There is always an urge to jump in and buy blue chip stocks such as Siemens AG ( SI , quote ) or JP Morgan ( JPM , quote ) or Exxon Mobil ( XOM , quote ) when the market is declining. Investors will always posit the query of, "how much lower can it possibly go?" as justification for a poorly timed purchase of a stock.
One answer for SI is that it has already fallen over 25% in the last six months alone.
Siemens AG will be back. But, like everything in life and investing, it is all a matter of timing. Anyone who has bought Siemens AG this year has had exquistetly poor timing as it is down more than 4% for the week, over 7% for the month and 21% for the year-to-date. SI was just downgraded on October 14th by Standpoint Research.
The Eurozone debt crisis is nowhere near being over. After that will come the recession in Europe, although it has probably already started. If history is to be a guide, Siemens AG (SI) bottomed out just under $50 in early 2009 -- when the markets were bottoming out.
Now around $95, Siemens AG (SI) has a number of encouraging features. The price-to-sales ratio is under 1. The price-to-earnings ratio is under 10 and projected to fall to about 8 over the next fiscal year. Siemens AG (SI) is profitable (9.54% margin) and it has an above average dividend of over 4% that is easily sustained by a payout ratio of under 40%.
It is trading below its 20-, 50- and 200-day moving averages with a sharp downward trend for November, which is very bearish. That is reinforced by the lengthy negative candlestick patterns. Blue chip stocks like JP Morgan (JPM), Exxon Mobil (XOM) and Siemens AG (SI) are not going bankrupt, but they are not going up any time soon, either.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.