April 2000
|
Contents Back Issues March 2000 Investing Buy & Sell: Casinos Stocks for traders Model Portfolio Sold Model Portfolio Update Model Portfolio Chart |
Current Economic Situation Favorable Factors Durable Goods Orders- Orders for the durable goods fell 2.3% in February, after dropping 2.2% in January. In December, orders for durable goods rose 6.5%. Recent declines have brought the manufacturing sector to a more manageable pace. Consumer confidence- In March, consumer confidence fell to 136.7 a five-months low. As the price of crude oil rose, consumers have lowered their outlook. This bodes well for the U.S. economy because consumers account for two-thirds of economic activity. Consumers could curtail their spending and this could slow down the economy to a more manageable, non-inflationary pace. Productivity- Productivity grew at 6.4% annual rate in the fourth quarter. For the year, productivity rose 3%. Although the cost of labor and materials continues to rise, the advances in productivity allow manufacturers to keep prices of manufactured goods at stable levels Consumer Prices- Consumer prices rose 0.4% in September after rising 0.3% in August. After the latest CPI increase, the annual inflation rate edged higher to 2.7%. Unfavorable Factors Producer Price Index- The index rose 1% in February. Majority of the increase was due to the high cost of energy related products. Oil- After rising to $34.13 a barrel on March 7, oil closed at $26.90 a barrel on March 31. Last month, oil closed at $30.43 a barrel on February 29. Oil producers intend to increase output, but it is not likely that we will see lower prices of gasoline until the end of summer. Trade deficit- The U.S. trade deficit rose to a record $28 billion in January, up 13% from December. |
|
Investing The market continued its volatility. The Dow Jones industrials average started at 10137.93 on March 1, and then proceeded on its wild up-and-down ride. On March 2, the Dow gained 202.28 points and closed at 10367.20. Then, on March 7, the Dow dropped a whopping 374.47 points and finished the day at 9796.03. Afterwards, the Dow proceeded to build upward momentum and on March 16, rocketed to 10630.60, a gain of 499.19 points, on a volume of 1.476 billion shares. On March 28, the Dow fell 89.74 points, to 10936.11 while the Nasdaq composite index dropped a whopping 124.67 points, or 2.5%, and finished the day at 4833.89, after Abby Joseph Cohen, who is a chief market strategist at Goldman Sachs recommended that investors cut their stock holdings to 65% from 70% and move that money into cash. Abby Joseph Cohen expects the Dow to finish the year at 12600, and if it does it would end the year with a gain of just 10 percent for the year. After this announcement, each investor should examine their portfolio and make appropriate changes. Investors do not have to act immediately. If a stock that you are planning to sell fell a few points and there is a strong probability that it could revisit its recent high in a few weeks, then surely you could wait a while and then sell it. Ms Cohen also added that in her opinion technology stocks are fully valued. This immediately affected the tech stocks and the Nasdaq composite index proceeded to fall at a fast pace. On March 28, Nasdaq composite index fell 124.67 points, and finished the day at 4833.89. The next day, Nasdaq composite index continued its free-fall and dropped 189.22 points to a close of 4644.67. On March 31, the Nasdaq composite index closed at 4572.83, up 114.94 points. Just two months ago, the index broke through the 4000 level. Then, on March 9, Nasdaq composite index closed above the 5000 level for the first time and finished the day at 5046.86, with a gain of 149.60 points, on a heavy volume of 1.9 billion shares. After the recent run-up, a pull back was expected. The Nasdaq composite index continues to be propelled by tech stocks such as Cisco Systems, Sun Microsystems and Intel. Although many of the tech stocks that are in the Nasdaq composite index trade at an extremely high price to earnings ratio, the revenues are growing as much as 50% annually, which justifies such lofty P/E ratio. Although the Fed will continue to raise interest rates to slow the economy to a more manageable pace, such action should not affect the tech stocks. It is very easy for the tech companies to do a secondary stock offering in order to raise additional cash and use it for expansion, or acquisitions. Although the market remains volatile, investors should remain calm. This isn’t the first correction and surely it isn’t the last. Corrections are a normal part of the market cycle. The market has to pause, then pull back once in a while, and then again resume its upward momentum. During this turmoil in the market, our “Model Portfolio” was very resilient and on March 31, rose to $151,836, up $13,613 or 10 percent, from $138.223 reached on February 29, 2000. Back to Top |
|
