June, be over.
The first half of 2008 has been tough for Wall Street bulls. Stocks are hitting lows they last saw two years ago. Soaring oil prices and a freefalling dollar, meanwhile, are combining to create an inflationary headache.
Are things about to get better? One can certainly hope so, as we nervously step into the second half of the year tomorrow.
You can tiptoe into the uncharted waters if you want. Me? I'm going in for a belly flop. I'm also whipping out my crystal ball, cracks and all, to take a shot at predicting some of the things that will happen in the latter half of this tumultuous trading year.
1. Yahoo! will bounce back
I have been a vocal critic of Yahoo! (NASDAQ:YHOO) in recent months, after blowing the Microhoo deal. However, even a worrywart like me can smell the Yahooliganesque opportunity.
Change is going to happen at Yahoo!, either by choice or by battering ram. You don't trade for a third less than a buyout offer you rebuffed and get away with it. Whether it's new leadership at the helm or the success of the margin-widening solution of outsourcing its paid search, a lot is going to happen at Yahoo! over the next six months. But if you're as flawed as Yahoo! has been, change is likely to be a good thing. That change could take the form of lucid visionaries rising to the top, or a return of Microsoft (NASDAQ:MSFT) to the bargaining table in a friendly capacity. Right now, Yahoo!'s attraction at today's prices -- with roughly half of its share price backed by cash and overseas investments -- lies in its imperfection.
2. Google will close the gap with gold
One of my dumbest calls -- though far from the dumbest call -- came in 2005, when I predicted that a share of Google (NASDAQ:GOOG) will be worth more than an ounce of gold in 10 years. We're less than a third of the way into the race, but it would take you nearly two shares of Google to buy an ounce of gold these days.
I'll go out on that troubled limb again. I believe that Google will close the gap with gold in the second half of 2008. No, my timing isn't perfect. Dot-com stocks are out of favor, and gold just broke out of a tight trading range to the upside. Many people like it as an inflation hedge. Still, I'll take Google's earnings power over the allure of gold and its percolating demand as emerging markets flourish. I think the greenback has been kicked around enough already. Investors will begin to wrap themselves around real growth stories, and there are few as compelling as Google's tale to tell.
3. XM will be a winner
XM Satellite Radio (NASDAQ:XMSR) will be a big winner over the next six months. How's that for a contrarian bet? June has proved to be a month to forget for satellite radio. Shares of XM and Sirius Satellite Radio (NASDAQ:SIRI) rallied after FCC Chairman Kevin Martin finally voiced his approval of the megamerger, but the stocks gave back those gains -- and then some -- when a Goldman Sachs analyst chimed in with a brutally bearish outlook.
I realize that six months isn't enough time for a combined Sirius-XM to prove the skeptics wrong. The deal still hasn't won official FCC approval, and there are financing hurdles to clear. However, even if XM and Sirius cash in on some of the expected synergies, the united company will be in much better shape to tackle the challenges and make the most of an industry that continues to grow.
4. Investors will warm up to China again
It's been a rough time for stateside investors in China's hottest growth stocks. The Olympic Games in Beijing that once seemed like a slam dunk into catapulting the bubbling Chinese economy into the mainstream are now being portrayed as a liability.
I think this will all change once it's time to set aside the boycott chatter and play the athletic contests. That's when the market will warm up to the leading growth stocks in China, including companies such as Baidu.com (NASDAQ:BIDU) and Sohu.com (NASDAQ:SOHU) that are growing just fine in the meantime.
June, be over. July, get started!
Related Foolishness:
