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 in the year 2000, 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 reached a high of $94.63 per share on June 21, 2000 (after the 2-for-1 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. Starting in September, the sales of chips typically rise and the demand reaches the highest level by December.
On January 31, 2001, this stock closed at $24.60 per share. The stock reached an intra-day high of $26.75 on February 15, 2001, and then edged lower to close at $21.50 per share on February 28, 2001.
On December 11, 2001, this stock closed at $17.86 per share, and in our opinion is fully valued at this level. This stock could test its support level of $7.93 per share by the end of December 2001, or beginning of January 2002, and at such level would be a screaming buy.
We are maintaining our target level of $60 for this equity, but due to the pricing pressure on chips it may take this stock much longer to reach this level, perhaps in the second half of 2002. As soon as this stock reaches our target level, 150 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 July 16, 2001, this stock fell to a low of $41.95 per share and then closed at $45.86 on July 31, 2001. In September issue, we stated that AMAT could fall to $39 per share in September and at such level would be a strong buy. Due to the horrific event on September 11, 2001, this stock fell tremendously and closed at $27.87 on September 27, 2001.
AMAT closed at $43.94 per share on December 11, 2001. In the beginning of January 2002, this stock may test its support level and although it may not fall to $27.87 per share, as soon as it falls to approximately $30 per share it would be a strong buy. Hold this stock at least four years.
CMGI, Inc. (NASDAQ symbol: CMGI) 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.
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 cash proceeds. The company has a history of acquiring successful Internet companies. CMGI, Inc. acquired a majority stake in Alta Vista, while Compaq retained 17% equity ownership in the Alta Vista business.
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
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 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 $90 per share in the first half of the year 2003.
On December 11, 2001, this stock closed at $2.30 per share. This stock may test its support level in January 2002, and speculators may buy it as soon as it breaks below $1.75 per share.
Once this stock reaches our revised target level of $90 per share, all three hundred 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 may only be bought by speculators. We maintain our rating of speculative screaming buy.
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 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.
During the past six months this stock continued to fall. On August 31, 2001, this stock closed at $16.33 per share. In September issue we stated that this stock could test its support level and may fall to approximately $15 per share. At such level this stock would be a strong buy.
On September 27, 2001, this stock closed at a low of $11.24 per share, then proceeded to rebound and closed at $20.78 on December 11, 2001. This equity may test its support level by the end of December and while it may not revisit its recent low, at approximately $12.75 per share it would be a strong long-term 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 third 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 three years ago.
The company sold 83% of interest in Alta Vista Web site to CMGI, Inc. Compaq Computer Corp. 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.
On September 20, 2001, CPQ closed at a low level of $7.85 per share. Even if Hewlett-Packard Corporation did not acquire this company, this stock may rebound on its own.
This stock closed at $9.49 per share on December 11, 2001. In January 2002, this equity may test its support level of $7.85 and at such level would be a strong buy. Speculators may buy this stock and trade it, while patient investors may hold it until it reaches our revised target level of $29 per share.
As soon as this stock reaches our target level of approximately $29 per share, one hundred shares that are held in the Model Portfolio will be sold immediately.
Compuware Corporation (NASDAQ symbol: CPWR) makes software that manages corporate networks, and improves productivity. The revenues are growing at a fast pace. 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.
On December 11, 2001, this stock closed at $12.95 per share and we rate it a strong long-term buy. Due to the negative short-term outlook for this sector, we revised our target level to $28 per share, from $35 per share. Once this stock reaches our revised target level, 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 April 30, 2001, this stock closed at $2.96 per share and we rated it a speculative buy.
As more money flowed into this timely stock, it closed at $8 per share on June 29, 2001. Several months ago we have revised our target level for this stock downward to $25 per share. This stock may reach such level in the first half of 2003.
