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Tech stocks - Monday, May 4, 2009

Sell And Go Away In May? Not Today!

Anyone who was tempted to put their shares on the block today should have immediately changed their mind after the stock market shot up this morning. Taking faith in the news that pending home sales were on the rise, the Dow streaked upward by 214 points. Is this rally going to last? And should investors bank on a housing survey conducted by the National Association of Realtors? The staff at tech:stocker isn’t buying what they are selling and neither should you.

First, the survey from the National Association of Realtors discusses pending home sales, not homes sold. This reminds us of eTrade (ETFC:NYSE) and how they boast about new customers when any moron can sign up for eTrade without providing sensitive information – something any legitimate trader would need to do. Pending sales are far different than actual sales as not all pending sales close. At a time when banks are actually forced to verify income and make sure that the borrower is actually “qualified” to borrow the amount they are asking for, we believe the percentage of sales that actually close is far lower than three years ago.

With unemployment still hovering around record highs and the summer coming up, we still expect to see more homes with for sales in front of them before the housing market truly bottoms. We’re not about to buy into a survey that is published by a group that represents realtors – the only profession whose morals are lower than most lawyers. If you are buying stocks because you believe the housing recovery is right around the corner, than you are buying for the wrong reason.

The rally we are currently riding could go higher before Wall St. makes a correction. If you don’t need the cash you have invested in equities for a year or two, don’t try to time the market and leave it in. As we saw with the Swine Flu rally killer last Monday, small pieces of bad news, let alone large significant ones, could send the market backwards in a hurry. Or, barely reputable pieces of good news can send the market higher like today. Either way, things will be fine in the long run. Stay from trying to “time the market” and you’ll be fine also.

Over the last few months we’ve been receiving emails to take a look at the Tel Aviv-based company, Radware (RDWR:NASDAQ). Because the company has been on a fairly consistent descent in Hell since January 2, 2004, we couldn’t understand why anyone was interested in the company so we decided to appease the requests.

In case you weren’t aware, Radware provides integrated application delivery solutions for networks. Their best product, Radware DefensePro, provides networks with protection against the supposedly rising number of threats. Radware is extremely proud of the fact that DefensePro is in the “visionary quadrant” of Gartner’s (IT:NYSE) Magic Quadrant for Network Intrusion Prevention System Appliances. Gartner’s Magic Quadrant never gets our investment dollars locked and loaded and we usually recommend staying away from their “pay-to-play” recommendations.

As we said earlier, Radware’s share price has been on a slow death spiral and today’s earnings report shouldn’t do much to slow it down. The company reported an 8 percent drop in quarterly revenues from the same quarter in the previous year. Radware reported a loss of $0.32 per share compared to $0.42 per share during the same quarter in 2008. While it’s good to see the company has done a solid job paring its expenses, we’re not convinced that the Radware is on the path to profitability as CEO Roy Zisapel touts in the earnings release.

Mr. Zisapel also makes mention of the $18 million acquisition of Nortel’s (NT:TSX) Layer 4-7 Application Delivery Business. We’re not familiar with their business but with Nortel Networks moving beyond the death spiral stage to basically a straight plummet to the earth, we have to wonder why some other company, maybe someone like Oracle (ORCL:NASDAQ), didn’t come in and buy the Layer 4-7 if there was money to be made. After all, Larry Ellison could have gathered the change lying around his house to make the acquisition.

While every once in a while we like to recommend low-lying stocks for speculation purposes, Radware isn’t going to be one of them. If you are looking for a geeky tech stock for speculation purposes, we’re going to recommend you buy Anaren (ANEN:NASDAQ).