December 2000
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Contents Back Issues March 2000 April 2000 May 2000 June 2000 July 2000 Aug. 2000 Sept. 2000 Oct. 2000 Nov. 2000 Investing Buy & Sell Stocks for traders Model Portfolio Model Portfolio Chart |
This economic expansion has lasted ten years and seemed to be unstoppable. The market proceeded to reach lofty levels. Now, out of the sudden the market seems to reach a lower level almost every day and there appears to be no bottom in sight. Investors who have been investing less than ten years have never been through a bear market. (continued in: Investing). Alcan Aluminum Limited (NYSE symbol: AL) is a Canadian corporation that conducts activities worldwide, through its subsidiaries and joint ventures. While the Company is involved in aluminum smelting it also conducts recycling of aluminum. Alcan is a leading international aluminum producer with operations and sales offices in 30 countries. The Company has approximately 36,000 employees. (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% on some of these stocks. 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.(continued in: Stocks for traders). Albertson’s, Inc. (NYSE symbol: ABS) is the second largest food-drug chain in the United States. After the merger with American Stores Company that was finalized on June 23, 1999, Albertson’s operates over 2,400 stores in 38 states. Among the stores operated by the Company are Albertson’s, Save-On, Osco Drug, Lucky Stores, Jewel, and Acme Markets. The merger will allow the Company to achieve greater (continued in: Model Portfolio). |
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Investing This economic expansion has lasted ten years and seemed to be unstoppable. The market proceeded to reach lofty levels. Now, out of the sudden the market seems to reach a lower level almost every day and there appears to be no bottom in sight. Investors who have been investing less than ten years have never been through a bear market. This is what a bear market looks like! The rising prices of oil have cut consumers’ disposable income and the falling stock prices have eroded consumer confidence. The technology laden Nasdaq Composite Index fell 109 points, or 4 percent, and closed at 2597.94 on November 30. As of November 30, Nasdaq Composite Index is down 48 percent from its high of 5048.61 reached in March of this year. During the month of November Nasdaq Composite Index fell 23 percent, this is the worst performance in the past 29 years. Although no one knows if the market has reached its bottom yet, in our opinion we are close to it. There were many factors that have negatively affected the market. First of all, many corporations have revised their future earnings downward and the stocks of these companies immediately fell as much as 20 percent in one day. Second of all, the price of oil reached a high level of $36.19 a barrel on November 20, and reignited the fear of inflation, thus prompting some of the individual investors to avoid buying equities. Third of all, a new “fair disclosure rule” went into effect and it prohibits corporations from releasing information to their favored analysts before disclosing it to the public. Previously, analysts may have slowly guided investors through revised estimates, whether these would be lower, or higher. Now, institutional investors and individual investors receive the data at the same time and they react to it accordingly. On many occasions, individual investors may sell their stock first and then analyze their decision. Fourth of all, the uncertainty of who will become the next president weighed heavily on peoples’ minds and the market. There is one thing that the market did not need at this time, and that’s additional uncertainty. Fifth of all, there were not enough buyers since many individual and institutional investors proceeded to remain on the sidelines, with cash parked in 3-month Treasury bills, or short duration Certificates of deposit. As there were more investors who proceeded to sell equities than there were investors who were willing to buy them, the prices continued to fall to lower levels. Many analysts expect the tech stocks to appreciate at slower pace next year. In our opinion, some of the tech stocks bought at the recent low levels could reward speculators with a short-term gain of 300 percent, or higher. Although the risk of owning tech stocks is much greater than owning old economy stocks, the rewards are also a lot higher. Speculators have to be very selective. We remain very optimistic about some of the tech stocks and some of the Internet stocks. Many of these stocks have fallen as much as 90 percent from their highs and speculators should buy them now. We reiterate a strong buy rating on Internet incubators such as CMGI, Inc. (NASDAQ symbol: CMGI) and Internet Capital Group (NASDAQ symbol: ICGE). As the Internet continues to grow, the revenues of select companies could grow up to 100 percent annually. We have compiled a list of 10 technology stocks that have great upside potential (read: Buy 10 Tech Stocks). Speculators should start buying some of these stocks now. Remember that the risk of owning these stocks is high. Once again, we advise investors to remain calm during this bear market. Do not let your emotions make your investment decisions’. We may still get a Santa Claus rally in December. Back to Top |
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Buy & Sell