Therefore, a decision was made to sell this stock as soon as it revisits its recent high of $8 per share and add cash to the existing cash in our Model Portfolio. On December 11, 2001, this stock closed at $5.49 per share. Delia’s, Inc. merged with iTurf, Inc. and after the conversion of stock into the newly issued shares, now there are 342 shares in our Model Portfolio.
Dell Computer Corporation (NASDAQ symbol: DELL) is the world’s number one direct-sale computer manufacturer in the world. The Company makes personal computers, notebook computers, servers and workstations.
In March of 1999, the Company issued a 2-for-1 stock split, the seventh in eight years.
On March 22, 2000, the stock reached an intra-day high of $59.68 per share. Then, the stock proceeded to fall.
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 September 21, 2001, this stock closed at a low level of $16.63 per share, and then proceeded to rebound to $26.14 per share on November 8, 2001. This stock closed at $29.06 per share on December 11, 2001. In January 2002, this stock may test its support level and at approximately $17 per share would be a strong buy.
Although it is not likely that the stock of Dell Computer Corporation will appreciate at such a fast pace as it did between the year 1994 and 1999, in our opinion, this stock could generate a gain of approximately 1,500 percent 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 reach over 800 million. The long-term outlook for Ericsson is excellent. ADR’s of Ericsson split 4-for-1 on May 8, 2000. On December 11, 2001, ERICY closed at $6.01 per ADR. Buy these ADR’s on dips, preferably below $5 and hold at least three years.
Intel Corporation (NASDAQ symbol: INTC) is the leading manufacturer of microprocessors. The company continues to switch production to 0.18 micron manufacturing process that yields more semiconductors from each wafer.
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 December 11, 2001, this stock closed at $33.19 per share. This stock may test its support level of $21.50 by the end of December 2001, or in January 2002, and at such level would be a strong buy. Hold this stock 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.
In July 2000, 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 high of $143.55 reached in March 2000.
Afterwards, this stock proceeded to build a slow upward momentum and closed at $6.44 per share on January 31, 2001. There is a very slight probability that this stock could revisit its high of $143.55 per share during the next two years.
As soon as this stock reaches approximately $130 per share, one hundred and fifty shares will be sold immediately. The remaining fifty shares will be held long-term. On December 11, 2001, this stock closed at a low level of $1.24 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, this stock broke below $20 per share and closed at a low level of $16.43 per share on December 21, 2000, way down from its high of $71.32.
On December 11, 2001, this stock closed at $16.35 per share. This stock may test its support level of $11.20 per share by the end of December 2001, and at such level would be a screaming buy. Due to the negative pressure on the stocks in this sector, we have revised our long-term target level for this stock to $42 per share, from $60 per share.
This stock will be sold as soon as it reaches our revised target level of approximately $42 per share, perhaps at the end of the second half of 2002.
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.
On October 30, 2000, an additional 200 shares of Lucent were bought at $20.75 per share and added to our Model Portfolio. Now, there is a total of 250 shares in our Model Portfolio.
This stock is for patient investors who are willing to hold it at least two years. In the year 2003, this equity may reach our revised target level of $55 per share.
As soon as this stock reaches our target level, 150 shares will be sold. The remaining hundred shares will be held long-term, at least ten years.
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 on March 30, 2001. On December 11, 2001, this stock closed at $7.81 per share. Buy this stock on dips and hold long-term. Investors who already own this stock may add to their position.
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.
Although this timely stock may not appreciate at previous fast pace, it could generate a gain of 700 percent 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.
On December 11, 2001, this stock closed at $67.32 per share and at this level is fully valued. This stock may test its support level in January 2002, and if it were to fall to approximately $54 per share it would be a strong buy. Hold this stock long-term.
Motorola Inc. (NYSE symbol: MOT) 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.
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.
The stock of Motorola is great for trading. In our opinion, this stock could reach $50 per share in the year 2002, and once it does it will be sold.
