April 2001
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Contents Back Issues Dec. 2000 Jan. 2001 Feb. 2001 March 2001 Investing Buy & Sell Stocks for traders Model Portfolio Sold Bought Model Portfolio Chart |
On Monday, March 12, 2001, there was a total capitulation of the market. Additional billions of dollars of investors’ wealth was wiped out on that day. The Nasdaq Composite index fell 129.40 points, or 6.3%, and ended the day at 1923.38. Last time Nasdaq Composite index closed below (continued in: Investing). Some of the investment gurus have been promoting gold for several years. In their opinion, an investor should have approximately 5% of assets invested in gold. Although an investment in gold may be an excellent hedge against inflation, it will only work when inflation is out of control. During the past ten years the Federal Reserve Board has kept inflation in check, (continued in: Buy & Sell ). 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. Many of the stocks in the technology sector should be bought at recent low levels. Speculators could achieve short-term gains up to 100%, or higher, on some of these stocks. American Power Conversion Corporation (NASDAQ symbol: APCC) designs, manufactures, and markets surge suppressors, uninterruptible power supplies and related software for computer related equipment (continued in: Stocks for traders). Advanced Micro Devices, Inc. (NYSE symbol: AMD) manufactures microprocessors, flash memory devices, data communications products and network products. AMD and Intel continue their fierce competition. While the demand for microprocessors continued to grow worldwide, Intel Corporation was not able to produce enough chips due to insufficient ( continued in Model Portfolio). |
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Investing On Monday, March 12, 2001, there was a total capitulation of the market. Additional billions of dollars of investors’ wealth was wiped out on that day. The Nasdaq Composite index fell 129.40 points, or 6.3%, and ended the day at 1923.38. Last time Nasdaq Composite index closed below the 2000 level was two years ago. Furthermore, the Standard & Poor’s 500 index closed at 1180.17, down 53.25 points for the day. The index is down 22.7% from its high reached on March 24, 2000, and is already in the bear market territory. The media did not calm investors, especially when TV reporters made statements such as “The worse is yet to come.” Once again, we would like to remind investors, do not, repeat, do not sell large-cap tech stocks at a loss! The only stocks that may be sold at this time are old economy stocks, and the cash generated from these sales used to buy more large-cap tech stocks at these ridiculously low levels. In our opinion, majority of large-cap blue chip stocks could revisit their recent 52-week high in less than ten months. There are many factors that influence investors’ decisions. Two of these factors are, greed, and fear. Here is a basic example of greed. An investor buys 100 shares of ABZ stock at $22 per share after it has fallen from its 52-week high of $45 per share. After eight months, the stock has reached its previous high and once again is trading at $45 per share. Investor continues to hold this stock, hoping that it may reach a higher level. Unfortunately, two months later the stock starts to fall. Four months into the downtrend of this stock, its chart specifies that the 50- week moving average fell below 200 day moving average. This technical indicator reinforces the downward trend and after additional eight months this stock is down to $22 per share. Had this investor sold the stock at $45 per share, the sale would have generated a short-term gain of approximately 100 percent. Although this investor would have to pay tax on this short-term capital gain, the sale could still net approximately 62 percent gain for someone who is in the highest tax bracket. Although there is an adage “Let your profits run,” it is very beneficial for an investor to set a target level at what price a particular stock will be sold. When the stock nears that level monitor it closely, every day. If an investor had bought the stock of ABZ at $22 per share and set a target level of $40, had this stock been sold at $40 per share an investor would have locked in a short-term gain of approximately $18 a share, or 81 percent, before taxes. Surely, it would have been better to sell this stock at $40 per share and pay taxes on short-term gain, than to hold this stock and watch it fall to $22 per share. Now, lets take a look at “fear,” another major factor that influences investors’ decisions. The stock of XYZ has traded as high as $55 during the past 52-weeks. An investor buys 100 shares of a blue-chip XYZ stock when it has fallen to $32 per share, after analyzing its fundamentals. Four weeks later, this stock falls 8 a share in one day, to $24 per share. Investor is concerned that this stock could continue to fall and sells it the next day at $23.50 per share, with a loss of $850 plus the cost of commission. Five weeks later, this investor is shocked when the stock reaches $32 per share. Furthermore, to make matters worse, after an additional eight weeks, XYZ stock reaches $37 per share. Had investor continued holding this stock it would have generated a gain of 5 a share. Firstly, it makes a big difference if this was a large-cap blue chip stock, or for example an Internet stock. If it was a large-cap blue chip stock, surely, investor could have held it. Secondly, the price of each stock will fluctuate. The price of some of the stocks fluctuates as much as $15 per share within three months, and that is why investors should look at the chart of each stock before buying it. Surely, if the stock is at the three months high, do not buy it at this level. Investor could wait four to six weeks and then buy it. Once again, monitor the chart, and once the stock reaches a bottom and then starts to rebound, buy it. If a stock has reached a high level of $42 per share two months ago, and after falling to $26.50 a week ago, now trades at $30 per share, it could be bought at this level. Once the stock revisits its recent high of $42 per share, it could be sold, to lock-in a short-term gain of 12 a share, or 40 percent. On the other hand, if more money were to flow into this stock, it could reach $47 per share within three months, thus generating a gross short-term gain of 17 a share, or approximately 56 percent. These are simplistic scenarios that take into account money flow and fluctuations in the price of the stock. In real trading situations investors should pay attention to other factors. Another major factor is earnings in the specific quarter, and this could influence the price of the stock substantially in either direction, depending whether announced earnings are better, or lower than expected. Our latest motto is: If the projected earnings for the quarter are lower than earnings for the same quarter a year ago, sell the stock before the company makes its earnings announcement. The last but not least is the investment strategy. Investors have been told to buy stocks and hold long-term. Such strategy is excellent when an investor buys a stock that continues its overall upward trend over the course of five, or ten years, and generates a return as high as 3,000 percent. This type of investment strategy would be great if it was possible to select stocks that would perform in such a manner, but it is almost impossible to estimate beforehand, which stock out of several thousand, could generate such a return. On the other hand, it is much easier to monitor the charts of a group of stocks, and buy each one, selectively, after it has reached its 52-week low and starts rebounding. Such stocks could be traded monthly, quarterly, or held as long as eleven months, and then sold as soon as each stock reaches its target level. Some of the large-cap blue chip stocks fall as much as 40 percent from its 52-week high. When such a stock is bought at a low level, once it rebounds to its 52-week high it could generate a return of approximately 60 percent in less than one year. At www.moderatetrader.com , as the name implies our previous strategy was to buy stocks and hold long-term. Some of our stock picks were