Thu07242014

Business & Real Estate

What to do when the Dow goes down?

Right now there is little doubt of the Dow’s status. Stocks are trending downward, prompting the question: Which way will investors go? The market’s reaction to third-quarter results, available in a week or two, will be crucial.

Will investors abandon stocks because of the November presidential election, the turmoil in Spain and the European Union or continued unemployment at home? Will they stick with stocks, maintain an invested posture and keep some cash on the sidelines? Or perhaps the situation presents a buying opportunity for upward stock movement next year. Drawing a big-picture conclusion from a short-term market move is usually a mistake, but stock exposure currently depends on investor sentiment, valuations and opportunities available in individual stocks. Sectors anticipating a slow year are heading higher and experiencing a huge year (Homebuilders Index and Oils). September historically has been the market’s worst month of the year, but last month the Dow increased 3 percent, the S&P 2.9 percent and the NASDAQ 2.3 percent. Shorting the market did not prove fruitful this September. Lousy results confronted investors nearly every day, but September was still a good month. Now it’s time to let the winners run and look for chances to enter the market with new buying and not jump out to avoid a slump. The following two Town Crier 50 companies have recently scored headlines and run into periodic problems for investors. • Rambus Inc. (RMBS; $5.32). The former Los Altos-based company relocated to Sunnyvale. Its stock is well off its highs because of recent rulings that have engendered volatility. The stock has slumped 23 percent since Jan. 1. Rambus’ share price has ranged from a high of $150 in 2000 to a low of approximately $3 in 2002, with a 4-to-1 split in June 2000. In 2010, the price rested between $20 and $24, which equaled a market capitalization value of $2.5 billion. According to the Wall Street Journal, Rambus’ history has always been marked by litigation, including patent battles with numerous chipmakers. Last week, Rambus and Fujitsu Semiconductor signed a six-year patent license agreement. Financial terms remained confidential. Profit via litigation has not been a good move for Rambus – whenever a new legal decision is reached, its stock experiences volatility. • LSI Corp. (LSI; $6.87). In 1981, Los Altos Hills resident Wilfred Corrigan and several other former Fairchild Semiconductor employees founded LSI Logic, an original Town Crier 50 stock. LSI has had its ups and downs but has survived more than three decades in Silicon Valley. LSI announced a recent collaboration with Microsemi Corporation wherein the two companies will pool their expertise and resources to reduce costs. The deal is expected to improve efficiency and operability to address the growing needs of mobile networks. Analysts are mixed on LSI’s prospects, with several calling the stock positive, two recommending a Hold and one a Buy.

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