January 2001
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Contents Back Issues Sept. 2000 Oct. 2000 Nov. 2000 Dec. 2000 Investing Buy & Sell Stocks for traders Model Portfolio Model Portfolio Chart |
Several months ago, investors had substantial gains in their stock portfolios and their spending exceeded disposable income. The six rate increases have already decelerated the economy to a much slower pace. Due to the substantial fall of the market, the stock portfolio of a typical investor has fallen (continued in: Investing). Advanced Digital Information Corp., (NASDAQ symbol: ADIC) is one of the world’s leading providers of hardware and software storage solutions. The Company is the largest device-independent supplier of automated storage libraries. Its latest enterprise library combines company expertise in Fibre Channel technology and storage management software in the industry’s first storage library (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. 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. (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 Model Portfolio). |
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Investing Several months ago, investors had substantial gains in their stock portfolios and their spending exceeded disposable income. The six rate increases have already decelerated the economy to a much slower pace. Due to the substantial fall of the market, the stock portfolio of a typical investor has fallen as much as 50% and all of these millions of investors could cut their spending, perhaps right after Christmas. If such a scenario were to occur, the nations economy could decelerate at a much faster pace and instead of hard landing, we could have a recession. The Fed met on December 19 and kept the interest rates steady, but changed their bias from “tightening” to “easing.” The Fed indicated that they are ready to cut rates to prevent this expansionary economic cycle from going into recession. Perhaps, the majority of investors expected a rate cut on December 19, therefore, right after the announcement the market went into a steep dive. The tech-heavy Nasdaq Composite Index fell a whopping 112.82 points and closed at 2511.71, down 4.3 percent for the day. Blue-chip stocks fared better and the Dow Jones Industrial average closed at 10584.36, down 61 points. In our opinion, Federal Reserve Chairman, Alan Greenspan has slammed on the brakes too hard with six rate hikes. We anticipate that the Fed might cut rates by 25 basis points, a quarter of a percent during their January 30-31 meeting, and then follow up with several additional rate cuts of 25 basis points. Furthermore, President George W. Bush could proceed with his tax cuts and although these may not go into effect until a year later, the anticipation of the tax refunds could prompt the consumers to increase spending, thus preventing economy from going into a recession. In addition, the corporate earnings could be higher than anticipated and the equities could once again resume their upward trend. Although this is a very optimistic scenario, in our opinion it could occur by the second quarter of 2001. Lately, many analysts have downgraded their rating on the tech-stocks and in turn, many investors are avoiding this sector. Although prudent investors should own some defensive old economy stocks such as in retail, or pharmaceutical sector in their portfolios, in our opinion at least 25% of the portfolio should consist of tech-stocks. Once the economy resumes its expansionary cycle, in our opinion, the revenues and earnings of the companies in this sector could continue to outpace the old economy stocks. Just four years ago, the stock of Yahoo! Inc. was trading below $20 per share, then the stock proceeded to ascend and reached a high level of $250.06 per share in January 2000. Many tech-stocks could develop similar trends over the course of the next three years, while some of these stocks could achieve their high within the next forty weeks, therefore would be great for trading. Some of the tech-stocks could provide investors with a short-term gain of 300% or higher, but speculators have to be very selective. In our opinion, chip makers such as LSI Logic Corporation (NASDAQ symbol: LSI) and Advanced Micro Devices (NYSE symbol: AMD) have potential to generate a short-term gain up to 300 percent. Last month we have compiled a list of ten technology stocks (read: Buy 10 Tech Stocks). Speculators should start buying these stocks now. Remember that the risk of owning these stocks is high. Once again we remind investors to remain calm during this bear market. Do not let your emotions make your investment decisions. Some of the tech-stocks may never again reach such low levels and should be bought now. In our opinion, during the next five months some of the tech-stocks could ascend to the levels approaching their previous 52-week high and reward speculators with gains as high as 300 percent. Back to Top |
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Buy & Sell
