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On a worldwide basis, it is likely that lower economic growth and increasing unemployment will reduce consumer spending beyond that of lower house sales and lower auto sales. This is likely to extend into the consumer electronics markets.
The U.S. stock market has lost five years of growth. Valuations have dropped in line with the decline in prices. Although there are many areas that have not yet felt the impact of a worldwide recession, many stocks reflect the perception that capital markets are dead or dying.
Stocks with negative cash flow have been hard hit. I would look for areas of economic strength, positive cash flow and potential growth in earnings at a reasonable price.
SINA Corp. ( SINA - Analyst Report ) is one of the most well-known online brands in China. The company is a leading provider of online media and value-added information services to global Chinese community. SINA continues to do well in its online brand advertising and is increasing the gap between it and its closest competitor in the online brand ad market.
Sohu.com, Inc. ( SOHU - Analyst Report ) is a leading online brand in China. Services provided by the company include news, search, e-mail, games and wireless messaging. The company offers services through one of the most comprehensive matrices of Chinese language web properties and proprietary search engines, consisting of the mass portal and online media destination sohu.com; interactive search engine sogou.com; online mapping service provider go2map.com; online alumni club chinaren.com; games information portal 17173.com; real estate website focus.cn; and wireless value-added services provider goodfeel.com.cn.
In the second quarter of 2008 the company derived about 42.5% of its revenue from online advertising. Online games and the wireless business each contributed 47% and 9% of the company's revenue, respectively. Gaming is growing rapidly and should do well over the next few years.
A decline in consumer purchases would impact Sony ( SNE - Snapshot Report ) , as well as the contract manufacturing companies such as Sanmina-SCI ( SANM - Snapshot Report ) . We would avoid these stocks.
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