June 2000
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Contents Back Issues March 2000 April 2000 May 2000 Investing Buy & Sell Stocks for traders Model Portfolio Model Portfolio Chart |
Current Economic Situation Right before the Fed meeting, the Dow has risen for four consecutive days. Furthermore, on May 16, the day of the meeting, after the Fed increased rates by 50 basis points, or half a percent, the Dow closed at 10934.57, with a gain of 126.79 points for the day. Then on May 17, the day after the Fed meeting, the market proceeded to fall and the Dow closed at 10769.74, (continued in: Investing). American Power Conversion Corporation (NASDAQ symbol: APCC) designs, manufactures, and markets surge suppressors, uninterruptible power supplies and related software for computer related equipment. The Company also makes equipment to protect wide area networks (WANs), local area networks (LANs), Internet equipment, telecommunications equipment and integrated services digital network (ISDN) equipment. The Company has manufacturing facilities in the United States, Ireland, Denmark, Switzerland, China and the Philippines. There are 193 million shares outstanding. (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. Some of the stocks in the technology sector could still be bought at recent levels. Speculators could achieve short-term gains, up to 100% on some of these stocks. 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. (continued in: Stocks for traders). 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. (continued in: Model Portfolio). |
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Investing Right before the Fed meeting, the Dow has risen for four consecutive days. Furthermore, on May 16, the day of the meeting, after the Fed increased rates by 50 basis points, or half a percent, the Dow closed at 10934.57, with a gain of 126.79 points for the day. Then on May 17, the day after the Fed meeting, the market proceeded to fall and the Dow closed at 10769.74, down 164.83 points. This trend continues to repeat itself. The market has performed in a similar way just before the previous Fed meeting. If this trend were to continue, speculators could use it to their advantage and buy equities at a low level two, or three days before the Fed meeting, and then sell at a higher level on the day of the meeting. The market is very volatile and it may continue as long as there is a high level of uncertainty about what action the Fed may continue to take to prevent inflation from ascending. Was it the last interest rate increase? Most likely, it was not. Although this expansionary cycle has lasted nine years, economy seems to be unstoppable, albeit inflation is a lot lower than it has been during previous expansion cycles. The Fed could raise interest rates by an additional 50 basis points and perhaps such action will finally slow this expansionary cycle to a sustainable pace. Alan Greenspan could manage a soft landing. What should investors do in such volatile market? First of all, investors should remain calm. Although it is easier said than done, it should be the main priority of every investor. Once an investor starts making buy and sell decisions based on emotion, the ending result could be very damaging to the performance of the portfolio. Second of all, investors could reevaluate their strategy and change the allocation of their portfolio from value stocks to a higher weighing of growth stocks such as Intel Corporation, Cisco Systems, Ericsson LM Telephone, and Nokia Corporation, because these have outperformed the market during recent years, and could continue to do so for several more years. Third of all, speculators who are willing to accept higher degree of risk could set aside up to 10 percent of their portfolio for short-term trading. Although it is recommended that investors hold growth stocks long-term, and the shares of Intel Corporation have been in our “Model Portfolio” since March 1995, for over five years now, generating a gain of over 1,100 percent, some of the growth stocks are great for trading. On April 15, 1999, one hundred shares of Dell Computer Corporation were bought at $38 5/8 per share, and added to the “Model Portfolio”, to be held long-term. On March 22, 2000, this timely stock reached an intra-day high of $59 11/16 per share and then proceeded to fall. There is a probability that this stock could once again test its low and may even fall below $40 per share. If the stock of Dell Computer Corporation were to reach approximately $40 per share, it should be bought immediately. This timely stock could resume its upward trend during the next three months and may reach approximately $62 per share. Such a scenario could reward speculators with a gain of approximately 50 percent in three months. Fourth, and foremost, investors should always do a fundamental analysis and a technical analysis of a stock before buying. After evaluating previous growth of revenues, earnings, and dividends, investors should take a look at the chart. Where is this particular stock at the