Alcan Aluminum Limited (NYSE symbol: AL) is a Canadian corporation that conducts activities worldwide, through its subsidiaries and joint ventures. While the Company is involved in aluminum smelting it also conducts recycling of aluminum. Alcan is a leading international aluminum producer with operations and sales offices in 30 countries. The Company has approximately 36,000 employees. For 1999, revenues edged lower to $7.324 billion, from $7.789 billion for 1998. Although annual revenues fell, the Company reported net income of $460 million, or $2.06 a share for 1999, versus $399 million, or $1.71 a share for 1998. While the price of aluminum fell to a five-year low in 1999, by reducing costs, the Company was able to improve its profit margin and thus maintain earnings growth. The Company continues to enter new market segments. In January 2000, the Company signed a multi-year supply agreement with Ford Motor Company. Alcan Aluminum already had a strategic alliance with General Motors. By becoming a supplier to two major automotive manufacturers, the Company will greatly expand its customer base. The Company completed its $370 million expansion at its Pindamonhangaba rolling complex in Brazil. This is the only high-volume can sheet production facility in South America. Alcan Aluminum continues to cut costs in order to improve profit margins. The Company has initiated a Full Business Potential (FBP) program in 1997 and since its inception achieved total savings of $462 million in three years, $162 million during 1999. Alcan Aluminum has set a five-year target level of $1 billion for its FBP plan and is right on track to achieve its goal. In 1999, Alcan’s total shipments rose to 3.1 million tonnes, an increase of 4.9% from 1998. Although the cost of aluminum is greater than the cost of steel, many car manufacturers are switching to this metal because of its weight advantage over steel, thus transportation is the fastest growing market for aluminum. This stock is highly cyclical. In January 2000, this stock reached a high of $45.06 and then proceeded to fall to $28.50 on October 20, 2000. In our opinion, due to the fear of diminishing sales in the automotive sector and renewed fear of a recession, this equity could fall to a lower level. This stock could fall to approximately $25 per share during the next two months. Since this stock is highly cyclical, it could be traded by speculators. We rate this stock a short-term buy. If the price of aluminum were to rebound from its low level, this stock could revisit its 52-week high of $45.06 during 2001. (on November 30, price $30.38, dividend $0.60, yield 2.0%, and P/E 9). EMC Corporation (NYSE symbol: EMC) is the worlds 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. The Company had another great year. For 1999, revenues rose to $6.716 billion, from $5.436 billion for 1998. Net income rose to $1.01 billion, or $0.92 a share, from $654 million, or $0.61 a share for 1998. This is the first time Company’s earnings have exceeded one billion dollars. EMC Corporation acquired Data General in October 1999 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 move 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. Although we don’t expect this stock to appreciate at such a fast 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 be worth $32,000 after ten years. During the recent carnage in technology sector this stock was very resilient and fell just 22% from its high. At the recent price level this stock is still trading at 60 times earnings, which is high even in this sector. We rate this stock a strong long-term buy. Hold this stock at least ten years (on November 30, price $74.38, dividend Nil, P/E not meaningful). Scientific-Atlanta, Inc. (NYSE symbol: SFA) is a major manufacturer of set-top boxes, fiber optic transmitters, optical amplifiers, and Power Vu ® digital video compression systems that allow broadcasters to send as many as 16 different video channels over a single transponder. For 1999, revenues rose to $1.24 billion, from $1.18 billion for 1998. Net income rose to $102.3 million, or $1.30 a share, from $80.8 million, or$1.02 a share for 1998. As of June 30, 1999, Scientific-Atlanta, inc. had $302 million of cash and marketable securities. For fiscal 1999 ended in June, stockholders equity rose to $9.54 per share, from $7.88 per share for 1998. The Company began investing in digital interactive networks six years ago and proceeded to develop new equipment that would allow video-on-demand, electronic mail, and Web browsing. Now, as the Internet continues to expand at a fast pace and the public wants to find information, and be entertained in real time, Scientific-Atlanta’s broadband access technology can deliver this kind of interactivity over a TV-set. The Company’s latest equipment will allow the public to view video on demand, with the ability to select, watch, pause, rewind and fast-forward a video program over a set-top box. In our opinion, due to the expanding convergence of cable, information technology and telecommunications industries, the demand for products made by Scientific-Atlanta, Inc., will continue to grow. Furthermore, in our opinion cable service providers will have to continue upgrading their equipment in order to expend their services. Although this is costly, in the long-run it will allow cable providers to generate additional revenue streams and increase their profit margins. On March 28, 2000, the Company issued a 2-for-1 stock split. The stock proceeded in the upward direction and closed at $70 per share on November 3, 2000. Recently, this stock fell below its 200 day moving average of $66.24 and could once again test its support level of $41.75. On November 30, this stock closed at $40.38 per share, near its support level. Buy this stock on dips and hold long-term, at least five years (price $40.38, annual dividend $0.40, yield 0.1%, and P/E 24). Xilinx Inc. (NASDAQ symbol: XLNX) is the worlds largest manufacturer of Programmable