Buy & Sell The gaming industry continues to do well in this positive economic environment. Most of the stocks in this sector are trading near their 52-week high. As the Fed continues to raise interest rates, the public could curtail their spending and the revenues derived by casinos could fall substantially. This would have negative effect on revenues and the stocks in this sector could fall as much as 50 percent over the course of a few months. The risk of owning stocks of casino operators is above average and in our opinion only speculators should invest in this sector. Ameristar Casinos, Inc. (NASDAQ symbol: ASCA) is a mid size casino operator. The Company operates the Reserve Hotel Casino in Henderson, Nevada; Ameristar Casino Vicksburg, in Mississippi; Ameristar Casino in Council Bluffs, Iowa; Ameristar Cactus Petes and Horseshu in Nevada. There are 20.36 million shares outstanding. For the year of 1998, revenues rose to $264.4 million, from $206.17 million for 1997. Due to the pre-opening cost of $10.6 million and promotional allowance of $22 million, the Company reported a net loss of $12.7 million, or $0.62 a share, versus income of $10.4 million, or $0.48 a share for 1997. The Company continues to add additional hotel and gaming facilities every other year. Furthermore, the Company continues to upgrade its existing casinos. In Ameristar Casino Vicksburg, the Company installed 150 additional new generation slot machines, which increased gaming revenues. The great variety of restaurants on casino premises, from buffet to Italian, and a 24-hour diner concept generated $45.7 million gross revenues in 1998. On July 15, 1997, the Company completed an offering of $100 million in principal amount of 10½ % Senior Subordinated Notes due 2004. These notes were sold at par and have a coupon rate of 10.5 percent. Interest on these notes is due semiannually on February 1, and August 1, of each year, and the maturity date is August 1, 2004. After falling to $2 ½ per share in April 1999, the stock reversed its slide and proceeded in the upward direction. At the present time this stock is fully valued, and we rate it a hold (price $3 5/8, dividend Nil, and P/E n/m). Isle of Capri Casinos, Inc. (NASDAQ symbol: ISLE) operates casinos in Mississippi, Louisiana and Colorado. Each casino operates under the name “Isle of Capri Casino” and they reflect a Caribbean theme and tropical décor. In 1998, in partnership with Commodore Cruise Line, the Company began operating a fully appointed cruise ship, the “Enchanted Capri.” The Company also owns Pompano Park Racing, a harness track in Pompano Beach, Florida. The Company had another excellent year. For fiscal 1999, that ended April 25, 1999, revenues rose to $480.4 million, from $440.8 million for fiscal 1998. Net income rose to $12.1 million, or $0.51 a share, up from $7.5 million, or $0.32 a share for fiscal 1998. The Company has started a $230 million expansion program that will take approximately two years to complete. Isle of Capri Casinos, Inc. will expand four existing properties and open a casino-hotel complex in Coahoma County, Mississippi. Furthermore, the Company will replace its existing barge in Biloxi, with one that is approximately three times as large. Although the long-term outlook for the Company is good, we do not foresee appreciation for the stock in the short run. This stock reached a 52-week high of $14 1/16 in November 1999, and since then has traded in a narrow range. This stock could reverse its upward trend and fall to approximately $4 ½ per share during the next six months. At such a low level, speculators should start accumulating these shares and sell as soon as they rebound to $9 for a probable short-term gain of 100 percent (price $12 ½, dividend Nil, and P/E 24). MGM Grand, Inc. (NYSE symbol: MGG) is among the largest casino operators. The Company operates hotel and casino complexes. There are 123 million shares outstanding. For the year of 1999, revenues rose to $1.4 billion, a 79% increase from $774 million for 1998. Earnings rose to $0.81 a share for 1999, from $0.61 a share for 1998. The Company continues to expand through internal growth and acquisitions. Recently, MGM Grand raised its bid for Mirage Resorts, Inc., which was accepted. MGM Grand, Inc., offered $21 a share, or $4.4 billion in cash. Through this acquisition, MGM Grand, Inc., will get Bellagio, which opened two years ago and generates $1 billion in revenues annually. After this acquisition, the Company will be able to achieve efficiency of scale, profit margin could improve, and eventually it will be reflected in the price of the stock. In our opinion, at the present time this stock is fully valued and we rate it a hold (price $24, annual dividend $0.10, yield 0.4%, and P/E 29). Back to Top |
|