excellent. Thirty shares of Intel Corporation were bought in March of 1995, and in six years have risen 488 % in value. Nokia Corporation was a better performer. In April 1997, ADRs of Nokia Corporation were bought at $58.88 and after three stock splits are up 369% after four years. Some of the remaining stocks that are held long-term in our Model Portfolio did not generate a substantial return. For example, the stock of PepsiCo has been in our Model Portfolio since August 1997, and it has generated a return of 195% in approximately four years. Although the name of our web site will remain unchanged www.moderatetrader.com there will be higher turnover of stocks in our Model Portfolio. In the near future, as much as 50% of the Model Portfolio could be turned over annually. Assuming beforehand that a majority of our trades are successful, such action could generate higher short-term capital gains, and along with it, higher tax consequences. Although it is not likely that a typical investor will acquire all of the stocks that are in our Model Portfolio, an investor has to be aware beforehand that these stocks that are intended to be held short-term could greatly increase the tax liability. Furthermore, we estimate that such trading strategy could increase the average annual return of our Model Portfolio to approximately 40 percent. In the near future, our Model Portfolio will be heavily weighed in tech stocks and the risk of such allocation will be much greater then owning a group of stocks in several sectors. On March 20, 2001, the Fed cut interest rates by 50 basis points, or half of a percent, to 5 percent. The market reacted negatively to such news, especially since there were rumors that the Fed may cut by 75 basis points, or three quarters of a percent. Dow Jones industrials fell 238.35 points, or 2.4%, and closed at 9720.76, on the average volume of 1,231 million shares. Nasdaq Composite index fell 93.74 points, or 4.8%, and closed at 1857.44. The main objective of the Federal Reserve Board is to maintain sustainable pace of our economy, not to please the investors. That is why the Fed eased only by 50 basis points, to reaffirm that it still remains independent. We have stated in February, that Alan Greenspan could continue to cut rates throughout the following months. Once again, we reiterate our statement, and we estimate that by July 2001, the rate could fall to 4 percent. When that happens the market will take off like a rocket. Back to Top |
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Buy & Sell
Some of the investment gurus have been promoting gold for several years. In their opinion, an investor should have approximately 5% of assets invested in gold. Although an investment in gold may be an excellent hedge against inflation, it will only work when inflation is out of control. During the past ten years the Federal Reserve Board has kept inflation in check, below 4% annually, and such a low inflation rate has not been matched for over twenty years. Investors, who have bought gold and held it during this non-inflationary period had watched this precious, shiny yellow metal, decrease in value and reach new lows. Beside runaway inflation there is another major factor that can propel gold to new highs, and that is war. Whenever there is war between two major countries the price of gold rises substantially. During a war, when the currency in the country that was invaded may be worthless, gold may be exchanged for food, shelter, clothing, etc. Although these are very strong reasons to own gold, we do not foresee that United States may be in such situation in the near future. With the former USSR broken into individual republics, the risk of one of them invading our country has greatly diminished. Furthermore, China, which has a very large army, is preoccupied with improving its economy and chooses to build skyscrapers instead of missiles. Although there may be some tension between a few smaller countries, overall the governments and the people on our planet are opting for peace. Some of the individuals, who were promoting gold several years ago, stated that it could reach $1,500 per ounce. To this day it has not happened. On the contrary, the price of gold fell below $300 per ounce even though our economy was growing at a strong pace and the unemployment level reached 4%, a thirty year low. The wages, which account for two-thirds of inflationary factor are rising at a slow pace, and as long as wage increases continue to be modest we will not see runaway inflation and gold prices of $1,500 per ounce. On the other hand, all it may take is some unforeseen event and the price of gold may rise substantially in a short time. It may be advisable for investors to monitor the price of gold, and if the price of this precious metal were to rise substantially, then consider buying stock of a mining company, because typically these appreciate more than the precious metal itself. We have analyzed two gold mining companies. Although the risk of owning either one of these stocks is above average in this sector, these two have potential to generate a short-term gain from 60% to 500% percent. Furthermore, in this non-inflationary environment, some of the gold mine operators who manage to cut their mining costs below $200 per ounce could still make a substantial profit from their operations, even though gold is trading below $280 per ounce. Bema Gold Corporation (AMEX symbol: BGO) explores for gold in United States, Russia, and Venezuela. The company has completed a final feasibility study on Cerro Cesale Deposit, at the Aldebaran Property in northern Chile. The study has shown that if gold and copper prices recover to historical average levels of $350 per ounce gold, and copper at $0.95 per pound, Cerro Cesale could become one of the worlds’ largest gold copper mines. This mine would be capable of producing approximately one million ounces of gold and 287 million pounds of copper annually for 18 years. The total cost to mine an ounce of gold would average approximately $200 per ounce. This project is capital intensive and the total cost could reach $1.43 billion, therefore the company will wait until gold prices reach their historical high levels and then proceed with the start up phase. Bema Gold has a 24% ownership in this project, Placer Dome, Inc., 51% ownership, and Arizona Star 25% ownership. Bema Gold has a 79% interest in the Julietta Project, located in the Russian far East. The company has mineral licenses for a total area of 225 square kilometers (87 square miles). This area is rich in mineral deposits and the probable reserves could be as high as 1.14 million tones, averaging 20.1 grams of gold per ton, and 340 grams of silver per ton. Total deposits could reach 734,000 ounces of gold and 12.4 million ounces of silver. The company estimates that operating cash costs, including royalties and mining taxes, could average $93 per ounce of gold during the first five years. Bema Gold corporation plans to start a full-scale production at Julietta Project in the second half of 2001. This could be one of the most efficient gold mines and generate high after tax return of 43%. For the year of 1999, the revenues rose to $35.252 million, from $32.120 million for 1998. The company reported a loss of $4 million, or $0.03 a share, versus a loss of $46.1 million, or $0.40 a share in 1998. By the end of 1999, the company had $1.793 million of working capital, versus $17.429 million in 1998. As the company cuts costs at its gold mines, its cash flow and operating results could improve. In September 1999, gold spiked to a high of $340 per ounce after European banks announced that they would limit their gold sales. The price of Bema’s shares rose to a high of $3.34 on the Toronto Stock Exchange. This had happened during a four-day period, and as soon as the price of gold fell, the stock of Bema Gold Corporation followed in the same direction. Only speculators could buy the stock of this highly leveraged company. In our opinion, once Bema Gold starts mining at its Julietta Project in the Russian far East the company’s profit margin could improve substantially, and the company could post income for the fourth quarter of 2001. Speculators could acquire a small position in this stock at the present price