Logic Devices (PLD). These are semiconductor chips that can be programmed by customers for specific function through the use of software. Among the Company’s major customers is Cisco Systems, Lucent Technologies, Nortel Networks, EMC Corporation, IBM, Sun Microsystems, and Hewlett-Packard. As of December 31, 1999, there were 320.7 million shares outstanding, and the Company had 1,856 employees. The Company had another great year. For 1999, revenues rose to $898.7 million, from $631.5 million for 1998. Earnings rose to $0.65 a share for 1999, from $0.39 a share for 1998. Gross margin remained steady at 62%, while profit margin rose to 25%, from 19% for 1998. Twelve-month average revenue per employee reached $560,000 in 1999, and is among the highest in the chip sector. In 1999, Xilinx redeemed $250 million of convertible notes, and since then the Company is debt-free. Majority of Xilinx’s chips are used in routers and wireless communications, thus provided 67% of annual revenues in 1999. Mass storage and computer peripherals accounted for 24% of revenues in 1999, while medical equipment and commercial aviation accounted for 9% of revenues. In 1999, Xilinx had 35% share of the market for Programmable Logic chips. The Company split its stock twice in 1999. Furthermore, Xilinx shares have outperformed the S&P 500 index for eight out of ten years the stock has been publicly traded. Between June 12, 1990, and December 31, 1999, the stock has risen 5,358%. On March 23, the stock closed at a high of $84.38 per share, and then proceeded in a downward direction. This stock proceeded to break through its support level and closed at $39 per share on November 30, 2000. The Company derives majority of its revenues from sales to wireless communications sector. In our opinion, the sales of cellular phones will continue to grow in high double-digits, and thus the demand for Xilinx’s chips could continue to grow approximately 50% annually for the next five years. Patient investors who buy this stock now and hold it at least five years could be rewarded with a gain as high as 2,000 percent. Although there is a probability that this stock could fall to a lower level during the next two months, we rate this stock a long-term buy (on November 30, price $39, dividend Nil, and P/E 19). Yahoo! Inc. (NASDAQ symbol: YHOO) is a global Internet media company. The Company provides comprehensive information and shopping services to over 140 million users worldwide. Company’s Web site www.yahoo.com is the most visited site and has the highest name recognition. As of December 1999, the Company had 1,992 full time employees. There were 596.8 million shares outstanding as of December 31, 1999. For the year of 1999, revenues rose to $589 million, from $245 million for 1998. The Company reported net income of $61 million, or $0.10 a share, versus a loss of $12.7 million, or $0.03 a share for 1998. As of December 31, 1999, the Company had $961 million in cash and short-term investments. 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 three-fold, to approximately $1.6 billion in the year 2002. Yahoo! Inc., is among the few Internet companies that already generate positive cash flow. The Company split its stock 2-for-1 on February 14, 2000. After the split the stock closed at a high of $197.19 on March 22, 2000. Due to the sell-off in the Internet sector, this stock closed at $39.63 per share on November 30, 2000. Although we are very optimistic about this stock, it is not for a timid investor. While Yahoo! Inc., has enough cash on hand to survive a short-term downturn in revenues, we would like to caution investors that the Company’s business plan is unproven, and the earnings may never rise high enough to justify the stocks lofty P/E ratio. On the other hand, if any of the large Companies is to survive the shakeout in the Internet sector, we project that this one could. As long as the management continues to execute its long-term plan, we project that this stock could rise ten-fold during the next five years. Investors could acquire a small position in this stock and hold it at least five years. (on November 30, price $39.63, dividend Nil, and P/E 100). 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. 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. Due to the bear market in NASDAQ this stock broke below $20 per share, down from its 52-week high of $90.38. On November 30, this stock closed at $18 per share. At this price level, we rate this stock a screaming buy. 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. 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 a href="http://www.altavista.com">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. This stock has been in a downtrend since March 2000. During September this stock proceeded to fall at a fast pace. On September 27, this stock broke through our 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 $10.06 per share on November 30, 2000. This stock could reach approximately $90 per share during the first 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 52-week high of $163.50 per share. Although patient investors could acquire this stock and hold it long-term, due to the high volatility and a wide trading range, this stock could be traded by speculators. This stock closed at $16.88 per share on October 31, and we rated it a strong buy. On November 30, this stock closed at $10.06 per share and we rate it a speculative, screaming buy. We are very optimistic about the stocks of Internet incubators such as CMGI, Inc., and Internet Capital Group. On October 30, two hundred shares of Internet Capital Group were bought at $11.63 per share and added to our 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. Last month we have stated that this stock could briefly test $18 level. On October 18, AMD closed at $18.125 per share and then proceeded in the upward direction. On October 31, this timely stock closed at $22.63 per share and we rated it a strong buy. During the sell-off in chip stocks, this stock closed at $15.25 per share on November 30, and at this level we rate it a screaming buy. During the first half of 2001, AMD could reach approximately $85 per share and speculators should sell it immediately to lock-in a probable gain of $61 a share, or 250 percent. 