Stocks for traders Speculators who like to trade frequently could buy stocks listed in this section. Investors should be aware that short-term trading involves much greater risk, and preferably no more than 10% of the portfolio may be invested in these stocks. Some of the stocks in the technology sector could still be bought at recent levels. The sales of computers continue to grow 20% in the United States and Europe, which could propel stocks in this sector to higher levels. Speculators could achieve short-term gains, up to 100% on some of these stocks. Monitor: Maxtor Corporation (NASDAQ symbol: MXTR) manufactures and markets disk drives for personal computers. The company sells its products to Original Equipment Manufacturers, distributors and retailers. This stock reached a high of $21 ¼ in January of 1999. Afterwards, due to the oversupply of disk drives and competition, the stock proceeded in the downward direction and fell to a low level of $4 15/16 on August 12, 1999. This stock closed at $6 1/16 per share on November 30, 1999, and we started recommending it to speculators in December. At that time we stated that this stock could reach $15 per share. After reaching an intra-day high of $8 5/16 on January 27, 2000, the stock pulled back and closed at $6 ¼ per share on February 22, 2000. Last month, we have raised the target level to $16 per share. During the past three weeks the stock proceeded to rise and closed at $14 3/16 per share on March 24, and then started to pull back. This stock could pull back to approximately $9 ½ per share and then resume its upward momentum and reach $16 per share during the next two months. Monitor this stock closely and sell as soon as it reaches $16 per share, to lock in a short-term gain as high as 140 percent. Bank One Corporation (NYSE symbol: ONE) is among the largest bank holding companies in the United States. Due to the losses in its credit card division, earnings fell and the stock reached a low of $ 24 7/16 per share on March 7, 2000, after reaching a 52-week high of $63 9/16 in May of 1999. After Bank One announced that James Dimon, formerly of Citigroup Inc., would become its CEO, the stock proceeded to rise and closed at $34 ¼, up $3 3/8 on March 28. Although mister Dimon is a bright young man, in mid-forties, who was a rising star at Citigroup, Inc., no one knows how long it will take him to turn Bank One Corporation around. Therefore, this stock can be bought by speculators who are willing to wait a year, or longer. Do not buy this stock at $34 per share! This stock could pull back to approximately $28 per share and speculators could start accumulating it at that level. James Dimon could turn this bank holding company around, and perhaps a year from now this stock could reach $50 per share. Speculators who buy this stock at approximately $28 per share, could achieve a gain of $21 per share, or 72 percent. TJX Companies, Inc. (NYSE symbol: TJX) is the leading off-price retailer of apparel and home fashions. The Company operates T.J.Maxx ® stores, Marshalls ®, and A.J.Wright off-price retail stores in the United States. In Canada, the Company operates Winners Apparel Ltd. And in United Kingdom T.K. Maxx TM, off-price apparel stores. In addition, the Company operates Home Goods stores in United States, that offer giftware, rugs, lamps, and accent furniture. For the fiscal 1998, that ended January 30, 1999, revenues rose to $7.95 billion, from $7.39 billion for fiscal 1997. Net income rose to $424 million, or $1.29 a share, from $305 million, or $0.91 a share for fiscal 1997. As of January 30, 1999, there were 334.6 million shares outstanding, versus 349.6 million shares a year earlier. After completing a $250 million stock repurchase program, the Company announced in October 1998, that it plans to repurchase $750 million of its common stock over several years. The Company has repurchased 17.6 million shares at a cost of $501.1 million by October 30, 1999. All share repurchases were funded by internal cash flow. TJX Companies, Inc., plans to open over 150 new stores during the next three years. The Company’s annual report states “_ _ _ we continue to be confident in our ability to grow earnings per share by 15-20%.” The stock reached a 52-week high of $37 per share in April 1999, and then proceeded to fall and closed at $15 per share on March 13, 2000. Afterwards, this stock proceeded to build upward momentum and closed at $22 1/4 on March 31. Do not buy the stock at this level! Monitor this stock closely and when it pulls back to approximately $18 per share, buy it and hold until it reaches our target level of $27 per share. Once the stock reaches this level, it should be sold, for a probable short-term gain of approximately 50 percent. Sell: People Soft Inc. (NASDAQ symbol: PSFT) designs and distributes enterprise resource planning software for large and medium size companies. The latest software can even manage payroll, benefits administration, pension administration, and scheduling. After closing at $18 13/16 on November 30, this stock proceeded in the upward direction and on January 14, 2000, reached an intra-day high of $27 ¾ per share. Then, the stock pulled back to $21 1/8 per share on January 28, 2000. On March 31, this stock closed at $20 per share. There is a probability that this stock has already reached its top and could proceed in a downward direction. Speculators should sell this stock and use the proceeds to buy shares of Boston Scientific Corporation listed below. Boston Scientific Corporation (NYSE symbol: BSX) is one of the worlds leading companies that designs and markets minimally invasive medical devices. The company makes coronary stents for less invasive treatment of cardiovascular