moment? If the stock is trading at its 52-week high and investor plans to hold it in the portfolio five years, or longer, as long as revenues are growing 30 percent annually, it doesn’t really matter at what price level it is bought. On the other hand, if investor plans to hold a stock less than a year, then a stock should never be bought when it is near the top of the chart, trading near its 52-week high. In such case, investor should wait several months, and then buy the stock gradually, perhaps in two-steps. Instead of buying 100 shares at once, 50 shares could be bought, and if the stock were to reach a lower level, then the remaining 50 shares could be bought and added to the original position. Then, investor should monitor the stock closely and as soon as it revisits its 52-week high (monitor the chart) sell to maximize the return on investment. By following this strategy investors could substantially increase the performance of their portfolios. Back to Top |
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Buy & Sell American Power Conversion Corporation (NASDAQ symbol: APCC) designs, manufactures, and markets surge suppressors, uninterruptible power supplies and related software for computer related equipment. The Company also makes equipment to protect wide area networks (WANs), local area networks (LANs), Internet equipment, telecommunications equipment and integrated services digital network (ISDN) equipment. The Company has manufacturing facilities in the United States, Ireland, Denmark, Switzerland, China and the Philippines. There are 193 million shares outstanding. For 1998, revenues rose to $1.13 billion, from $873.39 million for 1997. Net income rose to $147.56 million, or $1.55 a share, from $121.79 million, or $1.28 a share for 1997. As of December 31, 1998, the Company had $219.9 million of cash and cash equivalent versus $270.1 million at the end of 1997. The cash position has decreased due to the cash purchase of Silcon ™, a Denmark-based manufacturer of uninterruptible power supplies (UPSs) up to 480 kilo volt-amps. Afterwards, the Company acquired the remaining shares of Silcon ™. American Power Conversion Corporation is one of the ten major worldwide companies whose sole focus is to provide power protection equipment. As the E-commerce continues to grow, the demand for power protection for servers and other equipment will continue to ascend. The Company plans to expand its line of products to cover end-to-end enterprise solutions. During 1998, the revenues in the North America increased 27 percent, while the sales in Europe, Middle East and Africa were up 38 percent. The Company continues to introduce new products to the market, such as APC Power Stack ™, which is a rack-mount unit designed to protect hubs, routers and switches. During the past ten years, this stock was an excellent performer, and the Company has issued five stock splits. In the course of 52-weeks, the stock ascended from a low level of $15 7/8 in May 1999, to $45 per share reached in April 2000. Afterwards, this stock proceeded to fall. In our opinion, this stock could maintain its downward momentum over the course of the next four months. By October 2000, this stock could fall to approximately $20 per share, and at such price level, should be bought immediately by speculators. Although patient investors could buy this stock and hold it long-term, at least five years, speculators who trade it short - term could achieve higher gains. If this stock were to fall to approximately $20 by October 2000, and then ascend to approximately $40 per share by April 2001, it could generate a return of approximately 100 percent in six months. Speculators should start monitoring this stock in September 2000. On May 31, 2000, this stock closed at $35 7/16 per share (price $35 7/16, dividend Nil, and P/E 32). Brass Eagle Incorporated (NASDAQ symbol: XTRM) designs, manufactures, and distributes paintball markers, paintballs and accessories. The Company has approximately a 25 percent market share in a $300 million paintball industry. Over 95 percent of Wal-Mart and Kmart stores carry products made by Brass Eagle Incorporated. The Company opened a 24,000 square-foot manufacturing facility in Neosho, Missouri in 1998. The Company had a great year. For the year ended December 31, 1998, revenues rose to $75.1 million, a 108 percent increase from $36.1 million for the previous year. Net income rose to $8.2 million, or $1.07 a share, from $3.6 million, or $0.64 a share for 1997. The Company’s annual report states that teenagers and adults over twenty years old represent one of the largest segments in American history, totaling 66 million individuals, who affect more than $500 billion in consumer purchases annually. Due to its sheer size, the youth market is very influential and affects lifestyles and major trends. One of the latest trends is extreme sports’ in which over 50 million Americans participate. The sport of paintball is at the initial stage of market penetration, and as it becomes more popular, the sales could continue to grow for