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 in July and closed at $9.54 per share on July 27. 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. This stock was included in our section Stocks for traders, in July 2000. Since then the stock fell an additional five points and on July 31, closed at $9.68 per share. After testing its bottom in July, this stock proceeded to reverse its downtrend and closed at $13 per share on August 31, 2000. This stock rose to $14.38 on September 8, 2000. Afterwards, the stock proceeded to fall and found strong support at $10.18 on September 26, 2000. Once this timely stock breaks through its resistance level of $14.38 it could reach approximately $19 per share during the next three weeks. This timely stock is trading at a low P/E multiple. On November 30, this timely stock closed at $12.19 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. 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. As of March 31, 2000, there were 557 million shares outstanding. 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 52-week high of $79.44 in January 2000, the stock proceeded to descend and closed at $24.78 per share on July 31, 2000. On September 7, this stock closed at $32.55 and then proceeded to fall. The stock retested its low of $25 on September 21, and then closed at $25.31 per share on September 29. The resistance level is at $33 and once this stock breaks through this level it could ascend to approximately $40 and then pull back again. In our opinion, this timely stock has potential to revisit its 52-week high during the next seven months. This stock was added to our section of: Stocks for traders, in August 2000. Due to the recent sell-off, this timely stock closed at $26.12 per share on November 30, 2000. We maintain a strong buy rating on this stock. 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. For the fiscal 1999, ended January 1, 2000, revenues rose to $2.486 billion, from $2.409 billion for fiscal 1998. The Company reported a loss of $50.1 million, or $0.48 a share for fiscal 1999, versus a net income of $31.2 million, or $0.47 a share for fiscal 1998. This stock reached a high of $21.25 in January of 1999. Recently, the Company announced that it would acquire Quantum’s hard drive division (NYSE symbol: HDD) for $1 billion in stock. In our opinion, long-term this acquisition will improve economies of scale and increase profit margin. In a short-term, the Company could record a charge related to the merger and this could immediately be reflected in a lower price of the stock. In our opinion, this stock could fall to approximately $6 per share and remain at that level for a few months. Speculators could switch from Maxtor to Internet Capital Group (NASDAQ symbol: ICGE) for a short-term trade. 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. Recently this stock proceeded to ascend and reached $19.06 per share on September 11. Afterwards, the stock proceeded to fall and closed at $12.88 per share on November 30, 2000. We have downgraded this stock to accumulate from buy. This stock could trade in a narrow range during the next three months. Speculators who are willing to wait, could buy BSX at this level and if it were to reach $34 per share by May of 2001, sell it immediately. Quantum Corporation is a major manufacturer of hard drives for systems ranging from personal computers to servers. The company also makes tape drives, and solid-state disk drives. 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 November 30, Quantum HDD closed at $8.75 while Quantum DSS closed at $13.50 per share. Maxtor Corporation offered to acquire Quantum’s hard disk drive division for $1 billion in stock. Speculators should sell Quantum hard disk drive (NYSE symbol: HDD) and buy Internet Capital Group (NASDAQ symbol: ICGE) for a short-term trade. The stock of Storage Systems Group (DSS) could reach our target level of $20 per share during the next four months. At that level this stock 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 November 30, this timely stock closed at $35.82 per share. We maintain a buy rating on this stock. This stock could reach our target level of $50 per share during the next eight 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. BR> 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 November 30, this timely stock closed at $15.25 per share and we rate it a screaming buy. In our opinion, this stock could reach approximately $85 per share during the first half of 2001. As son 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. Albertson’s, Inc. (NYSE symbol: ABS) is the second largest food-drug chain in the United States. After the merger with American Stores Company that was finalized on June 23, 1999, Albertson’s operates over 2,400 stores in 38 states. Among the stores operated by the Company are Albertson’s, Save-On, Osco Drug, Lucky Stores, Jewel, and Acme Markets. The merger will allow the Company to achieve greater economy of scale, thus improving profit margins. Just a few months ago, on June 1, 2000, the stock closed at $38.87 per share. Three years ago the stock of Albertson’s displayed a similar trading pattern and it could once again repeat itself. Typically, the fourth fiscal quarter that ends in January is the best in this sector. This timely stock could revisit its recent high of $38.87 by the end of the year, for a probable short-term gain of approximately 70 percent. On November 30, this stock closed at $25.56 per share. As soon as this stock reaches our target level of $36 per share, these 200 shares will be sold immediately. 