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Marvell Hit by RIM Shot

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But scale buys could be handsomely rewarded.

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Research In Motion (RIMM) gave the market some bad news - mostly on margins as expenses rise.

As readers know, I've done little on RIM all year (save a couple comments on panic-type sell-offs), mainly due to what I've felt were stretched valuations. As an example -- and even though it isn't thought of as a great value stock -- Apple (AAPL) trades at less than half the price-to-sales ratio of RIM. Google (GOOG) also trades at a lower PSR and price-to-book than RIM.

So I think the big selling today has more to do with RIM still being priced closer to perfection than many other large-cap growth stocks in the technology space. All that being said, if you like RIM, I do think it could offer yet another bounce trade if we see the stock in the mid-high $60s. Let's call $68 an area I may take a stab at.

Lastly, had RIM's quarter not come out at almost exactly the same time as the bailout news coming apart came out, the stock would likely be trading down $10-plus instead of $20-plus.

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Google/ Apple:

If you have massive bravery and faith that a deal will get struck this weekend, the weakness in Apple and Google is probably an opportunity today. I think Apple's iPhone has put increasing pressure on RIM"s products, and the G-phone could add to that pressure.

Even so, RIM's product sales will likely gain share on traditional cellular products. I still like Apple a little lower, say in the $1-teens, so I'll continue to remain patient on this name. As for Google, I like it right here and any point lower.

As I said a couple of weeks ago now, I think we'll see financials outperform tech stocks for a while off these lows, and will likely provide better bounce plays - assuming you avoid the names that disappear.

It feels as though people are willing to look through the abyss in the financials that survive and ignore massive declines in sales, earnings and the occasional stock that goes to zero.

Meanwhile, tech balance sheets are the strongest in the world, valuations are exceedingly low and the number of leading tech names to go to zero is... zero. At some point, this massive valuation discrepancy will work itself out.

Marvell (MRVL)

Terry featured this stock in Two Ways To Play as on the bull side. Marvell is another RIM victim, even though they have a diversified lineup of chip products. Marvell does have significant RIM exposure - but does have an expanding product line that could help and not hurt Marvell.

Again, as was the case last quarter, nearly any company might miss the upcoming quarter. It's a matter of how much is priced in, when does sentiment change, and when do fundamental valuations matter again. If you only have days, it's hard to endorse any purchase other than a leading bank like JPMorgan (JPM) (which I've said is the new Goldman Sachs (GS)), or a leading US solar play.

However, if you have months to quarters, then I think Marvel purchases done with scales will be solidly or greatly rewarded.

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Position in GOOG, MRVL

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