Advanced Digital Information Corp., (NASDAQ symbol: ADIC) is one of the world’s leading providers of hardware and software storage solutions. The Company is the largest device-independent supplier of automated storage libraries. Its latest enterprise library combines company expertise in Fibre Channel technology and storage management software in the industry’s first storage library with both Storage Area Network (SAN) and Network Attach Storage (NAS) modes. The company’s products are used in a variety of industries ranging from mid-size businesses to Fortune 500 companies, such as AT&T, Cisco Systems, Dell Computer, Disney, Bank of America, and Yahoo! Advanced Digital Information Corp., has manufacturing facilities in the United States and Germany. As of October 31, 1999, the Company had 690 employees. The annual revenues rose to $223 million, for the fiscal year ended on October 31, 1999. A 95% increase from $114.6 million for fiscal 1998. Net income rose to $15.218 million, or $0.75 a share, from $1.5 million, or $0.08 a share for fiscal 1998. During fiscal 1999, gross margin rose to 34%, from 29% in 1998. Sales to Original Equipment Manufacturers rose to 16% of total sales. In 1999, the Company entered into expended marketing agreement with Fujitsu Siemens Computers and IBM. Furthermore, sales to Dell Computer accounted for 13% of total sales for fiscal 1999. The Company completed follow-on stock offering of $135.6 million in September 1999 and used the proceeds to repay majority of its long-term debt. ADIC continues to expand through acquisitions and through equity investments in companies in similar fields. In July 1999, the Company invested $7 million in @Backup, that provides secure, off site Internet based back-up and data access for mobile users. During fiscal 1999, share price increased by 450%. In our opinion, as the demand for data storage grows, the sales of Company’s products could increase by 100% annually during the next three years, and could reach approximately $2.5 billion at the end of fiscal 2003. The Company has a strong balance sheet, and as of October 31, 1999, had $156.5 million in cash, versus $28 million in 1998. On August 12, 1999, the Company issued a 2-for-1 stock split, and another 2-for-1 stock split on March 14, 2000. The stock reached a 52-week high of $50.50 per share in March 2000, and then proceeded to descend. On November 30, the stock closed at $14.75 per share. Then, the stock proceeded to ascend and closed at $25.18 on December 11. This stock could retest its recent support level of $18.63, and then once again resume its upward trend. In our opinion, as the Internet usage continues to grow, and along with it the amount of daily page views, the demand for the data storage products made by the Company will continue to expand. The price of this timely stock could grow eight-fold during the next three years and provide investors with a return of 700% (on December 29, price $23, dividend Nil, and P/E 16). RF Micro-Devices, Inc., (NASDAQ symbol: RFMD) designs, develops, manufactures and markets semiconductors and components for wireless handset market, wireless Local Area Networks (LAN), pagers, broadband cable communications sector, and wireless security. The Company offers a wide selection of products such as amplifiers, mixers, single chip transmitters, receivers and transceivers. Among the microprocessors made by the Company are gallium arsenide-based chips that offer better performance, and are the most expensive. The Company’s largest customer is Nokia Corporation, that accounted for 59% of annual sales for fiscal 2000. During fiscal 2000, sales in United States accounted for 44% of annual revenues, while sales in Asia generated 24% of revenues, and sales in Europe 32%. The Company had a great year. For fiscal 2000, that ended March 31, annual revenues rose to $288.96 million, from $152.85 million for fiscal 1999. Net income rose to $50.094 million, or $0.63 a share, from $19.561 million, or $0.29 a share for fiscal 1999. During fiscal 2000, gross profit rose to 47.1%, from 35% for fiscal 1999. While the average selling prices for the company’s components continued to trend lower, these were offset by lower overhead cost per unit and lower wafer costs due to greater internal manufacturing efficiencies. In fiscal 2000, chips manufactured in company’s wafer fabrication facility generated $180.5 million in sales and accounted for 62.5% of total annual revenues. The company’s wafer fabrication facility had a maximum production capacity of approximately 35,000 four-inch wafers per year. The Company planned to increase the annual capacity to 60,000 four-inch wafers by the end of the calendar year 2000. Furthermore, in order to expand manufacturing capacity, the Company began construction of a second wafer fabrication facility in 1999, and once the first phase is completed by the end of the calendar year 2000, this facility is projected to start producing approximately 60,000 four-inch wafers annually. RF Micro-Devices, Inc. projects that the second phase of construction will be completed by the end of calendar 2001. The total potential annual output from this facility could reach 210,000 four-inch wafers. The Company plans to increase the production capacity gradually, to meet the market demand. RF Micro-Devices, Inc. estimates that the cost to build and equip this facility will be approximately $140 million for the first phase and $180 million for the second phase. The Company will fund this project by a synthetic lease arrangement, that is an asset-based form of financing. The Company continues to spend heavily on research and development, and in fiscal 2000 this expense rose to $33.338 million, an increase of $19.1 million from fiscal 1999. RF Micro-Devices, Inc., had a working capital of approximately $142.3 million