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 two years to $43 billion annually. The long-term outlook for the Company is excellent. On October 14, 1997, and on March 16, 2000, Applied Materials split its stock 2-for-1. On November 30, this stock closed at $40.44 per share. At this price level, we rate this stock a strong long-term buy. 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. Speculators who are willing to wait, could buy this stock now and if it were to reach our revised target level of $34 per share by May 2001, 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. On March 23, 2000, this stock split 2-for-1. During the past eight weeks this stock edged lower and closed at $47.88 per share on November 30, 2000. At this level, we rate this stock a strong buy. 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 $21.50 per share on November 30. Patient investors could buy this stock now 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, 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. 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 November 30, this stock closed at $0.78 per share and at this level 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 200 shares will be sold. Delia’s, Inc. will merge with i Turf, Inc. Merged company will be called Delia’s i Turf, Inc. 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. During the past twelve months the price of the stock has almost stood still compared to the previous years. On March 22, the stock reached an intra-day high of $59.68 per share. Then, the stock proceeded to pull back. During summer, sales of computers are slower than at other time of the year. The sales should start rising in September and the stock could reach a new high of $65 per share before the end of this year. 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 1,500% in six years. Due to the recent sell-off of box makers, this stock broke through its support level. On November 30, this stock closed at $19.25 per share. At this price level we rate this stock a screaming buy. Patient investors should hold this stock 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 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 November 30, ADR’s closed at $11.38. 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, two hundred shares were sold and now there are 280 shares in the Model Portfolio. This stock continued to fall and closed at $38.06 per share on November 30. At this price level we rate this stock a strong buy. 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 $5.75 per share on November 30, down from its 52-week high of $212 per share. In our opinion this stock is oversold and at this level is a screaming buy. There is a 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, and the remaining fifty shares will be held long-term. 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 and may reach $80 billion in five years, a double from present annual revenues. In our opinion, the long-term outlook for the Company is excellent. On October 30, an additional 200 shares of Lucent were bought at $20.75 per share. Now, there is a total of 250 shares in the 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 new low of $15.56 per share on November 30, 2000. We maintain our rating of screaming 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 the Model Portfolio. On November 30, this stock closed at $92.69 per share. Buy this stock on dips 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 fiscal 1999, ended June 30, 1999, revenues rose to $19.747 billion, from $15.262 billion for fiscal 1998. Net income rose to $7.785 billion, or $1.42 a share, from $4.490 billion, or $0.84 a share for fiscal 1998. Stockholders equity rose to $28.438 billion from $16.627 billion for fiscal 1998. 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 November 30, this stock closed at $57.38 per share. At this price level we rate this stock a strong buy. Investors, who already own this stock, could add to their position. 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 $42.75 on November 30. Buy and hold 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 is oversold. On November 30, the stock closed at $6.63 per share. This stock is trading at seven times earnings, and at this low level we rate it a strong buy. The sell-off in this stock was overdone. This stock will be held in the 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. PepsiCo, Inc. offered to acquire Quaker Oats Company for $13 billion in stock. If this offer were accepted, PepsiCo would become the largest supplier of sports drinks. On November 30, stock of PepsiCo closed at $45.38 per share. Buy this stock on dips 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 November 30, this stock closed at $44.31 per share. Buy this stock on dips and hold long-term. Back to Top |
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Model Portfolio Chart 11-30-2000
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. 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. g) The quantity of shares was adjusted for a 2-for-1 stock split issued by Merck & Co. Inc. on February 17,1999. 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. 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 |