level. While the risk of owning shares of this highly leveraged company is high, this stock could generate a gain of approximately 500% in less than six months, between September 2001, and February 2002 (on March 30, price $0.24, dividend nil, and P/E n/m). Agnico-Eagle Mines Limited (NYSE symbol: AEM) operates La Ronde underground mine located in Eastern Canada. In the year of 1999, this mine processed approximately 800,000 tons of ore, that produced approximately 90,000 ounces of gold, 277,000 ounces of silver, and 3.3 million pounds of copper. There are three shafts and an open pit. Shaft number 3 reaches the depth of 7,380 feet, and is the deepest single lift shaft in the Western Hemisphere. At the end of 1999, La Ronde Mine reserves reached 6.1 million ounces of gold, an increase of 33% from the previous year. The year of 1999 was difficult for the company. Agnico-Eagle Mines Limited reported revenues of $32.111 million, down from $47.117 million for 1998. The company reported a loss of $14.675 million, or $0.28 a share, versus a loss of $7.475 million, or $0.15 a share for 1998. By the end of 1999, the company’s cash and cash equivalents fell to $22.6 million, from $76.3 million at the end of 1998. During 1999, cash operating costs to produce an ounce of gold rose to $277 per once, up from $212 per ounce in 1998. This was a result of lower gold production of 90,035 ounces in 1999, versus 150,443 ounces in 1998. The company projects that in the future, cash operating costs to produce an ounce of gold could fall to $168 per ounce. Agnico-Eagle Mines is one of the few companies that does not participate in forward selling, or any other hedging activities. This stock reached a low level of $4.88 per share in October 2000. Afterwards, the stock had built a strong upward momentum and closed at $7.55 per share on March 12, 2001. The support level is at $5.25. If this stock nears its support level of $5.25 and does not break below it, it could once again resume its upward trend and reach approximately $9 per share during the next four months. Only speculators could buy this stock. If this stock does not break through its support level of $5.25 per share, speculators could acquire a small position in this equity. On March 30, price $6.18, annual dividend $0.20, yield 0.3%, and P/E n/m). Gold still has a place in our lives but it should not be treated as a hedge against inflation. Individuals who derive satisfaction from owning gold should own it in the form of coins, or jewelry. Coin collectors who have acquired gold Eagles, or recently minted Krugerrands may enjoy viewing their collection at leisure. Furthermore, fine jewelry is the best investment in gold an individual may make. Buy it for yourself and wear it on special occasions, or even every day. Better yet, buy it as a gift for your wife, or a girlfriend, and she will appreciate it for many years. Back to Top |
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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. Many of the stocks in the technology sector should be bought at recent low levels. Speculators could achieve short-term gains up to 100%, or higher, on some of these stocks. American Power Conversion Corporation (NASDAQ symbol: APCC) designs, manufactures, and markets surge suppressors, uninterruptible power supplies and related software for computer related equipment. The Company also makes equipment to protect wide area networks (WANs), local area networks (LANs), Internet equipment, telecommunications equipment and integrated services digital network (ISDN) equipment. The Company has manufacturing facilities in the United States, Ireland, Denmark, Switzerland, China and the Philippines. American Power Conversion Corporation is one of the ten major worldwide companies whose sole focus is to provide power protection equipment. As the E-commerce continues to grow, the demand for power protection for servers and other equipment will continue to ascend. The Company plans to expand its line of products to cover end-to-end enterprise solutions. During 1998, the revenues in the North America increased 27 percent, while the sales in Europe, Middle East and Africa were up 38 percent. The Company continues to introduce new products to the market, such as APC Power Stack ™, which is a rack-mount unit designed to protect hubs, routers and switches. During the past ten years, this stock was an excellent performer, and the Company has issued five stock splits. This stock ascended from a low level of $15.88 in May 1999, to $45 per share reached in April 2000. Afterwards, this stock proceeded to fall. In June 2000, we stated that this stock could maintain its downward momentum over the course of the next four months and by October 2000 this stock could fall to approximately $20 per share. Although patient investors could buy this stock and hold it long-term, at least five years, speculators who trade it short - term could achieve higher gains. In addition, we stated that speculators’ should start monitoring this stock in September 2000. Due to the bear market, this stock fell below our projected price level and reached a low of $10.32 per share in December 2000. On January 23, 2001, this stock closed at $18.24 per share, and then pulled back to $11.69 on March 1. This stock could revisit its recent high of $18.24 per share during the next two months. If this stock breaks through its resistance level of $18.24, it could even reach approximately $22.50 per share, and at such level should be sold immediately. On March 30, this timely stock closed at $12.89 per share and we rate it a strong buy. EMC Corporation (NYSE symbol: EMC) is the major supplier of enterprise storage devices, software, and services. The Company’s top of the line Symmetrix® system can hold 19 terabytes of data on 384 individual drives. EMC Corporation has over 17,000 employees worldwide. EMC Corporation acquired Data General in October 1999, and that has added a selection of mid-priced storage devices. During 1999, EMC Corporation shipped over 10,000 software licenses that generated $822 million in revenue. EMC Corporation plans to spend $1.7 billion on R&D through 2000 and 2001. Approximately 75% of this expense will be applied toward development of software. Although EMC Corporation’s hardware and software is the most expensive, 98 percent of customers are willing to recommend it to their colleagues and business associates. As Internet continues to grow and hundreds of millions of people go online during the next decade, we project that the need for storage devices could continue to grow in high double-digits. In our opinion, EMC Corporation’s annual revenues could grow ten-fold, and reach $60 billion in 10 years. During the past decade, this was the top performing stock on NYSE and has risen 81,000 percent since January 1, 1990. The Company consistently splits its stock, and the most recent stock split was 2-for-1 on June 5, 2000. After the split, the stock continued to ascend and closed at $103.18 per share on September 20, 2000. Although we don’t expect this stock to appreciate at previous pace during the next decade, it could provide investors with a gain of 1,600 percent. At such rate of return, $2,000 invested in this stock now, could reach $32,000 after ten years. During the recent carnage in the technology sector this stock proceeded to fall and closed at $39.76 per share on February 28, 2001. In March we have stated that the stock of EMC Corporation could fall to $30 per share during the next two months. By March 12, this stock had already reached such level. This stock is still in a downtrend and could even test $22.50 level during the next three months. In our opinion, the annual revenues of this large-cap behemoth could grow 28% annually during the next two years. Even if it takes two years for this stock to rebound to its previous level of $103.18 per share, investors who buy it now could achieve a long-term gain of 200 percent. On March 30, this stock closed at $29.40 per share and we rate it a strong long-term buy. LSI Logic Corporation (NYSE symbol: LSI) makes chips for: cellular phones, satellite set-top boxes, DVD products and personal computers. The company derives 58% of revenues from international sales. LSI Logic has manufacturing