as of March 31, 2000. The Company announced an agreement with Qualcomm, Inc., on February 28, 2000, to cooperate on the development of the module CDMA power amplifiers to be used in Qualcomm CDMA chipsets. Furthermore, the Company is expanding its component line for Motorola’s phone platform and plans to begin volume shipments in the second half of fiscal 2001. Although Nokia Corporation remains the biggest customer and continues to increase orders, the sales to this company have decreased as a percentage of total revenue, because RF Micro-Devices, Inc., continues to expand its customer base. In the fourth-quarter of fiscal 2000, Sagem, a major manufacturer of handsets in France placed a long-term order for components. The Company has also received an order from Sony Corporation to provide components for one-year. In our opinion, as the demand for wireless handsets continues to grow worldwide, the long-term outlook for RFMD is excellent. Although this stock may not repeat its previous performance, where it has risen from a low of $2.78 per share in the second fiscal quarter of 1999 to $184.50 in the fourth fiscal quarter of 2000, it could generate a return up to 2,000% during the next five years, and $1,000 invested in this stock now could appreciate to $20,000 by 2005. This sector is very volatile, therefore, investors who buy this stock should prepare themselves for a bumpy ride. Furthermore, once the second phase of wafer fabrication facility is completed near the end of calendar 2001, the Company could incur increased costs toward the end of fiscal 2001 due to the initial low capacity utilization. During that time, the Company could start to write-off the depreciation on the wafer manufacturing equipment. These costs could weigh heavily on the bottom line and bring substantial downward pressure on the price of the stock. The Company issued a 2-for-1 stock split on August 28, 2000. Recently, the stock reached an intra-day low of $12.12 per share in October 2000, and then reversed its downward trend and closed at $36.39 per share on December 8, 2000. Afterwards, this stock proceeded to descend and found strong support level at $23.69 on December 21, 2000. Patient investors could buy this stock now and hold it long-term, at least five years. Speculators could hold this stock four months, and if it were to reach approximately $90 per share, sell it to lock in your gains (on December 29, price $27.44, dividend Nil, and P/E 78). Spectra Link Corporation (NASDAQ symbol: SLNK) designs, manufactures and sells Wireless Telephone Systems that function with existing telephone systems inside office buildings, or warehouses, by providing portable communications. This system increases the efficiency of employees by allowing them constant telephone contact while moving throughout their place of employment. Spectra Link’s system uses a micro-cellular design and interfaces directly with PBX, Centrex, or key/hybrid system. Furthermore, all calls are routed through the Corporate phone system therefore there are no airtime phone charges incurred. These systems are used by retailers, allowing their employees to quickly respond to customers requests for information while they are away from basic desk phone. In addition, these systems are used by manufacturers and distributors, where employees could be hundreds of feet away from a desk phone, but with the Spectra Link wireless phone system these employees can respond immediately, thus saving time and increasing productivity. The annual revenues rose to $41.169 million for year 1999, from $35.135 million for year 1998. Net income rose to $7.934 million, or $0.42 a share, from $2.075 million, or $0.11 a share for 1998. As of December 31, 1999, the Company had $34.933 million of working capital and only $237,000 of long-term liabilities. During 1999, the Company invested $4.11 million in research and development. The Company had 71 employees in its direct sales organization as of February 25, 2000. In addition, the Company distributes its products through telecommunications distributors such as Bell Atlantic, Bell South Communications Systems, SBC Communications, Inc., Siemens Information, Communications Networks, Inc. and several other companies. Spectra Link Corporation exhibited its system at the ceBIT show in Germany, in February 2000. Afterwards, Spectra Link proceeded to establish distribution channels in Europe. In our opinion, this is just the first phase initiated by the Company to expand its market. In the future the Company could proceed to market its products on other continents and then its revenues could grow approximately 29% annually. During the year 1998, this stock was a non-performer and traded in a narrow range between $2.063 and $5.50 per share. Then, in 1999, the stock reached a low of $3.12 in the first quarter and then proceeded to ascend to a 52-week high of $17.75 in the fourth quarter. The stock continued its strong upward momentum and reached a 52-week high of $32.25 in March 2000. The Company issued a 3-for-2 stock split on April 10, 2000. Afterwards, the stock proceeded to descend and reached a 52-week low of $6.19 per share at the end of 2000. Although the Company has a strong balance sheet, the risk of owning this equity is above average therefore this stock could be bought by speculators. On December 18, this stock closed at $15.12 per share and then proceeded to descend. The stock found strong