several years at high double-digits. Brass Eagle Incorporated continues to expand its market share by introducing new products to the market, and through acquisitions. In January of 1999, Brass Eagle Incorporated acquired certain assets of C M Support Inc., for $5.0 million in cash. Furthermore, the Company continues to market its products to target audience through a campaign on ESPN, ESPN 2 and MTV. The Company entered into a licensing agreement with the Outdoor Recreation Group of Los Angeles, California, to manufacture a full line of paintball apparel which will be sold through retail stores and paintball market. On May 31, 2000, the stock closed at $4 15/16, per share, down from its 52-week high of $20 1/8 per share. As the stock regains its upward momentum, it could revisit its 52-week high, and reach approximately $20 per share during the next twelve months. Speculators could start accumulating this stock, and if it were to reach $20 per share, sell immediately for a probable 300 percent short-term gain (price $4 15/16, dividend Nil, and P/E 6). Brunswick Technologies, Inc. (NASDAQ symbol: BTIC) is a leading developer and producer of engineered reinforcement fabrics used in fabrication of composite materials. The Company uses stitch-bonding equipment to combine glass, carbon and other high modulus fibers with resin, to produce laminates used to make boats, skis, diving boards, protective helmets, car and truck parts. These products are superior to conventional materials because of higher strength-to-weigh ratio, greater design flexibility, and lower maintenance requirements. Through the use of its innovative quadraxial single-step stichbonding fabrication process, the Company can produce engineered composite reinforcement fabrics in sizes and shapes not otherwise generally available. This innovative process allows the Company to make heavyweight quadraxial fabrics over 100 inches wide and up to 10 inches thick, in a single step. As of December 31, 1998, the Company had 176 full time employees. There were 5.438 million shares outstanding. For the year of 1998, revenues rose to $41.422 million, from $30.510 million for 1997. Net income rose to $1.548 million, or $0.28 a share, from $1.219 million, or $0.26 a share for 1997. As of December 31, 1998, the Company had $8.963 million of working capital, long-term liabilities of $1.173 million, and total liabilities of $4.701 million. Stockholders equity stood at $24.938 million on December 31, 1998, versus a deficit of $2.244 million on December 31, 1996. Brunswick Technologies invested over $1.8 million for capital expansion in its Maine and Texas plants. The Company leased an additional 25,000 square feet of new manufacturing facilities in Maine. In Texas, the Company added 10,000 square feet distribution center to existing production facility. Furthermore, the Company leased an additional 6,255 square feet of manufacturing space at its plant in United Kingdom. The extended space will hold two new machines and will allow to double the annual production volume at that plant. In our opinion, the long-term outlook for the Company is excellent, but short-term, this stock may reverse its upward trend and could fall below $5 per share during the next six months. The stock is trading at 28 times earnings and closed at $8 3/4 per share on May 31, 2000. At this price level, the stock should be sold (price $8 3/4, dividend Nil, and P/E 28). Cornerstone Internet Solutions Company (NASDAQ symbol: CNRS) operates two subsidiaries, US Web/CKS Cornerstone, and Internet consulting firm B2B Galaxy.com that leverages its expertise in Internet technology and e-commerce solutions to create business-to-business e-commerce portals that link buyers and sellers. B2B launched FOOD Galaxy.com a portal designed to lower the cost of food and supplies for restaurants and other food service providers. This portal will enable restaurants to post a customized inventory list online and will require suppliers to continually submit their latest product bids. Such competitive process is intended to drive down the cost of goods to buyers and generate savings up to 20 percent on the cost of food and supplies. As of August 1, 1999, the Company had 35 full-time employees. The Company still has not achieved a profitable stage. For fiscal 1999, ended May 31, revenues rose to $3.257 million, from $1.183 million for fiscal 1998. The Company reported a net loss of $5.496 million, or $0.46 a share, an improvement from a net loss of $18.422 million, or $2.21 a share for fiscal 1998. As of May 31, 1999, accumulated deficit reached $33.545 million, up from a deficit of $29.899 million for fiscal 1998. The Company’s ability to continue as an ongoing concern could be impacted by continuing losses from operations. Although the Company has reduced its operating expanses pertinent that it starts generating positive cash flow. The stock reached a 52-week high of $12 5/16 per share in December 1999. Afterwards, the stock proceeded to fall at a fast pace and on May 31, 2000, closed at $1 1/4 per share. The risk