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Why I'm Leery of Monster

 Apr 16, 2008 03:38 AM UTC
Return Risk
+23.98% MID
Tracked Blogger
Symbol Sentiment Start Return Closed
MWW Negative 04/16/08 +23.98% --

Graphic_arrow1 Via Short Stock Ideas from Seeking Alpha:  

Yesterday on TickerHound.com, a member asked: "What do you think about Monster.com?".<!--more-->


I haven't thought about this company for a long time. But once I started to really take stock of our current economic climate and Monster's business model, I began to see why I needed to tell all my friends to doublecheck their portfolios and make sure they weren't holding onto any shares of this one.




Monster Worldwide (MNST) is one of the world's largest online job databases. The company is one of the few successful holdouts of the dot-com era, and performed rather well after the market began to make a comeback in 2003.


The stock went from a low of $8.57 per share in March of 2003 to a high of $57.40 in April of 2006 - that's a 569% return in under 3 years. Not bad, not bad at all.


But to keep all this in perspective, the stock was at $91 a share in March of 2000. So over the course of 6 years, the stock was actually down about 37%. Reason being the recession of 2001 and the subsequent multi-year bear market that followed.


Monster, being so tightly correlated to the job market, got hit so hard because as unemployment went up and companies stopped hiring, their site provided very little value to employers and employees alike.


So now we're at the beginning of 2008, it's pretty obvious we're heading into a recession (no one knows how bad this could get), and I feel like I've seen this movie before.


Many people would tend to agree - Monster's already down about 30% since the beginning of 2008.


Some may call that oversold, I call it "the tip of the iceberg."


If we were simply talking about an equities market "correction," then I'd say we'll be coming out of the downturn by the 3rd quarter. But we're talking about a crisis in the credit markets here - we haven't had to deal with this since the '70s and when you stack inflation on top of it we're looking at a "perfect storm" scenario.


So this isn't even a matter of performing deep financial analysis or picking apart the chart to identify a pattern. Let's use some common sense (an underused asset in many investors' toolboxes) here and see if we can figure out what's going to happen to Monster…I think asking ourselves a few questions will be a good way to proceed:

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