support level at $9.50 per share on December 22, 2000. On December 29, this stock closed at $14.44 per share. This timely stock could once again retest its support level at approximately $10 per share and then once again resume its upward trend. This stock could revisit its recent 52-week high of $32.25 per share during the next four months. Speculators could buy this stock on dips and then sell it as soon as it reaches our target level of approximately $30 per share (on December 29, price $14.44, dividend Nil, and P/E 34). Telescan, Inc., (NASDAQ symbol: TSCN) provides stock screening tools, technical analysis and financial data for domestic and international markets on its website at www.WallStreetCity.com . Traffic on this website rose 48% to 21.1 million average page views in the first quarter of 2000. WallStreet.com can be accessed through wireless hand held devices such as Palm VII. In addition, the Company builds, hosts and maintains websites for leading providers of online financial services and content providers such as AOL, American Express, CNBC and Citibank. As of December 31, 1999, there were 15.486 million shares outstanding. The revenues continue to expand. For 1999, annual revenues rose to $26.438 million, from $15.234 million for 1998. Due to the increased marketing and administrative expenses, the Company posted a loss of $6 million, or $0.39 a share, versus a loss of $8.339 million, or $0.66 a share for 1998. As of December 31, 1999, Telescan, Inc. had $10 million of working capital. Total stockholders equity rose to $57.77 million, from $4.77 million for 1998. The Company continued to expand agreements with its alliance partners and entered into new alliances with America Online, FreeRealTime.com, GlobalNetFinancial.com, and the National Broadcasting Company. One of the major alliances was a five year licensing agreement to provide customized investment analytics, financial data and hosting services for NBC’s personal finance portal CNBC.com. As a result of this alliance, NBC along with its affiliate, GE Equity Capital made an investment in Telescan, Inc. in 1999, by acquiring a 14% equity stake in Telescan. Furthermore, America Online entered into a three-year agreement, where Telescan will provide stock screening and portfolio analysis tools to AOL’s Personal Finance Channel. Telescan expanded its agreement to provide hosting and content for American Express’ Financial Resource Center. Furthermore, Citibank expanded to license Telescan’s investment services to its affiliate’s worldwide Internet and Intranet websites. Telescan continues to expand through internal growth, acquisitions, and strategic partnerships. The Company acquired INVESTools, Inc., in May 1999, in exchange for 2,345,931 shares of Telescan. INVESTools operates an investment advice website (http://www.investools.com) that features portfolio advice from money managers and also has alliances with Quicken.com, CBS MarketWatch.com, CNBC.com and other sites that distribute their content. Investors worldwide are using Internet to search for financial data, stock analysis, and trading. In Western Europe alone, Internet usage was expected to triple in the year 2000. As Telescan expands overseas, it plans to provide international investors with capabilities to research and analyze stocks. The Company relaunched its WallStreetCity.com website in May 2000 and now individual investors can easily navigate through the site and also access streaming real-time quotes. Telescan, Inc., proceeded to strengthen its management team and appointed Lee Barba to the position of Chief Executive Officer in February 2000. Previously, Lee Barba was a CEO at Open Link Financials and has 22 years of experience in the financial industry. In addition, Telescan appointed Dennis Santiago as acting Chief Technology Officer. Before joining Telescan, Dennis Santiago was Chief Strategy Officer at Zacks Investment Research. Furthermore, Mister Santiago was a leader in the development of CBS MarketWatch.com. This stock has traded in an extremely wide range. In the fourth quarter of 1998, the stock fell to a low of $2.63 per share and then proceeded to ascend at a fast pace and reached a high of $32.88 per share in the fourth quarter of 1999. Due to the negative outlook for the Internet stocks, this stock fell throughout the year 2000, and closed at $1.06 per share on December 29. Although Telescan, Inc., has contracts and alliances with major companies, the risk of owning this stock is high, therefore it could be bought only by speculators. As long as the management continues to properly execute its expansionary strategy, and starts paying attention to the bottom line, in the future this company could emerge as one of the leading providers of financial data over the Internet. Speculators could acquire a small position in this stock and hold it at least two years. If this stock were to revisit its recent 52-week high of $32.88 it should be sold immediately (on December 29, price $1.06, dividend Nil, and P/E not meaningful). 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. 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 proceeded to ascend to $33.30 per share on November 2, 2000. Due to continued bear market in NASDAQ, this stock proceeded to descend and closed at a low level of $19.50 on December 29, 2000. 