of owning this stock is very high therefore it could be only bought by speculators. Speculators who already own this stock may continue to hold it. These, who do not own these shares yet, may start accumulating a small position in this stock and if it were to reach approximately $5 per share, sell immediately for a probable gain of 300 percent (price $1 1/4 dividend Nil, and P/E nm). Protocol Systems, Inc. (NASDAQ symbol: PCOL) designs, manufactures and markets patient monitoring instruments and medical instruments. The Company pioneered the multiple-parameter, portable patient monitoring market with the introduction of Propaq ® monitor that provides continuous vital signs measurement inside and outside hospitals. As of December 31, 1998, there were 8.487 million shares outstanding. For 1998, revenues rose to $67.3 million, from $64.1 million in 1997. Due to the restructuring charges of $5.4 million for 1998, the Company reported a loss of $675 thousand, or $0.08 a share, versus an income of $3.356 million, or $0.36 a share for 1997. During 1998, research and development expenses decreased 4.3% to $8.3 million, from $8.7 million in 1997. On the other hand, selling, general and administrative expenses increased 8.8% to $22.7 million in 1998, from $20.9 million in 1997. The establishment of direct sales organizations in Germany and France in 1998 was a major factor that affected this expense. After falling to $6 in October 1999, this stock proceeded to rise at a fast pace and reached $13 per share in March 2000. Although the stock is trading at 15 times earnings, in our opinion it has reached its top valuation and may not appreciate in the short-term. On May 31, this stock closed at $15 9/16 per share. Investors who own this stock should sell it now to lock in their gains (price $15 9/16, dividend Nil, and P/E 19). To find out more about Protocol Systems, Inc. visit Company’s Web site at www.protocol.com Sensory Science Corporation (ASE symbol: VCR) develops and markets innovative analog and digital audio, video, and Internet products. The Company holds patents on the Dual-Deck ® VCR as well as other electronic products. On March 1, 1999, the Company changed its name from Go-Video to Sensory Science Corporation. The new name reflects the direction of the Company and its innovative electronic products. In fiscal 1999, Sensory Science Corporation introduced a complete line of large screen direct view televisions, and plans to attain a 3 percent market share for these units. The Company derives 58.2 percent of its annual revenues from sales of the Dual-Deck ® VCR’s, and the sales of these units grew more than 70 percent in fiscal 1999. In fiscal 1999, Sensory Science became one of the top 10 VCR manufacturers ranked by retail shelf space. Furthermore, the Company introduced a palm size rave MP Media Player allowing for downloading of music, voice and broadcast from the Internet, CDs, using MP’3 audio compression. This unit has no moving parts and the music is stored on a memory chip in a computerized file format. As of March 31, 1999, there were 13.658 million shares outstanding. The Company had another good year. For fiscal 1999, ended March 31, 1999, revenues rose to $63.6 million, up 35 percent from $47.14 million for fiscal 1998. Net income edged lower, to $1.7 million, or $0.12 a share, from $3.4 million, or $0.25 a share for fiscal 1998. Due to aggressive new product development that cost almost $3 million, net income was lower than in the previous year. As of March 1999, the Company had a net working capital of $8.4 million. The Company has a $20 million line of credit with Congress Financial Corporation, secured by inventory and receivable balances. In 1997, Sensory Science Corporation entered into an agreement with Loewe Opta GmbH of Germany, to develop a line of digital television products designed specifically for North American market. The agreement is effective through January 1, 2003, with built in five year extensions. Sensory Science Corporation incurred fees totaling $2.3 million for the exclusive right to market and distribute Loewe Opta direct view televisions in North America. The annual report states that Company plans to capture a 1 to 3 percent share of the large-screen direct-view TV market. This would imply unit sales of 25,000 to 75,000 units annually. The selling price averages $2,000 per unit, so the Company’s annual revenues from sales of television sets alone, could reach $50 million within two to three years. As the sales of the large-screen, direct-view TV’s continue to grow, the Company will be positioned to become one of the few significant participants in this segment of consumer electronics industry. In our opinion, as the sales of Dual-Deck ® VCR’s and large-screen direct-view television sets continue to grow, annual revenues could double by 2003, but the risk of owning this stock is above average. Therefore, only speculators who are willing to tie up a small portion of their assets in this stock and wait three years could start accumulating it. On May 31, 2000, this stock closed at $2 5/8 per share and we rate it accumulate (price $2 5/8, dividend Nil, and P/E n/m). The Company’s Web site is located at www.sensoryscience.com 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. Some of the stocks in the technology sector could still be bought at recent levels. Speculators could achieve short-term gains, up to 100% on some of these stocks. 