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ramses01 on 16 October 2010
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Aielyn said:
ramses01 said:

You must not understand Pachter's job very well.  10% down is terrible.  Wii software is horrendous.  The handheld market is very weak compared to the past years.  You have to understand that investors need to see strong, continued growth in order to invest in stocks.  Basically, what he is saying is that given the environment, now is a good time to short stocks with large exposure to Wii and handhelds.

That IS what he's saying... unfortunately, it's entirely the wrong message.

Whether or not to invest or divest in stocks for a company should be based on FUTURE performance, not PAST performance. The Wii and DS have been performing weaker than usual SO FAR. But that's actually a good reason to INVEST in Nintendo, because it's when everyone else is selling and the price is down; meanwhile, not only does Nintendo have one of its biggest-selling franchises on the way (Zelda, early in 2011), but it has two other major releases coming for the holidays - DKCR and Epic Yarn. And in addition to this, one of the biggest other franchises in the universe, Mickey Mouse, is also coming exclusively to the Wii. And at the same time, Nintendo has the 3DS on the way.

Pachter has consistently only looked at short-term issues. This is common amongst analysts, who need to look good in the short term. But a Wii HD, for instance, would be devastating in the long term for Nintendo - they would make nowhere near as much money off it, it would be more expensive and thus sell worse, and it would split the market at a time that Nintendo needs to leverage the market. The ONLY advantage that a Wii HD would conceivably have is support from third parties... and if third parties won't make for the best-selling system of all time, what makes you think they'll support an install base that is miniscule compared with the 360/PS3? The only way that a new iteration of a console makes sense for Nintendo is if they're releasing the next generation of console, in which case it had better be more than just a Wii HD.

For Pachter's clients, ONLY the short term matters.  You never invest on the down swing.  At or near the bottom yes, on the way down no.  Nintendo and the other publishers of concern are probably going to get hammered over the next 3 months so now would be the worst possible time to invest.