disease. Boston Scientific was founded in Watertown, MA in 1979. Through acquisitions, the annual revenues have grown to $2.2 billion in 1998, from just $2 million in 1979. The stock has reached a 52-week high of $47 1/16 on July 19, 1999. Afterwards, the stock proceeded to fall at a fast pace and by October 1999, fell to an intra-day low of $17 9/16 per share. Afterwards, the stock proceeded in the upward direction and reached an intra-day high of $25 7/8 in January. During the recent correction, the stock tested its bottom again and closed at $17 7/8 per share on February 25. This stock has already formed a double bottom and if it were to break through the $25 resistance level, it could proceed in the upward direction. On March 31, this stock closed at $21 5/16 per share and we rate it a screaming buy. This stock could reach $37 per share during the next three months. At that price level, the stock should be sold immediately. Callaway Golf Company (NYSE symbol: ELY) designs and manufactures premium golf clubs. Professional golfers who use these superior golf clubs had more wins than golfers using equipment made by competitors. Callaway Golf derives 34% of revenues from sales in the United States. After closing at $14 9/16 on November 30, this stock continued its strong upward momentum and closed at $17 11/16 on December 31, 1999. On March 31, 2000, this stock closed at $15 1/2 per share and at this price level we rate it a strong buy. As the volume grows and the stock builds upward momentum, it could reach approximately $29 per share during the next ten months. If the stock were to reach this level, it should be sold immediately. Milacron Inc. (NYSE symbol: MZ) formerly known as Cincinnati Milacron Inc. is a major supplier of machine tools, mold bases, plastics machinery and grinding wheels. Milacron Inc. employs 13,000 people in 30 plants worldwide. In the year of 1997, Milacron’s joint venture in India increased production by 75% and the company plans to increase the plants capacity. After reaching a low of $14 ½ per share, the stock proceeded to ascend and rose to $23 3/16 in June 1999. On March 31, this stock closed at $14 7/16 per share and is trading at a P/E of 8. Furthermore, the stock pays an annual dividend of $0.48 per share, yielding 3.3%. We rate this stock a screaming buy. Speculators should buy this stock now, and sell as soon as it reaches approximately $21 per share. Delias, Inc. (NASDAQ symbol: DLIA) offers a variety of apparel and accessories for young women. The Company conducts sales through its web site and through brick and mortar stores. After reaching a 52-week high of $40 per share in April 1999, the stock proceeded to fall along with the rest of the Internet stocks and by November reached a 52-week low of $5 ½ per share. Afterwards, the stock proceeded to rise, buoyed by the optimistic expectations of higher holiday sales, and reached an intra-day high of $13 ¼ per share in November 1999. This stock proceeded to fall and tested its low in February when it fell to $6 5/16 per share. During the recent correction, this stock was more resilient than other stocks in this sector and closed at $5 1/2 per share on March 31. Speculators who are willing to hold this stock for several months could acquire at least 100 shares and if it were to reach approximately $31 per share, sell it immediately for a probable gain of over 400 percent. Western Digital Corporation (NYSE symbol: WDC) is a major manufacturer of hard disk drives that are used in variety of computers. During the years of 1996 and 1997 the stock had appreciated at a fast pace and rose from $8 1/8 to $54 ¾ per share. Due to the manufacturing overcapacity and intense competition, the stock of Western Digital proceeded in a downward direction in September 1997, and by now could have reached a bottom. Due to the intense competition, profit margins continued to fall and the stock closed at a low level of $3 1/4 per share on October 29, 1999. During March, this stock proceeded to build a strong upward momentum. Money is flowing into the stocks of hard drive manufacturers. We have revised our opinion on this stock upwards, to a strong buy. Speculators should buy this stock now. On March 31, this stock closed at $7 7/16 per share and if it were to reach $15 during the next six months sell it immediately for a probable short-term gain of approximately 100 percent. Iomega Corporation (NYSE symbol: IOM) designs and manufactures zip drives and cartridges. Although unit sales continue to rise revenues remain flat. Several major PC manufacturers already offer Iomega drives as standard equipment. In the year of 1997, the Company relocated its manufacturing facility from Roy, Utah to Penang, Malaysia. Recently, this stock proceeded to build upward momentum and closed at $4 1/16 per share on January 31. During the recent correction this stock was resilient and edged slightly lower to close at $3 13/16 per share on March 31, 2000. Speculators could acquire a small position in this stock and sell it as soon as it reaches approximately $9 per share, for a probable gain of 150 percent. Quantum Corporation is a major manufacturer of