Increasing Stock Correlation (Highest since 1987)

The last few weeks my portfolio has moved in sync with the larger markets. I thought it was coincidence until I saw this article in Wall Street Journal. The average correlation since 1980 has been 44%.

Earlier this year, when stocks were on the mend and investors were less anxious, the correlation between the S&P 500 and its stocks fell below 50%, suggesting investors were looking for individual stocks to own rather than just buying large indexes.

Earlier this year, when stocks were on the mend and investors were less anxious, the correlation between the S&P 500 and its stocks fell below 50%, suggesting investors were looking for individual stocks to own rather than just buying large indexes. By mid-June, the correlation had jumped back above 70%, last week it touched 83% one day.

Correlation typically goes up during volatile periods when investors dump stocks wholesales rather than pick out stocks that once were viewed as refuges *such as those that pay dividends.

Source: http://bit.ly/ddgZc4

Priceline vs Expedia

Recapping some of the insights from this writer, let’s take a look at Expedia & Priceline, two travel-booking companies.



1. Priceline. http://www.google.com/finance?q=priceline earned $3 billion in revenues  in 2009 with expected earnings to grow 17% in 2010. EBITDA is expected to reach nearly $950 million in 2010, up 12% YoY.
2. Expedia earned $2.3 billion in fees with expected revenues to grow 19% this year with expanding margins.

Accordingly, if one were to value Expedia at EBITDA, then their shares are worth $45, 93% above the current share price. Taking into account that many internet companies trade at less than half that yield, Expedia is still worth 50% above the current share price.

Source

http://seekingalpha.com/article/192388-priceline-is-properly-valued-while-expedia-is-undervalued

China’s Exports Rise 46%

Seriously, talk about a great headline. A 46% increase in exports, more than 50% of it attributed to Western nations, signals that the markets are starting to turn around.Exports of textiles, steel products, televisions and motorcycles also rose.

Source

http://www.nytimes.com/2010/03/11/business/global/11yuan.html?hp