facilities in the United States, Europe and Japan. The company may continue to invest 15-17% of revenues in R & D. As the demand for cellular phones and set-top boxes continues to grow in double-digits, the revenues and earnings of LSI Logic could outperform the rest of the companies in the chip sector. This stock closed at $32.63 per share on October 31, 2000 and then proceeded to descend. Due to the bear market in NASDAQ this stock broke below $20 per share and closed at a low level of $16.43 per share on December 21, way down from its 52-week high of $90.38. On March 30, 2001, this stock closed at $15.73 per share. In our opinion, due to the strong demand for cellular phones and handheld wireless devices the demand for chips made by LSI will continue to grow. While the long-term outlook for LSI Logic is positive, we recommend this stock to speculators to buy it now and sell as soon as it reaches approximately $60 per share for a probable short-term gain of 200 percent. If the money flowing into this stock were to rise substantially, this stock could reach $35 per share in April 2001. This timely stock could reach our target level of $60 per share before August 2001. Computer Associates International, Inc., (NYSE symbol: CA) designs business application software and systems management software that allows computers to run efficiently. In addition, the Company provides software that allows corporations to manage Web infrastructure. The Company is the third largest after Microsoft Corporation and Oracle Corporation. Computer Associates International has offices in 44 countries. For the fiscal 2000, ended March 31, 2000, revenues rose to $6.1 billion, from $4.666 billion for fiscal 1999. Net income rose to $696 million, or $1.25 a share, from $626 million, or $1.11 a share for fiscal 1999. The Company took a charge of $800 million for purchased research and development. In our opinion, without this charge earnings could have been as high as $2.68 a share. Computer Associates International acquired Platinum Technology International for $3.5 billion in cash. The Company also acquired Sterling Software, Inc. As of March 31, 2000, total outstanding debt reached $5.4 billion. During fiscal 2000, the Company generated $1.566 billion of cash from operations and in our opinion it is sufficient to cover the repayment of debt. In our opinion, the short-term and the long-term outlook for the Company is very good. As the debt level falls, earnings could reach $2.50 a share for fiscal 2002, thus propelling the stock to a probable level of approximately $98 per share. After reaching a high of $79.44 in January 2000, the stock proceeded to descend and closed at $24.78 per share on July 31, 2000. Due to the bear market in NASDAQ, this stock proceeded to descend and closed at a low level of $19.50 on December 29, 2000. Afterwards, this timely stock proceeded to establish a strong upward trend and closed at $37.50 per share on January 30, 2001. On February 28, this stock closed at $31.19 per share and we have stated that it could once again test its support level and may fall to approximately $27 per share by the end of March 2001. As this timely stock nears this level, it should be bought by speculators and held until it reaches our target level of $78 per share. Once this stock reaches our target level, it should be sold immediately to lock in the short-term gain. In our opinion, this timely stock has potential to reach our target level during the next six months. CMGI, Inc., (NASDAQ symbol: CMGI) finds, acquires, develops and operates Internet companies. It is one of the worlds largest Internet investment companies. CMGI consists of three venture capital funds. CMG Ventures III that was launched in 1998 has a minority interest in Raging Bull www.ragingbull.com a web site dedicated to investors, and a minority interest in Virtual, Inc. CMGI, Inc. has developed a strategy to acquire start-up Internet companies, and then either sell them out right, or sell a minority interest and reinvest the proceeds. The company has a history of acquiring successful Internet companies. David Wetherell, who is a CEO of CMGI, Inc., continues to steer the company on the Internet path to high growth. In our opinion, the best decision was to form a strategic partnership with Compaq Computer Corporation (NYSE symbol: CPQ). CMGI, Inc. acquired a majority stake in Alta Vista, while Compaq retained 17% equity ownership in the Alta Vista business. Through this partnership, both companies plan to establish Alta Vista as one of the worlds leading Internet networks. To find out more about Alta Vista, visit the company’s Web site at www.altavista.com and to find out more about CMGI, Inc., visit the company’s Web site at www.CMGI.com In our opinion, tremendous growth opportunities are ahead. Although the stock of CMGI is trading at a high P/E ratio, in our opinion earnings could grow 60% annually and bring the price to earnings ratio down to a reasonable P/E 50 in two years. On January 12, 2000, the company issued a 2-for-1 stock split. It was a fourth 2-for-1 stock split issued during the past three years. This stock has been in a downtrend since March 2000. On September 27, 2000, this stock broke through our initial target level of $28 and closed at $26.63 per share. Due to the tremendous sell-off in the Internet sector, this stock broke through our revised target level of $23 per share and closed at $15.38 on October 17, 2000. Afterwards, this stock proceeded to reach new lows and closed at $5.59 per share on December 29, 2000. This stock could reach approximately $90 per share during the second half of 2001. On the other hand, this is a very conservative target level and there is a probability that this stock could test its previous high of $163.50 per share toward the end of 2001. Although patient investors could acquire this stock and hold it long-term, due to the high volatility and a wide trading range, speculators could trade this stock. On March 30, 2001, this stock closed at $2.54 per share and we maintain our rating of speculative screaming buy. Advanced Micro Devices, Inc., (NYSE symbol: AMD) manufactures microprocessors, flash memory devices, data communications products and network products. AMD and Intel continue their fierce competition. While the demand for microprocessors continued to grow worldwide, Intel Corporation was not able to produce enough chips due to insufficient manufacturing capacity. During that time AMD was able to increase its market share. AMD could continue to spend large percentage of its gross revenues on research and development and try to keep pace with Intel by introducing faster processors to the market. As AMD sells a larger quantity of higher priced processors, the average selling price will continue to rise, thus improving profit margins. The stock of AMD reached a 52-week high of $94.63 per share on June 21, 2000 (after the 2-for-1 stock split that was issued on August 22, 2000, this high was adjusted to $47.32). Before the Company issued the split, the stock was already in a downtrend. Although this timely stock could be held long-term, speculators who trade it short-term may achieve better return on investment. Worldwide demand for microprocessors continues to grow 17 percent annually. At this time chipmakers do not have sufficient manufacturing capacity to meet this growing demand and that will guarantee that every processor made, will be sold almost immediately. During the sell-off in chip stocks, this stock closed at $13.81 per share on December 29, 2000. On January 31, 2001, this timely stock closed at $24.60 per share and we rated it a strong buy. This stock maintained its upward trend and closed at $26.24 on February 15, 2001. On March 30, this timely stock closed at $26.54 per share and we maintain our rating of strong buy. During the first half of 2001, AMD could reach approximately $81 per share and speculators should sell it immediately to lock-in a probable gain of 250 percent, or higher. Unisys Corporation (NYSE symbol: UIS) is a major provider of customer services and information services. The Company makes network servers and software. Unisys derives 67 percent of revenues from services, where profit margins are much higher than margins on hardware. The Company projects