hard drives for systems ranging from personal computers to PC workstations, and servers. The company also makes tape drives, and solid-state disk drives. In May 1998, the Board of Directors authorized the Company to repurchase approximately 14 million shares of its common stock. The stock was previously listed on NASDAQ under the symbol: QNTM. The management of Quantum Corporation has decided to issue two tracking stocks, the Hard Disk Drive (symbol: HDD) and the Storage Systems Group (symbol: DSS). Both stocks trade on NYSE. On March 31, Quantum HDD closed at $11 1/4, while Quantum DSS closed at $11 15/16 per share. We maintain our buy rating on both stocks. In our opinion, the stock of Storage Systems Group could double during the next twelve months. The stock of the Hard Disk Drive division could reach $17 during the next six months and it should be sold immediately at that level. Back to Top |
|
Model Portfolio Applied Materials, Inc. (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. The Company produces systems that use physical vapor deposition technology, chemical vapor deposition and oxide etching. For the fiscal year ended October 31, 1999, revenues rose to $4.86 billion, a 20 percent increase from $4.04 billion for fiscal 1998. Net income rose to $748 million, or $1.89 a share, from $417 million, or $1.10 a share for fiscal 1998. The demand for the company’s equipment continues to accelerate in line with the growing sales of computers and telecommunication devices. Applied Materials estimates that the market for wafer fabricating equipment could double in three years to $43 billion annually. The long-term outlook for the Company is excellent. Applied Materials split its stock 2-for- 1 on March 16. On March 31, this stock closed at $94 1/4 per share. Buy this stock on dips and hold long-term. Boston Scientific Corporation (NYSE symbol: BSX) is one of the worlds leading companies that designs and markets minimally invasive medical devices. The Company makes coronary stents for less invasive treatment of cardiovascular disease. This stock has reached a high of $47 1/16 per share on July 19, 1999. A month later, the stock proceeded to fall at a very fast pace and by October 1999, fell to an intra-day low of $17 9/16 per share. Afterwards, this stock proceeded in the upward direction and reached an intra-day high of $25 7/8 in January 2000. During the recent correction, the stock tested its bottom again, and closed at $17 7/8 per share on February 25, 2000. This stock has already formed a double bottom, and if it were to break through $25 resistance level it could proceed in the upward direction. On March 31, this stock closed at $21 5/16 per share and we rate it a screaming buy. Our objective is to hold this stock short-term, with a target level of $37 per share. Monitor this stock very closely and as soon as it reaches $37 per share, sell it immediately. Cisco Systems, Inc. (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. For fiscal 1999, that ended July 31, revenues rose to $12.2 billion, a 43% increase from $8.5 billion for fiscal 1998. Net income rose to $2.096 billion, or $0.62 a share, from $1.355 billion, or $0.42 a share for fiscal 1998. Cisco Systems continues to expand its market share. The annual revenues have grown from $2.2 billion in fiscal 1995, to $12.2 billion in fiscal 1999. John T. Chambers, who is a CEO of Cisco Systems, continues to steer the company on a path to high growth. Since 1994 the stock of Cisco Systems, Inc. has risen twenty-fold and the long-term outlook for the company is excellent. In our opinion, Cisco Systems, Inc. could continue its acquisition spree and the annual revenues might reach $50 billion in six years. Cisco Systems, Inc., is positioned to offer the latest equipment to service providers, such as IP internetworking technology which allows to host Internet applications and expand their service from basic voice traffic to broadband which can carry data, provide Internet access, and video conferencing. Recently, this stock split 2-for-1 and on March 31, closed at $77 5/16 per share. Buy this stock now and hold at least ten years. Compaq Computer Corp (NYSE symbol: CPQ) is the second largest computer manufacturer in the world. The Company designs and makes notebook personal computers, servers, consumer PCs and networking equipment. For the fourth-quarter, revenues edged lower, to $10.6 billion, from $10.9 billion for the same quarter in 1998. The turnaround is taking longer than expected. Although revenues continue to grow, the earnings are still below the levels reached two years ago, therefore we recommend this stock to patient investors who are willing to hold it at least five years. The Company has efficient manufacturing operation and manages to turn over its inventory of PCs eleven times per year. Compaq sold 83% of interest in Alta Vista web site to CMGI Inc. Compaq retained 17% equity in the Alta Vista. Both companies will promote this site. In the future it could become one of the top five sites and generate substantial amount of revenues. This stock has a strong potential to gain 500% in five years. During the