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, on May 12. Then, on May 26, 2000, the stock fell $3 from the previous close, and finished the day at $7 5/16 per share, on a very heavy volume of 16 million shares. In our opinion, this stock is oversold. On May 31, the stock closed at $7 per share. This stock is down $16 13/16, or 70 percent, from its 52-week high of $23 13/16 per share. The stock is trading at nine times earnings, and at this low level, we rate this stock a screaming buy. The sell-off in this stock was overdone, and it could bounce back to approximately $14 per share during the next four months, providing speculators with a probable gain of 100 percent. People Soft Inc. (NASDAQ symbol: PSFT) designs and distributes enterprise resource planning software for large and medium size companies. The latest software can even manage payroll, benefits administration, pension administration, and scheduling. After closing at $18 13/16 on November 30, 1999, this stock proceeded in the upward direction and on January 14, 2000, reached an intra-day high of $27 ¾ per share. Then, the stock pulled back to $21 1/8 per share on January 28, 2000. On March 31, the stock of this enterprise resource planning software maker closed at $20 per share. On March 31, we have stated, “There is a probability that this stock has already reached its top and could proceed in a downward direction. Speculators should sell this stock and use the proceeds to buy shares of Boston Scientific Corporation.” (On March 31, 2000, Boston Scientific Corporation, NYSE symbol BSX, closed at $21 5/16 and we rated it a screaming buy). In April, the stock of People Soft, Inc. proceeded to fall, and then closed at $13 13/16 per share on May 31, 2000. In our opinion, speculators could start to accumulate the stock at this price level. This timely stock could revisit its previous high of $27 ¾ per share during the next nine months, generating a short-term gain of approximately 100 percent. Monitor: Maxtor Corporation (NASDAQ symbol: MXTR) manufactures and markets disk drives for personal computers. The company sells its products to Original Equipment Manufacturers, distributors and retailers. 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. Maxtor Corporation has tremendously improved its financial position, and as of January 1, 2000, total stockholders equity stood at $255.3 million, versus a deficit of $327.5 million for fiscal 1996. At the end of the year, the Company had $353.9 million of cash and marketable securities, versus $227.6 million in the previous year. This stock reached a high of $21 ¼ in January of 1999. Afterwards, due to the oversupply of disk drives and price competition, the stock proceeded in the downward direction and fell to a low level of $4 15/16 on August 12, 1999. This stock closed at $6 1/16 per share on November 30, 1999, and we started recommending it to speculators in December. At that time we stated that this stock could reach $15 per share. After reaching an intra-day high of $8 5/16 on January 27, 2000, the stock pulled back and closed at $6 ¼ per share on February 22, 2000. This stock closed at $14 11/16 per share on March 27, 2000. During the recent correction, this stock was very resilient and fell slightly below its support level of $10 per share. On May 31, this stock closed at $10 7/16 per share and speculators could still buy it. In our opinion, this stock could reach approximately $16 per share during the next four weeks. Monitor this stock closely and sell as soon as it reaches our target level. 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 52-week high of $47 1/16 on July 19, 1999. Afterwards, the stock proceeded to fall at a fast pace and by October 1999, fell to an intra-day low of $17 9/16 per share. Afterwards, the stock proceeded in the upward direction and reached an intra-day high of $25 7/8 in January. The stock tested its bottom again and closed at $17 7/8 per share on February 25, 2000. This stock has already formed a double bottom. Afterwards, the stock proceeded in the upward direction and on April 19, 2000, broke through the $25 resistance level, finishing the day at $25 ¼ per share. During the recent correction, this stock was very resilient and closed at $25 5/8 on May 31, 2000, on a low volume of 612,000 shares. At the recent price level, we still maintain our rating of screaming buy. This stock could reach $37 per share during the next two months. At that price level, the stock should be sold immediately. TJX Companies, Inc. (NYSE symbol: TJX) is the leading off-price retailer of apparel and home fashions. The Company operates T.J.Maxx ® stores, Marshalls ®, and A.J.Wright off-price retail stores in