On December 11, 2001, this stock closed at $16.82 per share. In January 2002, this stock may test its support level and if it were to fall below $14 per share it would be a strong buy. Buy this stock when it tests its support level and hold until it reaches our target level of approximately $50 per share.
Nokia Corporation (NYSE symbol: NOK) is the world’s 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.
ADRs of Nokia Corporation closed at $25.50 on December 11, 2001. These ADRs may once again test their support level of $15.20 in January 2002, and at such level should be bought immediately. Hold these ADRs long-term, at least three years.
Nortel Networks Corp. (NYSE symbol: NT) is the leading provider of networking solutions, including optical networking solutions and wireless networking systems. The stock is way off from its 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 approximately 50 percent, perhaps next year, this stock may once again resume its strong upward trend.
Until September 2001, we were estimating that this stock could revisit its high of $86 per share in less than twelve months. Due to the continued slow-down, it could take this stock two years to reach such level. 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 could continue to grow worldwide.
After the company announced that it would take a restructuring charge of $19.2 billion the stock proceeded to fall to a new low level. On December 11, 2001, this stock closed at $8.51 per share. Buy this stock on dips and hold long-term. This stock will be held in our Model Portfolio until it reaches approximately $60 per share and then it will be sold.
Oracle Corporation (NASDAQ symbol: ORCL) is the world’s second largest software company. The company makes database management system software. Approximately 90% of corporate Web sites are using Oracle’s database software.
In the year of 1999, Oracle Corporation consolidated its computer system from approximately 40 locations around the world, down to two locations. The company launched its Internet store and all of its sales will be made through this online storefront. Oracle Corporation has already achieved annual savings of $1 billion from this E-engineering.
As soon as this stock reaches our target level of approximately $25 per share, perhaps in January 2002, all of the shares that are held in our Model Portfolio will be sold immediately. The cash will be added to the existing cash in our Model Portfolio.
On December 11, 2001, this stock closed at $15.11 per share. Due to the strong money flow, this stock may continue its upward momentum and reach approximately $20 per share in December. Afterwards, this equity may test its support level of $11.20 per share, perhaps in February 2002. Buy this stock on dips and sell as soon as it reaches our target level of approximately $25 per share.
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 good. On December 11, 2001, this stock closed at $40.35 per share. This stock may test its support level of $37 in January 2002, and at such level would be a strong buy. Hold this stock long-term.
Sun Microsystems, Inc.(NASDAQ symbol: SUNW) 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 may double its annual revenues in three years.
As additional hundreds of millions of users access the Internet, the demand for servers could grow 50 percent annually during the next five years. This stock will be held in our Model Portfolio approximately three years, and as soon as it generates a gain of 400 percent, all of the shares will be sold.
On December 11, 2001, this stock closed at $13.39 per share. This stock may test its support level of $8 per share in the beginning of January 2002, and at such level would be a screaming buy.
Vertical Net, Inc., (NASDAQ symbol: VERT) is an Internet incubator that owns and operates over 50 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.
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, perhaps in 2003, and then will be sold to lock in long-term capital gain. On December 11, 2001, this stock closed at $1.80 per share and we rate it a speculative strong buy.
WorldCom, Inc., (NASDAQ symbol: WCOM) has already grown from a small telecommunications provider to a behemoth, through mergers and acquisitions. 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 approximately $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 approximately 120 percent. On December 11, 2001, this stock closed at $14.94 per share. Buy this stock on dips and hold until it reaches our target level.
Yahoo Inc., (NASDAQ symbol: YHOO) is a global Internet media company that provides comprehensive information and shopping services to approximately 200 million users worldwide. The company’s Website 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 one year. 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 five 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 one hundred shares will be sold.
On December 11, 2001, this stock closed at $18.42 per share. Due to the unusually strong money flow, this stock may maintain its upward momentum and reach approximately $22 per share by the end of December. Afterwards, this stock may pull back and test its support level of $9 per share in February 2002. At such level this stock would be a speculative, strong long-term buy.
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