recent correction this stock pulled back and tested its bottom again. On March 31, 2000, this stock closed at $27 per share and we rate it a strong buy. Compuware Corporation (NASDAQ symbol: CPWR) makes software that manages corporate networks, and improves productivity. The revenues are growing at a fast pace, and for the fiscal 1999, reached $1.65 billion. The stock of Compuware Corporation reached $40 per share in December 1999. Although there is a probability that this stock could fall to $16 per share during the next three months, investors should start accumulating it now. Our objective is to hold this stock long-term, at least three years, and if it were to quadruple in value, it will be sold to lock in a gain of approximately 300 percent. Delias, Inc. (NASDAQ symbol: DLIA) sells a variety of apparel and accessories for young women. The Company conducts sales through its Web site and through brick and mortar stores. This stock reached a 52-week high of $40 per share in April 1999, and then proceeded to fall along with other Internet stocks. After reaching a 52-week high of $40 per share in April 1999, the stock proceeded to fall and by November reached a 52-week low of $5 ½ per share. Afterwards, the stock proceeded to rise, buoyed by optimistic expectations of higher holiday sales and reached an intra-day high of $13 ¼ per share in November 1999. This stock proceeded to fall and closed at $6 5/16 in February. As the sales continue to grow, the stock could resume its upward momentum, and if it breaks through $15 per share it could revisit its previous high of $40 per share during the next ten months. The stock is trading at 8 times earnings, which is very low for an Internet stock. On March 31, 2000, this stock closed at $5 17/32 per share. This stock will be held in the Model Portfolio until it reaches our target level of $35 per share and then all of 200 shares will be sold. Dell Computer Corporation (NASDAQ symbol: DELL) is the third largest computer manufacturer in the world. The Company makes personal computers, notebook computers, servers and workstations. For the fiscal year ended January 29, 1999, revenue rose to $18.2 billion, a 48% increase from $12.3 billion for fiscal 1998. Earnings rose to $1.05 a share, from $0.64 a share for fiscal 1998. On March 5, 1999, the Company has issued a 2-for-1 stock split, the seventh in the past seven years. During the past twelve months the price of the stock has almost stood still compared to the previous years. Recently, the stock started to build upward momentum and reached an intra-day high of $59 11/16 per share on March 22. This stock could pull back to approximately $47 per share, and than slowly rise to $65 per share during the next four months. Although it is not likely that the stock of Dell Computer will appreciate at such a fast pace as it did during the past five years, in our opinion, the stock could generate a gain of 1,200% in six years. This stock closed at $53 15/16 per share on March 31, and we rate it a strong buy. Buy this stock now and hold long-term, at least five years. Ericsson LM Telephone (NASDAQ symbol: ERICY) is a leading supplier of mobile phones and telecommunications equipment. The Company’s main manufacturing facilities are located in Sweden. Ericsson’s telecom equipment is among the most advanced in the world. The sales of equipment have increased significantly in China and surpassed the sales in U.S. Ericsson LM Telephone projects that between now and the year 2003, the number of mobile phone users could rise from 240 million to over 800 million. The long-term outlook for Ericsson is excellent. ADR’s of Ericsson closed at $93 13/16 on March 31. Buy on dips and hold long-term. Intel Corporation (NASDAQ symbol: INTC) is the leading manufacturer of microprocessors. The Company has high name recognition, and still has approximately 85% share of the market. For 1999, revenues rose to $29.4 billion, from $26.3 billion for 1998. Net income rose to $7.3 billion, or $2.11 a share, from $6.1 billion, or $1.73 a share for 1998. The Company continues to switch production to 0.18 micron manufacturing process that yields more semiconductors from each wafer. As the sales of cellular phones continue to grow, the demand for chips made by Intel could accelerate throughout the year 2000. During the past ten years earnings grew 32% annually. The stock of Intel Corporation has kept rising ever since 30 shares were bought in March of 1995, at $78 ¼ per share. The Company issued a 100% stock dividend on June 22, 1995, another one on July 14, 1997, and a 2-for-1 stock split on April 11, 1999. Since the original 30 shares were bought, now there are 240 shares in the portfolio. During the past three months this stock has build a strong upward momentum, and if it were maintained these timely shares could reach approximately $190 by the end of this year. On March 31, this stock closed at $131 15/16 per share. Buy this stock and hold long-term. Merck & Co., Inc. (NYSE symbol: MRK) manufactures a variety of pharmaceutical products. Major brand names include Vasotec, Mevacor, Zocor, Crixivan, and Propecia. For the fourth-quarter