that in a few years, services business could generate approximately 75 percent of annual revenues. In September of 1999, the stock reached a high of $49.68 and then during the following months fell below $25 per share. In February 2000, the stock proceeded to revisit its high, but due to strong resistance at $35 level proceeded to descend once again. Due to the sell-off in the tech sector, this stock continued to descend and closed at $9.54 per share on July 27, 2000. In January 2001, we have stated that this stock could retest its recent high, but in our opinion will find strong resistance at $20 level. Nevertheless, if this were to happen, it could provide speculators with a short-term gain of approximately $7.25 per share, or 60 percent, during the next six weeks. On the other hand, patient investors could buy this stock now and hold until it revisits its previous high of $49.68 per share reached during September 1999. As the services business continues to grow, profit margins could accelerate and the earnings for the year 2001 could rise above $2 a share, the stock could break through the previous high and provide investors with a probable gain of $40 per share, or 300 percent in approximately one year. On February 16, 2001, this stock approached $20 level but found strong resistance and closed at $18.93 per share. On March 30, this stock pulled back and closed at $14 per share. We still rate this stock a strong short-term buy and a screaming long-term buy, depending on the objective and the time frame of the investor. 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. The stock has reached a high of $47.06 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 $17.55 per share. This stock closed at a low level of $12.88 per share on November 30, 2000. We have downgraded this stock to accumulate from buy. During the past two weeks this stock has built a strong upward momentum and closed at $20.18 on March 30, 2001. As soon as this stock reaches our target level of $26 per share it should be sold immediately. 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 $24.44 per share on March 7, 2000, after reaching a 52-week high of $63.54 in May of 1999. After Bank One announced that James Dimon, formerly of Citigroup Inc., would become its CEO, the stock closed at $34.25 up $3.38 on March 28, 2000. In April we stated that this stock could pull back to approximately $28 per share and speculators could start accumulating it at that level. On May 8, the stock of Bank One Corporation reached an intra-day low of $28.75 and then resumed its upward momentum. Money is flowing into stocks in this sector and this timely stock proceeded to build a strong upward momentum. On January 31, this timely stock closed at $39.19 and then pulled back and closed at $35.26 per share on February 28, 2001. On March 30, this stock closed at $36.18 per share. We maintain a buy rating on this stock. The Fed started lowering interest rates in January and this should improve earnings in this sector. This stock could reach our target level of $50 per share during the next five months. Once this stock reaches our target level, speculators should sell it immediately. Back to Top |
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Model Portfolio Advanced Micro Devices, Inc. (NYSE symbol: AMD) manufactures microprocessors, flash memory devices, data communications products and network products. AMD and Intel continue their fierce competition. While the demand for microprocessors continued to grow worldwide, Intel Corporation was not able to produce enough chips due to insufficient manufacturing capacity. During that time AMD was able to increase its market share. AMD could continue to spend large percentage of its gross revenues on research and development and try to keep pace with Intel by introducing faster processors to the market. As AMD sells a larger quantity of higher priced processors, the average selling price will continue to rise, thus improving profit margins. The stock of AMD reached a 52-week high of $94.63 per share on June 21, 2000 (after the recent 2-for-1 split this high was adjusted to $47.32). Before the Company issued the split, the stock was already in a downtrend. Although this timely stock could be held long-term, speculators who trade it short-term may achieve better return on investment. Worldwide demand for microprocessors continues to grow 17 percent annually. At this time chipmakers do not have sufficient manufacturing capacity to meet this growing demand and that will guarantee that every processor made, will be sold almost immediately. Starting in September, the sales of chips typically rise and the demand reaches the highest level by December. On August 31, this stock closed at $37.63 per share. During September this stock proceeded to descend, broke through our initial target level of $24 per share and closed at $23.63 on September 29, 2000. On January 31, 2001, this stock closed at $24.60 per share and we rated it a strong buy. The stock reached an intra-day high of $26.75 on February 15, and then edged lower to close at $21.50 per share on February 28, 2001. On March 30, this timely stock closed at $26.54 per share. We maintain our rating of a strong buy. In our opinion, this stock could reach approximately $81 per share during the first half of 2001. As soon as this stock reaches our target level, one hundred and fifty shares will be sold and the remaining fifty shares will be held long-term. 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. The demand for the company’s equipment continues to accelerate in line with the growing sales of computers and telecommunication devices. Although short-term, there may be a temporary decline in demand for the equipment made by Applied Materials, in our opinion long-term outlook for the company is excellent.As the demand for chips continues to grow worldwide, the sales of Applied Materials could grow approximately 20 percent annually during the next five years. On October 14, 1997, and on March 16, 2000, Applied Materials split its stock 2-for-1. On March 30, this stock closed at $43.50 per share. Buy this stock now and hold at least four years. 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 $47.06 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 $17.43 per share. On June 30, this stock closed at $21.94 per share and then proceeded to descend. After reaching $19.06 on September 11, this stock proceeded to fall and closed at $12.88 per share on November 30, 2000. We have downgraded this stock to accumulate from buy. During the past two weeks this stock has built a strong upward momentum and closed at $20.18 on March 30, 2001. As soon as this stock reaches our revised target level of $26 per share it will be sold immediately. CMGI, Inc. (NASDAQ symbol: CMGI) was added to our list “Buy 10 Tech Stocks” on November 10, 2000, at $16.25 per share. We liked the stock then, and at the recent price we like it even more. On January 30, 2001, three hundred shares of CMGI, Inc., were bought at $6.78 per share. Although the risk of owning this stock is high, so is the potential for the appreciation. CMGI, Inc., is one of the worlds largest companies with stakes in the Internet start-ups. The main reason why we like this company is because it has an 83% interest in Alta Vista. CMGI planned to issue an Initial Public Offering in Alta Vista in the beginning of this year, but due to the negative market condition the IPO has been postponed. When the market improves and the company does an IPO on Alta Vista, the stock of CMGI could establish a strong upward trend and may even reach $100 per share during the next twelve months. On March 30, 2001, this stock closed at $2.54 per share. Once this stock reaches our target level of $100 per share, all of 300 shares will be sold to lock in the gain. We would like to remind investors that the risk of owning this stock is high therefore it should only be bought by speculators. To find out more about CMGI, Inc., read the section Stocks for traders. Cisco Systems, Inc. (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. 