the United States. In Canada, the Company operates Winners Apparel Ltd. and in United Kingdom T.K. Maxx ™ off-price apparel stores. For the fiscal 1998, that ended January 30, 1999, revenues rose to $7.95 billion, from $7.39 billion for fiscal 1997. Net income rose to $424 million, or $1.29 a share, from $305 million, or $0.91 a share for fiscal 1997. As of January 30, 1999, there were 334.6 million shares outstanding, versus 349.6 million shares a year earlier. After completing a $250 million stock repurchase program, the Company announced in October 1998, that it plans to repurchase $750 million of its common stock over several years. The Company has repurchased 17.6 million shares at a cost of $501.1 million by October 30, 1999. All share repurchases were funded by internal cash flow. TJX Companies, Inc., plans to open over 150 new stores during the next three years. The Company’s annual report states “_ _ _ we continue to be confident in our ability to grow earnings per share by 15-20%.” The stock reached a 52-week high of $37 per share in April 1999, and then proceeded to fall and closed at $15 per share on March 13, 2000. Afterwards, this stock proceeded to build upward momentum and closed at $22 1/4 on March 31. In April, we recommended that speculators monitor this stock closely and buy it when it pulls back to $18 per share. This stock closed at $18 per share on May 11, 2000. Then, the stock resumed its upward trend and closed at $21 5/8 per share on May 31. This stock could reach $27 per share during the next two months. Once the stock reaches this level, it should be sold, for a probable short-term gain of approximately 50 percent. Callaway Golf Company (NYSE symbol: ELY) designs and manufactures premium golf clubs. Professional golfers who use these superior golf clubs had more wins than golfers using equipment made by competitors. On April 28, 2000, this stock closed at $16 5/8 per share and at this price level we rated it a strong buy. The stock proceeded to rise and closed at $20 9/16 per share on May 12. Afterwards, this stock proceeded to pull back, and on May 31, closed at $18 1/8 per share, on a very low volume of 209 thousand shares. As the volume grows and the stock builds upward momentum, it could reach approximately $29 per share during the next nine months. If the stock were to reach this level, it should be sold immediately. Monitor: Milacron Inc. (NYSE symbol: MZ) is a major supplier of machine tools, mold bases, plastics machinery and grinding wheels. Milacron Inc. employs 13,000 people in 30 plants worldwide. After reaching a low of $14 ½ per share, the stock proceeded to ascend and rose to $23 3/16 in June 1999. This stock proceeded to build a strong upward momentum and on April 28, 2000, closed at $18 1/4 per share. During the recent correction, this stock was very resilient and closed at $15 13/16 per share on May 31. Speculators should monitor this stock closely and sell as soon as it reaches approximately $21 per share. Western Digital Corporation (NYSE symbol: WDC) is a major manufacturer of hard disk drives that are used in variety of computers. During the years of 1996 and 1997 the stock had appreciated at a fast pace and rose from $8 1/8 to $54 ¾ per share. Due to the manufacturing overcapacity and intense competition, the stock of Western Digital proceeded in a downward direction in September 1997, and reached a bottom by the end of 1999. That was then. Now, as the sales of computers continue to grow 20 percent worldwide, the demand has caught up with capacity and the prices for hard disk drives have firmed. Money is flowing into the stocks of hard drive manufacturers. We have revised our opinion on this stock upwards, to a strong buy. Speculators should buy this stock now. On May 31, this stock closed at $4 11/16 per share, and if it were to reach $15 during the next five months, sell it immediately for a probable short-term gain of approximately 200 percent. 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 May 31, Quantum HDD closed at $9 7/16 per share, while Quantum DSS closed at $10 5/16 per share. We maintain our buy rating on both stocks. In our opinion, the stock of Storage Systems Group could double during the next twelve months. The stock of the Hard Disk Drive division could reach $17 during the next six months and it should be sold immediately at that level. Bank One Corporation (NYSE symbol: ONE) is among the largest bank holding companies in the United States. Due to the losses in its credit card division, earnings fell and the stock reached a low of $ 24 7/16 per share on March 7, 2000, after reaching a 52-week high of $63 9/16 in May of 1999. After Bank One announced that James Dimon, formerly of Citigroup Inc., would become its CEO, the stock closed at $34 ¼, up $3 3/8 on March 28. 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 ¾ and then resumed its upward momentum. This stock closed at $33 1/16 on May 31, and we maintain buy rating on these timely shares. James Dimon could turn this bank holding company around, and perhaps a year from now this stock could reach $50 per share. Once this stock reaches our target level, speculators should sell it immediately to lock in a gain of approximately 50 percent. Back to Top |