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. At the recent price level, we rate this stock a screaming 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 December 29, this stock closed at $17.09 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. At the recent low 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 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, 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 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 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, this stock could be traded by speculators. At the recent low level of $5.59 per share we rate this stock 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 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. 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. Two months ago, we have stated that this stock could 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 $13.81 per share on December 29, 2000, and at this level we rate it a screaming 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 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. This timely stock is trading at a low P/E multiple. On December 29, 2000, this timely stock closed at $14.63 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. 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. Recently, the Company announced that it would acquire Quantum’s hard drive division (NYSE symbol: HDD) for $1 billion in stock. Once this acquisition is completed Maxtor Corporation will become one of the major disk drive manufacturers. 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. We have previously stated that this stock could fall to approximately $6 per share and remain at that level for a few months. The stock is already trading at this low level. On December 29, this stock closed at $5.59 per share and could remain at that level until February 2001. 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. On December 29, 2000 this stock closed at $13.69 per share and we maintain our rating of accumulate. This stock could trade in a narrow range during the next two months. Speculators who are willing to wait, could buy BSX at this level and if it were to reach $34 per share by June 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 December 29, Quantum HDD closed at $8 while Quantum DSS closed at $13.25 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 December 29, this timely stock closed at $36.63 per share. We maintain a buy rating on this stock. The Fed could start lowering interest rates in January 2001, and such action would improve earnings in this sector. This stock could reach our target level of $50 per share during the next seven 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 December 29, this timely stock closed at $13.81 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. We have revised the time frame that it could take this equity to reach our target level. This stock could reach our target level of $36 per share by February 2001. On December 29, this stock closed at $26.50 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. 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 December 29, this stock closed at $38.19 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. On December 29, 2000, this stock closed at $13.69 per share. 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 twelve weeks this stock edged lower and closed at $38.25 per share on December 29, 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 $15.05 per share on December 29, 2000. 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. On December 29, this stock closed at $6.25 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 December 29, this stock closed at $1.41 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 the shares will be sold. Recently, Delias, Inc. merged with iTurf, Inc. and after the conversion of existing stock into the newly issued shares there are 342 shares in the 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. 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. This equity proceeded to reach lower levels and on December 29, 2000, closed at $17.44 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 December 29, ADR’s closed at $11.19. 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 the Model Portfolio. This stock continued to fall and closed at $30.06 per share on December 29. 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 a low of $3.28 per share on December 29, 2000, 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 low of $13.50 per share on December 29, 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 December 29, this stock closed at $93.63 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 December 29, 2000, this stock closed at $43.38 per share. At this price level we rate this stock a screaming 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 $43.50 on December 29. 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 December 29, the stock closed at $7.13 per share. This stock is trading at nine 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 December 29, stock of PepsiCo closed at $49.56 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. 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 December 29, this stock closed at $46 per share. Buy this stock on dips and hold long-term. Back to Top |
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Model Portfolio Chart 12-29-2000
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 |