHU. Looks like a good stock with great forward earnings, but timing is everything in this market. As I mentioned yesterday.

    Today SOHU WAS DOWN OVER TWO BUCKS.

    Some one once said buy low sell high.

    Any comments?

  • Report this Comment On December 10, 2008, at 2:04 AM, serraballi wrote:

    I think 2009 will be a very disappointing year for equity investors. China too is hurting big and with consumers in the west cutting back their frivolous consumption, export oriented countries like China will hurt the most.

    Obama's plans to increase US infrastructure expenditure will be targeted to benefit US companies and rightfully they should. So I don't see much respite for China here. Come spring we are looking at a US market crash taking out the recent lows once the market realize that Obama cannot do much with a dismal world economy! Not much hope till 2010/11!

    The lowered corporate earnings estimates are still too high - the recent rally is a suckers rally so beware.

  • Report this Comment On December 10, 2008, at 10:30 AM, FinancialFellow wrote:

    It's always fun to read about stock predictions. We'll see if any of them come true... At the least they sound feasible. The author is right on one thing, though, bargains are everywhere. My biggest obstacle is coming up with enough extra cash to invest in the market. Interesting article on a way to save a little cash (that you could use to invest in the market) by saving money on your cell phone bill: http://financialfellow.com/2008/12/09/14-ways-to-save-money-...

  • Report this Comment On December 10, 2008, at 2:19 PM, jetsetpete wrote:

    I'd look at China with a cautious eye right now. Those stocks are going to fall farther.

    http://www.ft.com/cms/s/0/704c10ca-c69f-11dd-97a5-000077b076...

    http://nymag.com/news/business/52754/

  • Report this Comment On December 12, 2008, at 8:58 PM, jamesgambrell wrote:

    in 2009:

    Yahoo trades below $8.00

    Amazon below $30.00

    Google trades above $400

    Annaly continues to pay above 10% dividend

    Good luck, be prudent and have a Merry Christmas

    ....Santa Clause

  • Report this Comment On December 12, 2008, at 11:07 PM, bigkansasfool wrote:

    I'm curious why there were so many recs on this article other than hopeful optimism that the 4 things will come true. Personally I'd take the the other side of all four of these predictions.

    1) Yahoo is the atari of this decade. Microsoft won't come back because the whole purpose was to go head to head with Google and Microsoft realized that combining 2 losing search engines won't create a winner.

    2) Sirus XM will go the way of Iridium (the satellite telephone company that went bankrupt then came back).

    3) The causes of the recession will be, and have to be, the ones that lead out. Real estate value have to bottom, and then banks. They'll be the ones that rebound first (hopefully in the 1st quarter).

    4) Chinese stock will not outperform US stocks, and most likely will go the way of Russian stocks. China's growth is still extremely dependent on US consumption. The US economy has to recover before the Chinese economy can begin to recover. The only way that Chinese stocks would outperform US stocks is not through fundamentals, but instead rampant speculation similar to the past. In the deleveraged, risk-adverse future this is highly doubtful.

  • Report this Comment On December 12, 2008, at 11:14 PM, mgtcrguy wrote:

    Gee Whiz,

    All these Smart guys........Thank god for small private cap business in Michigan. The strength of manufacturing is still small private cap generational family businesses. look out for MIMFEDS, a kieratsu of private caps ready to step in for the mess....You guys just keep wasting your time...small private cap businesses will pick up the ball in Mi.

    Ha Ha Ha on all of you !!

  • Report this Comment On December 13, 2008, at 8:16 AM, pedorrero wrote:

    I usually am the pessimist. Good news: I'm ususally wrong! But, parroting some other bears, DOW hits its low (5000? 4000?, yield at 6%) maybe in 2009, probably 2010. Unemployment: 10-15%. Not quite there yet! My money is mostly in gold (yay!), my house (yuk!) and has been so for years. Sadly, most of my retirement (I have no control of it), is managed by the "Wise", let's see ... 60% stocks, 40% bonds. Well, what can I do??? Answer: buy another Kruggerrand if any money left over.

  • Report this Comment On December 13, 2008, at 4:59 PM, earthsphere wrote:

    Oh, please! China will not outperform USA. China will fall lot faster. So We'll see.

  • Report this Comment On December 15, 2008, at 7:15 PM, journeywithme wrote:

    I have one that I think may be interesting to look at now. It is Ingersoll Rand. (IR) Although I am a novice at investing I think we may see this stock go north in the near future. It's at a decent price now ($15/ per share) and has traded in 2007 at around $55/per share.

    I just blogged about it here: http://ourstockmarketjourney.blogspot.com/

    Be well.

  • Report this Comment On December 26, 2008, at 1:58 PM, pmitchel2008 wrote:

    Add one more prediction for 2009: Gold will most likely double.

    Given the proposed spending of Pres. elect Obama, gold will explode. A quarter or two of deflation will turn into inflation.

    An analyst named Schiff predicted the present financial crisis and was laughed at in mid to late 2007. He predicts Gold as the place to be in 2009.

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