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 may 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. On March 23, 2000, this stock split 2-for-1. During the past five months this stock continued to fall. On March 30, this stock closed at a ridiculously low level of $15.81 per share. At this level we rate this stock a screaming buy. Investors who already own this stock could add to their position. Hold this stock 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. 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 three sites and generate substantial amount of revenues. This stock has a strong potential to gain 500% in five years. Due to the sell-off in the tech sector, this stock broke through its support level and closed at $15.05 per share on December 29, 2000. During January this stock proceeded to rebound and closed at $23.71 per share on January 31. On March 30, this stock closed at $18.20 per share. Patient investors could buy this stock and hold it long-term. 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. On March 31, 2000, we have stated that there is a probability that this stock could fall to $16 per share during the next three months. When this stock fell below $13 per share, an additional 200 shares were bought at $12.38 on April 14, 2000. Due to the negative sentiment for this sector, we have revised our short-term target level to $28 per share, from $35 per share. On December 29, this stock closed at $6.25 per share. Afterwards, this timely stock proceeded to build a strong upward momentum and closed at $12.44 per share on January 31. On March 30, this timely stock closed at $9.75 per share and we rate it a strong buy. Once this stock reaches our revised target level, these two hundred shares will be sold immediately. The remaining 150 shares will be held long-term, at least three years. Delia’s, 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. By November 1999, this stock reached a low of $5.50 per share. Afterwards, the stock proceeded to rise, buoyed by optimistic expectations of higher holiday sales and reached an intra-day high of $13.25 in November 1999. On March 30, 2001, this stock closed at $3.94 per share and we rate it a speculative buy. This stock will be held in the Model Portfolio until it reaches our revised target level of $25 per share and then all of the shares will be sold. Recently, Delias, Inc. merged with iTurf, Inc. and after the conversion of existing stock into the newly issued shares, now there are 342 shares in our Model Portfolio. 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. On March 5, 1999, the Company issued a 2-for-1 stock split, the seventh in the past eight years. On March 22, 2000, the stock reached an intra-day high of $59.68 per share. Then, the stock proceeded to fall. Due to the sell-off of stocks of box makers, this stock broke through its support level. On November 30, 2000, this stock closed at $19.25 per share. The stock continued its downtrend and reached a low of $16.25 per share. On February 7, 2001, this stock reached an intra-day high of $27.50 per share. Two weeks later, on February 21, this stock tested its support level of $20.43 per share. On March 30, this timely stock closed at $25.69 per share. At the present level this stock presents a great buying opportunity. Although it is not likely that the stock of Dell Computer Corporation will appreciate at such a fast pace as it did between 1994 and 1999, in our opinion, the stock could generate a gain of 1,500% in six 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 by the year 2003 the number of mobile phone users could rise to over 800 million. The long-term outlook for Ericsson is excellent. ADR’s of Ericsson split 4-for-1 on May 8, 2000. On March 30, ADR’s closed at a low level of $5.59. Buy these ADR’s now and hold at least seven years. 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. 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 $78.25 per share. The Company issued a 100% stock dividend on June 22, 1995, another one on July 14, 1997, a 2-for-1 stock split on April 11, 1999, and another 2-for-1 split on July 30. Since the original 30 shares were bought, after these stock splits there were 480 shares in the portfolio. On October 30, 2000, two hundred shares were sold and now there are 280 shares in our Model Portfolio. This stock continued to fall and closed at $30.06 per share on December 29, 2000. As the institutional investors proceeded to buy this stock, it rebounded and closed at $37 per share on January 31, 2001. On March 30, this stock closed at $26.31 per share. At this level the stock is a screaming buy. Buy this stock and hold long-term. Internet Capital Group (NASDAQ symbol: ICGE) is a venture capital group that owns a stake in over 52 Internet companies. This venture capital group owns a stake in Vertical Net, a group of online trading communities where transactions for parts and raw materials are made among corporations. Just four months ago, in July this stock traded at $45.18 per share and then proceeded to fall. Due to the carnage in the Internet sector this stock closed at a low of $3.28 per share on December 29, 2000, down from its 52-week high of $212 per share. Afterwards, this stock proceeded to build a slow upward momentum and closed at $6.44 per share on January 31. There is a very slight probability that this stock could revisit its 52-week high of $212 per share during the next twelve months. We will monitor this stock closely. As soon as this stock reaches approximately $150 per share, one hundred and fifty shares will be sold immediately. The remaining fifty shares will be held long-term. On March 30, this stock closed at a very low level of $2.19 per share, and we rate it a speculative strong buy. LSI Logic Corporation (NYSE symbol: LSI) makes chips for: cellular phones, satellite set-top boxes, DVD products and personal computers. The company derives 58% of revenues from international sales. LSI Logic has manufacturing facilities in the United States, Europe and Japan. The company may continue to invest 15-17% of revenues in R & D. As the demand for cellular phones and set-top boxes continues to grow in double-digits, the revenues and earnings of LSI Logic could outperform the rest of the companies in the chip sector. This stock closed at $32.63 per share on October 31, 2000 and then proceeded to descend. Due to the bear market in NASDAQ this stock broke below $20 per share and closed at a low level of $16.43 per share on December 21, way down from its 52-week high of $90.38. On January 31, 2001, this stock closed at $24.75 per share. This stock broke through its support level of $19.80 and closed at $16.11 per share on February 28, 2001. In March, this timely stock tested its support level again and then closed at $15.73 on March 30, 2001. In our opinion, due to the strong demand for cellular phones and handheld wireless devices the demand for chips made by LSI will continue to grow. This stock will be sold as soon as it reaches approximately $60 per share for a probable short-term gain of approximately 200 percent. Lucent Technologies, Inc., (NYSE symbol: LU) is the largest manufacturer of the telecommunications equipment. Lucent Technologies makes fiber-optic equipment and optical network equipment that allows the phone companies to increase the capacity and to provide a high speed Internet access. During the year of 1999, the stock continued its strong upward momentum and reached a 52-week high of $84 3/16 per share in December. Then, in January 2000, the stock fell at an extremely fast pace and closed at a 52-week low of $49.79 per share. Afterwards, the stock proceeded to ascend and reached an intra-day high of $75.38 per share on March 1, 2000. During the recent correction, the stock tested its bottom again. As the telecommunications providers buy new equipment, the annual revenues of Lucent could grow in double digits. In our opinion, the long-term outlook for the company is excellent. On October 30, 2000, an additional 200 shares of Lucent were bought at $20.75 per share. Now, there is a total of 250 shares in our Model Portfolio. This stock is for patient investors who are willing to wait two years for the stock to reach $80 per share. As soon as this stock reaches our target level, one hundred and fifty shares will be sold and the remaining 100 shares will be held long-term, at least ten years. Due to the sell-off in this sector, the stock closed at a low of $13.50 per share on December 29, 2000. On January 31, 2001, this stock closed at $18.60 per share. Afterwards, this stock proceeded to test its support level and closed at $9.97 per share on March 30, 2001. We rate this stock a strong long-term buy. Merck & Co., Inc. (NYSE symbol: MRK) manufactures a variety of pharmaceutical products. Major brand names include Vasotec, Mevacor, Zocor, Crixivan, and Propecia. The company derives 34 percent of revenues from international sales. Merck continues to spend substantial percentage of gross revenues, on research and development. Merck & Co. split its stock 2-for-1 on February 17, 1999, and now there are one hundred shares in our Model Portfolio. On March 20, 2001, a decision was made to sell this stock, and 100 shares were sold at $70.88 per share. On the same day, cash proceeds were used to buy four tech stocks (read Sold). 