revenues rose to $8.97 billion from $7.5 billion for the same quarter in 1998. Net income rose to $1.57 billion, or 67 cents a share, from $1.4 billion, or 58 cents a share for the fourth-quarter a year earlier. Merck & Co. split its stock 2-for-1 on February 17,1999, and now there are one hundred shares in the Model Portfolio. This stock closed at $62 1/8 on March 31. Buy this stock and hold long-term. Microsoft Corporation (NASDAQ symbol: MSFT) is the largest maker of software. The operating system made by Microsoft is used in the majority of computers. The Company has no debt and has approximately $17 billion in cash and short- term investments. For the second fiscal quarter ended December 31, 1999, revenue rose 18 percent, to $6.11 billion, from $5.2 billion for the same quarter a year ago. Net income rose to $2.4 billion, or 44 cents a share, from $2 billion, or 36 cents a share for the same quarter a year earlier. On March 29, 1999, the Company issued a 2-for-1 stock split. The anti-trust trial continues to affect the stock negatively. While the Justice Department accuses Microsoft Corporation of wielding a monopoly power, the company denies any wrongdoing. Is the break-up of Microsoft Corporation the only solution? Of course not. As soon as this chapter in Microsoft’s history is closed, the stock could resume its strong upward momentum, but in the meantime this stock will be very volatile. Although these timely shares may not appreciate at previous fast pace, this stock could generate a gain of 700% in six years. The stock will be held long-term, at least five years. On March 31, this stock closed at $106 1/4 per share. We rate this stock a strong buy. Nokia Corporation (NYSE symbol: NOK) is the world’s second largest manufacturer of mobile phones. The Company is located in Finland, with subsidiaries in the United Kingdom and China. Nokia derives 56% of its revenues from sales in Europe and 44% from sales in other continents. The long-term outlook for Nokia is excellent. The Company issued a 2-for-1 split on April 16, 1998, and another one on April 11, 1999. The ADR’s continue their strong upward momentum. American Depository Receipts (ADRs) closed at $217 1/2 on March 31. Buy on dips and hold long-term. PepsiCo, Inc. (NYSE symbol: PEP) makes soft drinks, Doritos, Sun Chips, Ruffles potato chips and Lays potato chips. For 1999, revenues edged lower to $20.4 billion, from $22.3 billion for 1998. Net income rose to $2 billion, or $1.37 a share from $1.99 billion, or $1.31 a share for 1998. In 1998, PepsiCo acquired Tropicana and several snack chip businesses in Europe, Australia and Chile. In the past forty years, PepsiCo sales grew an average of 16% per year. After the Company had spun-off its restaurants in 1997, the return on assets employed rose from 9.5% in 1996, to 16.2% in 1997. PepsiCo continues to buy back its stock. Recently, this stock proceeded to bounce back and closed at $34 7/8 on March 31. As some investors take their profits in their tech-stocks and switch into old world stocks, the shares of PepsiCo could proceed in the upward direction. Buy this stock and hold long-term. Pfizer, Inc. (NYSE symbol: PFE) is a diversified manufacturer of pharmaceuticals and consumer products. Among its brand name pharmaceutical products is Norvasc for hypertension and Zoloff for depression. The latest addition is Viagra, a pill for erectile dysfunction. For 1999, revenues rose to $16.2 billion, up 20 percent from $13.54 billion for 1998. Net income edged lower, to $3.18 billion, or 82 cents a share, from $3.35 billion, or 85 cents a share for 1998. All data is adjusted for the 3-for-1 stock split issued on June 30, 1999. Warner-Lambert agreed to be acquired by Pfizer, Inc. The shareholders will receive 2.75 shares of Pfizer stock for each share of Warner-Lambert stock. The deal is valued at $85 Billion. After the merger is completed Pfizer, Inc., will become a pharmaceutical behemoth with extensive R & D department. The long-term outlook for the Company is excellent. On March 31, this stock closed at $36 9/16 per share. Buy and hold long-term. Sara Lee Corp. (NYSE symbol: SLE) is an international producer of frozen and fresh baked goods, meats and consumer products. Revenues remained flat for fiscal 1999, at $20 billion, unchanged from fiscal 1998. For fiscal 1999, company reported earnings of $1.27 a share, versus a loss of $0.60 a share for fiscal 1998. Fiscal 1998 was affected negatively by a restructuring charge of $2 billion. Sara Lee split its stock 2-for-1 on December 21, 1998. After falling to a 52-week low of $13 5/8 per share on March 7, the stock proceeded to bounce back and closed at $18 per share on March 31. We rate this stock a strong buy. Xerox Corporation (NYSE symbol: XRX) is the worlds largest maker of copier equipment, digital monochrome and color publishing equipment. The Company sells its products and provides services in more than 170 countries. For the year of 1998, revenues rose to $19.4 billion, and 62 percent came from service, supplies, financing, and other recurring revenues. The company’s annual report states that $100 invested in Xerox stock at the end of 1990, grew to $1,266 by the end of 1998. The stock is trading at thirteen times earnings, and is down 56 percent from its 52-week high of $63 15/16 per share. One hundred shares of Xerox Corporation will be sold as soon as the stock reaches $60 per share and the remaining 100 shares will be held long-term, at least five years. On March 31, this stock closed at $26 per share. In our opinion, this blue chip stock is oversold. We maintain a strong buy rating on this stock. Back to Top |