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Model Portfolio Applied Materials, Inc. (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. The Company produces systems that use physical vapor deposition technology, chemical vapor deposition and oxide etching. For the fiscal year ended October 31, 1999, revenues rose to $4.86 billion, a 20 percent increase from $4.04 billion for fiscal 1998. Net income rose to $748 million, or $1.89 a share, from $417 million, or $1.10 a share for fiscal 1998. The demand for the company’s equipment continues to accelerate in line with the growing sales of computers and telecommunication devices. Applied Materials estimates that the market for wafer fabricating equipment could double in three years to $43 billion annually. The long-term outlook for the Company is excellent. On October 14, 1997, and on March 16,2000, Applied Materials split its stock 2-for-1. On May 31, this stock closed at $83 1/2 per share. Buy this stock and hold long-term. Boston Scientific Corporation (NYSE symbol: BSX) is one of the worlds leading companies that designs and markets minimally invasive medical devices. The Company makes coronary stents for less invasive treatment of cardiovascular disease. This stock has reached a high of $47 1/16 per share on July 19, 1999. A month later, the stock proceeded to fall at a very fast pace and by October 1999, fell to an intra-day low of $17 9/16 per share. Afterwards, this stock proceeded in the upward direction and reached an intra-day high of $25 7/8 in January 2000. During the recent correction, the stock tested its bottom again, and closed at $17 7/8 per share on February 25, 2000. This stock has already formed a double bottom. On May 31, this stock closed at $25 5/8 per share and we maintain our rating of screaming buy. Our objective is to hold this stock short-term, with a target level of $37 per share. Monitor this stock very closely and as soon as it reaches $37 per share, sell it immediately. Cisco Systems, Inc. (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. For fiscal 1999, that ended July 31, revenues rose to $12.2 billion, a 43% increase from $8.5 billion for fiscal 1998. Net income rose to $2.096 billion, or $0.62 a share, from $1.355 billion, or $0.42 a share for fiscal 1998. Cisco Systems continues to expand its market share. The annual revenues have grown from $2.2 billion in fiscal 1995, to $12.2 billion in fiscal 1999. John T. Chambers, who is a CEO of Cisco Systems, continues to steer the company on a path to high growth. Since 1994 the stock of Cisco Systems, Inc. has risen twenty-fold and the long-term outlook for the company is excellent. In our opinion, Cisco Systems, Inc. could continue its acquisition spree and the annual revenues might reach $50 billion in six years. Cisco Systems, Inc., is positioned to offer the latest equipment to service providers, such as IP internetworking technology which allows to host Internet applications and expand their service from basic voice traffic to broadband which can carry data, provide Internet access, and video conferencing. On March 23, 2000, this stock split 2-for-1. On May 31, this timely stock closed at $56 15/16 per share. Buy this stock now and hold at least ten years. Compaq Computer Corp (NYSE symbol: CPQ) is the second largest computer manufacturer in the world. The Company designs and makes notebook personal computers, servers, consumer PCs and networking equipment. For the fourth-quarter, revenues edged lower, to $10.6 billion, from $10.9 billion for the same quarter in 1998. The turnaround is taking longer than expected. Although revenues continue to grow, the earnings are still below the levels reached two years ago, therefore we recommend this stock to patient investors who are willing to hold it at least five years. The Company has efficient manufacturing operation and manages to turn over its inventory of PCs eleven times per year. Compaq sold 83% of interest in Alta Vista web site to CMGI Inc. Compaq retained 17% equity in the Alta Vista. Both companies will promote this site. In the future it could become one of the top five sites and generate substantial amount of revenues. This stock has a strong potential to gain 500% in five years. On May 31, 2000, this stock closed at $26 3/8 per share and we rate it a long-term buy. Compuware Corporation (NASDAQ symbol: CPWR) makes software that manages corporate networks, and improves productivity. The revenues are growing at a fast pace, and for the fiscal 1999, reached $1.65 billion. The stock of Compuware Corporation reached $40 per share in December 1999. On March 31, we 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 3/8 on April 14, 2000. This stock could reach $35 per share during the next four months, and once it does, these two hundred shares will be sold immediately. The remaining 150 shares will be held long-term, at least three