Motley Fool Money: 07.24.2009

While the stock market and economic data may be showing signs of improvement, some investors remain skeptical and believe the current rally could be short-lived. Shannon, a guest on Motley Fool Money, expressed this viewpoint, pointing out that despite some positive economic indicators, there are still challenges such as declining home values, stagnant personal income, and high unemployment. She sees the current market conditions as a "summer romance" that may have outlasted its welcome. The Think Fast, Talk Smart podcast, which focuses on communication skills, offers valuable insights for business and personal growth, with guests ranging from neuroscientists to speechwriters. Regardless of the market's direction, developing strong communication skills is essential for success.

The recent increase in home sales, as reported by those with a vested interest, should be viewed with caution. While there has been a slight uptick in sales compared to predictions, the pace is still down compared to last year and includes a higher number of foreclosure sales. The real estate market, particularly commercial, remains a concern. Microsoft's recent earnings report showed weak demand for PCs and a decline in Windows sales, which is in line with the trend in the industry. The hype around Windows 7 may have contributed to investors' expectations, leading to disappointment with the earnings report. Apple, on the other hand, reported better than expected earnings, driven primarily by iPhone sales. The iPhone's growing importance to Apple's business is a good sign if it continues to generate revenue.

Apple's strategic pricing moves have helped them sell more units and generate more revenue, even during a recession. The iPhone, which initially had high prices, saw a significant increase in unit sales when Apple lowered the prices. Apple's smart decisions, such as reversing the Palm Pre lockout and untethering the development app process for the iPhone, have also contributed to their success. Regarding Amazon, there are several factors at play. While Amazon's acquisition of Zappos was a positive move, their weaker-than-expected sales for the quarter and subsequent stock tumble have raised concerns. These disappointing results may be due to the high expectations set for Amazon, as well as the impact of economic conditions on consumer spending. Amazon's reliance on the iPhone for sales, as well as the potential for them to untether the device from AT&T, are also key factors to watch. Overall, both Apple and Amazon have shown strategic acumen in their respective industries, but face challenges that could impact their future success.

Amazon is currently dominating the e-commerce market, leaving eBay behind. The discussion also highlighted Zappos, a profitable subsidiary of Amazon, which is contributing significantly to Amazon's revenue. Ford reported a large profit, but most of it came from debt restructuring, and the company is expected to turn a profit in 2011. Ford's vehicle sales were strong, but their cars are not considered sexy or desirable by consumers. EBay reported better than expected earnings due to the success of PayPal. Overall, Amazon's continued growth and eBay's reliance on PayPal for success were the key themes of the discussion.

EBay's reliance on PayPal for revenue growth raises concerns for investors, as the dominance of PayPal in the online payments market could be disrupted by new competitors. Although PayPal has been successful for a long time, its high margins make it an attractive target for potential disruptors. On a positive note, Chipotle's strong earnings report and double-digit revenue growth make it an attractive investment opportunity for long-term investors, despite its stretched valuation. Looking ahead, McDonald's also presents a solid investment option, as it reported strong quarterly earnings, despite the negative impact of currency translation. Meanwhile, Morgan Stanley's cautious approach to risk-taking serves as a reminder that not all companies need to take aggressive actions to succeed, especially in uncertain economic times.

Even the best performing mutual funds can experience significant downturns and become poor performers in a given year. However, this doesn't necessarily mean that the fund is flawed or that the risks taken were unwise. Instead, it could be a short-term setback that sets the fund up for future success. For instance, a fund with a significant investment in commercial real estate may experience poor performance during economic downturns but could recover strongly during economic upswings. It's important to consider the long-term outlook and the specific risks and opportunities of each fund before making any judgments based on short-term performance. Another stock worth considering is Microsoft, which may be undervalued based on its expected growth rate. However, investors should be cautious and consider a discounted cash flow analysis before making a purchase. Microsoft's stock price could provide an attractive entry point if it experiences a downturn due to negative news. In summary, even the best mutual funds can have off years, and it's essential to consider the long-term outlook and specific risks before making any judgments. Additionally, stocks like Microsoft may offer attractive entry points during market downturns.