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. On March 29, 1999, the Company issued a 2-for-1 stock split. The anti-trust trial affected the stock negatively. While the Justice Department accused Microsoft Corporation of wielding a monopoly power, the company denied 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. This stock will be held long-term, at least five years. On December 29, 2000, this stock closed at $43.38 per share and we rated it a screaming buy. This stock closed at $54.69 per share on March 30. Buy this stock and hold long-term. 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, as the demand for company’s products grows worldwide. The Company issued a 2-for-1 split on April 16, 1998, one on April 11, 1999, and a 4-for-1 split on April10, 2000. These timely ADRs closed at a ridiculously low price of $24 on March 30, 2001, and at this level we rate these a screaming buy. Hold these ADRs at least seven years. Office Depot, Inc. (NYSE symbol: ODP) is a major retailer of office products, with stores located in the United States and Canada. The Company also conducts sales through its Web site at www.officedepot.com and through a catalog. For the year of 1999, revenues rose to $10.27 billion, from $9 billion for 1998. Earnings rose to $0.69 a share, from $0.60 a share for 1998. On April 12, 2000, the stock rose to $14 3/16 per share on a heavy volume of 4.45 million shares, and then proceeded to fall. Four weeks later, on May 12, the stock closed at $11 per share, on a low volume of 688,000 shares. Then, on May 26, the stock fell 3 from the previous close, and finished the day at $7.32 per share, on a very heavy volume of 16 million shares. In our opinion, this stock has a strong upside potential. On March 30, this stock closed at $8.75 per share and at this low level we rate it a strong buy. This stock will be held in our Model Portfolio until it reaches our target level of $19 per share, and then all four hundred shares will be sold, for a probable long-term gain of 200 percent. 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 deployed rose from 9.5% in 1996, to 16.2% in 1997. On March 30, the stock of PepsiCo closed at $43.95 per share. This stock has run-up during the past six months and in our opinion is trading near its full valuation level. Short-term, this stock does not have much of upside potential therefore we have revised our rating from a buy to a hold. On January 31, 2001, one hundred share of PepsiCo were sold at $44.06 per share, with a gain of approximately 198 percent. The remaining 100 shares of PepsiCo will be held 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. The company issued a 3-for-1 stock split 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 30, 2001, this stock closed at $40.95 per share. Buy this stock on dips and hold long-term. Vertical Net, Inc., (NASDAQ symbol: VERT) is an Internet incubator that owns and operates 55 Websites designed as online business-to-business communities. These Websites, known as vertical trade communities are grouped in several industry sectors such as Advanced Technologies, Communications, Environmental, Food and Packaging, Food Service, Healthcare, Manufacturing and Metals, Textile and Apparel, and Service. This stock was featured in our “Buy & Sell” section in August 2000. At that time, we have stated that this stock could fall to approximately $35 per share. Furthermore, we have stated that the risk of owning this B2B start up is high, therefore this stock could only be bought by speculators. Who would have known then that this stock would break through a $35 level and reach a ridiculously low price of $2.68 per share on February 23, 2001. In August 2000, we have stated that this stock could ascend to $140 per share, short-term. We maintain our price target level, but it could take this stock approximately two years to reach it. Once again, we would like to reiterate that this stock is not for the faint of heart and may be bought only by speculators. These two hundred shares will be held in our Model Portfolio until the stock reaches approximately $140 per share, and then these 200 shares will be sold to lock in long-term capital gain. On March 30, 2001, this stock closed at $2.03 per share and we rate it a speculative screaming buy. WorldCom, Inc., (NASDAQ symbol: WCOM) has already grown from a small telecommunications provider to a behemoth, through mergers and acquisitions. This stock is down from its 52-week high of $52.50 per share. On September 14, 1998, World Com merged with MCI Communications Corporation. Once this merger was finalized, World Com was in possession of one of the worlds largest and most advanced digital networks that connect local markets in the United States to more than 280 countries and locations worldwide. On August 4, 1998, the company acquired a 51.79% voting interest and 19.26% economic interest in Embratel, a national telecommunications provider in Brazil. World Com plans to continue expanding globally through mergers and acquisitions. In our opinion, at the recent price level this stock is undervalued and has a potential to reach $50 per share during the next twelve months. As soon as this stock reaches our target level of $50 per share, all one hundred shares will be sold to lock in a probable short-term gain of 120 percent. On March 30, this stock closed at $18.69 and we rate it a strong buy. Yahoo Inc., (NASDAQ symbol: YHOO) is a global Internet media company that provides comprehensive information and shopping services to over 140 million users worldwide. The company’s Website < href="http://www.yahoo.com">www.yahoo.com is the most visited site and has the highest name recognition. Yahoo Inc., continues to provide the widest choice of content that has generated an average of 465 million page views per day in December 1999, an increase of 178 percent from December 1998. The Company provides Web content around the world in 12 languages. As the advertising market on the Web continued to grow, in the fourth quarter of 1999, there were 3,550 advertisers, versus 2,225 in the same quarter of 1998. Average revenue per advertiser rose to $57,000 in the fourth quarter of 1999, from $34,000 in the fourth quarter of 1998 Advertising revenues on the Web in the United States alone are projected to reach over $8 billion annually in two years. Yahoo Inc., could receive 20 percent of these revenues; thus we estimate that the company’s annual revenue could grow to approximately $1.6 billion in the year 2002. Yahoo Inc., is among the few Internet companies that already generate positive cash flow. We project that this stock could rise twenty-fold from present level, during the next four years. The risk of owning this stock is above average and it is not for a timid investor. This timely stock will be held in our Model Portfolio until it reaches our target level of $300 per share and then these 100 shares will be sold. On March 30, this stock closed at $15.75 per share and at this price level we rate it a speculative screaming buy. Back to Top |