|
Sold Nokia Corporation was added to the “Model Portfolio” in April of 1997. Since then, in three years ADRs of Nokia Corporation have risen 1378 percent. Although the long-term outlook for the Company is excellent and we maintain our long-term buy rating on these timely ADRs, a decision was made to take some profits. On March 31, thirty American Depository Receipts of Nokia Corporation were sold at $214 ¼, which generated $6,415 of cash that was added to the existing cash in the “Model Portfolio.” The remaining 70 ADRs of Nokia Corporation will be held long-term. Model Portfolio Update Applied Materials, Inc. (NASDAQ symbol: AMAT) split its stock 2-for-1 on March 16, 2000. This is the second split since March 1996, when 40 shares were bought at $38 1/8 and added to the “Model Portfolio.” Now there are 160 shares of Applied Materials, Inc. in the portfolio. As the sales of computers continue to grow 20 percent, the sales of equipment used to make microprocessors will continue to expand. Ever since PCs broke the $1,000 price barrier and became affordable to more people worldwide, the sales of computers proceeded to grow at a fast pace. As the demand for microprocessors continues to grow, the chip manufacturers will have to buy additional semiconductor manufacturing equipment to increase their production capacity. In our opinion, the long-term outlook for the manufacturers of the semiconductor making equipment is excellent and the stock of Applied Materials, Inc. could triple in value in three years. On March 31, this stock closed at $94 1/4 per share (that’s $188 1/2 at pre-split level). Even at this lofty level we maintain a strong buy rating on this stock. This stock should be among core holdings in a portfolio. We recommend that investors hold this stock long-term, at least ten years. For the latest news releases visit the Company’s Web site at www.appliedmaterials.com Cisco Systems, Inc. (NASDAQ symbol: CSCO) split its stock 2-for-1 on March 23, 2000, and now there are 100 shares in the “Model Portfolio.” Shares of Cisco Systems were bought on October 29, 1999, the same day when two hundred shares of Manpower Inc. were sold at $34 ¾ per share. Part of the cash proceeds received from the sale of Manpower was used to buy 50 shares of Cisco Systems, Inc. at 73 7/8 per share. As the demand for switches, networking gear and data networking equipment continued to grow, the revenues and earnings continued to rise. The stock of Cisco Systems, Inc. continued its strong upward momentum and closed at $77 5/16 per share on March 31, 2000. This stock has risen over one hundred percent in just five months. In our opinion, Cisco Systems, Inc. could continue its acquisition spree and the annual revenue might reach $50 billion in six years. Cisco Systems is positioned to offer the latest equipment such as IP internetworking technology which allows to host Internet applications and expand the service from basic voice traffic to broadband which can carry data, provide Internet access, video conferencing, and also carry voice transmission. We maintain buy rating on this stock. Since 1995, the stock of Cisco Systems, Inc. has risen twenty-fold and the long-term outlook for the company is excellent. This blue chip of tech-stocks will be held in the “Model Portfolio” long-term, at least ten years. Back to Top |
|
Model Portfolio Chart 3-31-2000
Cash $8,647 Total $151,836 a) The quantity of shares was adjusted for a 100% stock dividend issued by Intel Corporation on June 22, 1995, a 2-for-1 stock split issued on July 14, 1997, and a 2-for-1 stock split issued on April 11, 1999. b) The quantity of shares was adjusted for a 100% stock dividend issued by PepsiCo on June 3rd, 1996. c) The quantity of shares was adjusted for a 100% stock dividend issued by Applied Materials, Inc. on October 14, 1997 and a 2-for-1 stock split issued on March 16, 2000. d) The quantity of ADR’s was adjusted for a 2-for-1 split issued by Nokia Corporation on April 16, 1998, and a 2-for-1 split issued on April 11, 1999. e) The quantity of ADR’s was adjusted for a 2-for-1 split issued by Ericsson Telephone on May 22, 1998. f) The quantity of shares was adjusted for a 2-for-1 stock split issued by Sara Lee Corporation on December 21, 1998. g) The quantity of shares was adjusted for a 2-for-1 stock split issued by Merck on February 17,1999. h) The quantity of shares was adjusted for a 2-for-1 stock split issued by Microsoft on March 26, 1999. i) The quantity of shares was adjusted for a 3-for-1 stock split issued by Pfizer on June 30, 1999. j) The quantity of shares was adjusted for a 2-for-1 stock split issued by Cisco on March 23, 2000. Back to Top |