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Sold On March 20, 2001, one hundred shares of Merck & Co. Inc., (NYSE symbol: MRK) were sold at $70.88 per share. Fifty shares of Merck were bought in October 1994, at $36.25 per share. The company issued a 2-for-1 stock split on February 17, 1999, and since then there were 100 shares in our Model Portfolio. Although our original objective was to hold this stock long-term, a decision was made to sell this stock now and use the proceeds to buy stocks in the technology sector. These shares of Merck have generated a gain of $5,171.50, or 278%, before taxes. Bought On the same day, March 20, 2001, one hundred shares of Cisco Systems, Inc. (NASDAQ symbol: CSCO) were bought at $19.88 per share. In March of 2000, this stock was trading at a 52-week high of $82 per share, and a sky-high valuation level of 180 times earnings. At that time, analysts were justifying such a lofty P/E ratio because the revenues were growing approximately 50 percent. Now the growth of revenues has subsided, and could grow at a slower pace during a quarter, or two. In our opinion, the orders could improve and the growth of revenues could resume its fast pace in the second half of this year. Once this happens, the stock could resume its upward trend, and by April 2002, could once again trade at approximately $80 per share. There were already 100 shares of Cisco Systems, Inc., in our Model Portfolio. After this trade, there will be a total of 200 shares. As soon as the stock of Cisco reaches $80 per share, all of the shares that were bought in October 1999, at $36.94 will be sold. Originally, 50 shares of Cisco Systems were bought at $73.88 per share. Adjusted for the 2-for-1 stock split issued by Cisco Systems on March 23, 2000, the cost basis of these 100 shares is $36.94 per share. The sale of these shares will generate smaller long-term capital gain then would the shares that were bought recently at $19.88 per share. One hundred shares of Cisco Systems that were bought on March 20, 2001, will be held in our Model Portfolio long-term, at least ten years. On the same day, one hundred shares of Motorola Inc. (NYSE symbol: MOT) were bought at $15 per share and added to our Model Portfolio. Motorola is a major supplier of cellular phones, semiconductors, and pagers. The stock of Motorola continued to fall and reached an intra day low of $14 per share, an eight year low, on March 22, 2001. This stock is trading at such a low level, as if the U.S. economy were to enter a recessionary stage, even though it may not. Christopher Galvin who is the CEO of Motorola, could once again steer the company on a path of high growth and profitability. The stock of Motorola was held in our Model Portfolio between February 1995, and April 1997. On April 23, 1997, all 50 shares of Motorola were sold at $57.50 per share, with a loss of 5%. On the same day, the funds received from the sale of shares of Motorola were used to buy 50 ADRs of Nokia Corporation at $58.88. To cover the balance of this trade, $179.85 of cash was deducted from the cash position in our Model Portfolio. Nokia continues to be the second best performer in our Model Portfolio. The stock of Motorola is great for trading. Its recent 52-week high was $61.54 per share. In our opinion, this stock could reach $50 per share in 2002, and once it does it will be sold. One hundred shares of Nortel Networks Corp. (NYSE symbol: NT) were bought at $17.56 per share. During the past four months this stock has fallen to a low level, due to the fear of a slowdown of orders for fiber-optic network equipment. The stock is way off from its 52-week high of $86 per share. Although this stock could trade at a low level during a quarter, or two, as soon as the growth of revenues reaches 50%, this stock may once again resume its strong upward trend. In our opinion, this stock could revisit its 52-week high in less than twelve months. The Internet is not going away. Quiet the opposite is happening. Each month millions of new users are accessing the Internet. This greatly increases the demand for bandwidth therefore the demand for the equipment made by Nortel Networks will continue to grow worldwide. At the recent price level, we rate this stock a screaming buy. One hundred shares of Nortel networks will be held in our Model Portfolio until the stock reaches $80 per share and then all 100 shares will be sold. The last stock bought on March 20, 2001, was Sun Microsystems, Inc.(NASDAQ symbol: SUNW). One hundred shares were bought at $18.82 per share. Sun Microsystems is among the major suppliers of hardware to the Internet. The company continues to introduce new servers, competitively priced, in order to expand its market share. Sun Microsystems revenues have doubled during the past three years, to $19 billion. In our opinion, the company could attain a greater market share during this economic slowdown, and once again double its annual revenues in three years. As additional hundreds of millions of users access the Internet, the demand for servers could grow 50% annually during the next five years. The stock has fallen from its 52-week high of $64.65 per share. At the recent price level we rate this stock a strong buy. This stock will be held in our Model Portfolio approximately three years, and as soon as it generates a gain of 400%, all of the shares will be sold. To cover the balance of this trade, $188.50 of cash was deducted from the cash position in our Model Portfolio. After the above trades our Model Portfolio is heavily weighed in tech stocks. The risk of such asset allocation is much greater than owning a group of stocks in several sectors. Furthermore, more stocks will be held short-term. Although it is not likely that a typical investor will acquire all of the stocks that are in our Model Portfolio, each investor has to be aware beforehand that short-term trading is risky, and will greatly increase Tax liability. Back to Top |
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Model Portfolio Chart 3-30-2001
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, a 2-for-1 stock split issued on April 11, 1999 and a 2-for-1 stock split issued on July 30, 2000. (There were 480 shares of INTC on October 29, 2000. On October 30, 2000, two hundred shares were sold and now there are 280 shares). b) The quantity of shares was adjusted for a 100% stock dividend issued by PepsiCo, Inc. on June 3rd, 1996. (There were 200 shares of PepsiCo on January 29, 2001. On January 30, 2001, one hundred shares were sold and now there are 100 shares). 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, a 2-for-1 split issued on April 11, 1999, and a 4-for-1 split issued on April 10, 2000. e) The quantity of ADR’s was adjusted for a 2-for-1 split issued by Ericsson Telephone on May 22, 1998, and a 4-for-1 split issued on May 8, 2000. h) The quantity of shares was adjusted for a 2-for-1 stock split issued by Microsoft Corporation 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 Systems, Inc. on March 23, 2000. k) Two hundred shares of Delia’s, Inc., were bought in December 1999, at $7.19 per share. After Delia’s, Inc., merged with i Turf, Inc., these shares were converted into newly issued stock and now there are 342 shares in our Model Portfolio. The original acquisition cost has been adjusted to $4.20 per share. After the trades done on March 20, 2001, our Model Portfolio is heavily weighed in tech stocks. The risk of such asset allocation is much greater than owning a group of stocks in several sectors. Furthermore, more stocks will be held short-term. Although it is not likely that a typical investor will acquire all of the stocks that are in our Model Portfolio, each investor has to be aware beforehand that short-term trading is risky, and will greatly increase Tax liability. Between April 1994 and July 1998, a total of $28,336 of cash was invested in the Model Portfolio. Due to the excellent performance of the technology stocks, over the course of six years the total value of the portfolio has risen to $145,374 as of June 30, 2000. Our Model Portfolio has generated a gain of $117,038, or 413 percent in just six years. Investors who are just starting out should not be deterred by the size of our Model Portfolio. Notice that a total of $28,336 was invested over the course of four years, averaging an investment of $7,000 per year. Investors who are just starting out could invest as little as $2,000 each year, but be consistent and invest that amount every year. After several years, investor could have a portfolio consisting of several blue-chip stocks. Back to Top |