years. Delias, Inc. (NASDAQ symbol: DLIA) sells a variety of apparel and accessories for young women. The Company conducts sales through its Web site and through brick and mortar stores. This stock reached a 52-week high of $40 per share in April 1999, and then proceeded to fall along with other Internet stocks. After reaching a 52-week high of $40 per share in April 1999, the stock proceeded to fall and by November reached a 52-week low of $5 ½ per share. Afterwards, the stock proceeded to rise, buoyed by optimistic expectations of higher holiday sales and reached an intra-day high of $13 ¼ per share in November 1999. During the recent correction this stock proceeded to fall and closed at a low level of $2 1/2 per share on May 31, 2000. This stock will be held in the Model Portfolio until it reaches our target level of $35 per share and then all of 200 shares will be sold. Dell Computer Corporation (NASDAQ symbol: DELL) is the third largest computer manufacturer in the world. The Company makes personal computers, notebook computers, servers and workstations. For the fiscal year ended January 29, 1999, revenue rose to $18.2 billion, a 48% increase from $12.3 billion for fiscal 1998. Earnings rose to $1.05 a share, from $0.64 a share for fiscal 1998. On March 5, 1999, the Company has issued a 2-for-1 stock split, the seventh in the past seven years. During the past twelve months the price of the stock has almost stood still compared to the previous years. Recently, the stock started to build upward momentum and reached an intra-day high of $59 11/16 per share on March 22. This stock could pull back to approximately $47 per share, and than slowly rise to $65 per share during the next four months. Although it is not likely that the stock of Dell Computer will appreciate at such a fast pace as it did during the past five years, in our opinion, the stock could generate a gain of 1,200% in six years. This stock closed at $43 1/8 per share on May 31, and we rate it a screaming buy. Buy this stock now and hold long-term, at least five years. Ericsson LM Telephone (NASDAQ symbol: ERICY) is a leading supplier of mobile phones and telecommunications equipment. The Company’s main manufacturing facilities are located in Sweden. Ericsson’s telecom equipment is among the most advanced in the world. The sales of equipment have increased significantly in China and surpassed the sales in U.S. Ericsson LM Telephone projects that 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 closed at $20 1/2 on May 31, after a 4-for-1 split on May 8, 2000. Buy these ADR’s now and hold long-term. Intel Corporation (NASDAQ symbol: INTC) is the leading manufacturer of microprocessors. The Company has high name recognition, and still has approximately 85% share of the market. For 1999, revenues rose to $29.4 billion, from $26.3 billion for 1998. Net income rose to $7.3 billion, or $2.11 a share, from $6.1 billion, or $1.73 a share for 1998. The Company continues to switch production to 0.18 micron manufacturing process that yields more semiconductors from each wafer. As the sales of cellular phones continue to grow, the demand for chips made by Intel could accelerate throughout the year 2000. During the past ten years earnings grew 32% annually. The stock of Intel Corporation has kept rising ever since 30 shares were bought in March of 1995, at $78 ¼ per share. The Company issued a 100% stock dividend on June 22, 1995, another one on July 14, 1997, and a 2-for-1 stock split on April 11, 1999. Since the original 30 shares were bought, now there are 240 shares in the portfolio. During the past three months this stock has build a strong upward momentum, and if it were maintained these timely shares could reach approximately $190 by the end of this year. On May 31, this stock closed at $124 11/16 per share. Buy this stock and hold long-term. Merck & Co., Inc. (NYSE symbol: MRK) manufactures a variety of pharmaceutical products. Major brand names include Vasotec, Mevacor, Zocor, Crixivan, and Propecia. For the fourth-quarter revenues rose to $8.97 billion from $7.5 billion for the same quarter in 1998. Net income rose to $1.57 billion, or 67 cents a share, from $1.4 billion, or 58 cents a share for the fourth-quarter a year earlier. Merck & Co. split its stock 2-for-1 on February 17,1999, and now there are one hundred shares in the Model Portfolio. On May 31, this stock closed at $74 5/8 per share. Buy this stock and hold long-term. Microsoft Corporation (NASDAQ symbol: MSFT) is the largest maker of software. The operating system made by Microsoft is used in the majority of computers. The Company has no debt and has approximately $17 billion in cash and short- term investments. For 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 continues to affect the stock negatively. While the Justice Department accuses Microsoft Corporation of wielding a monopoly power, the company denies any wrongdoing. Is the break-up of Microsoft Corporation the only solution? Of course not. As soon as this chapter in Microsoft’s history is closed, the stock could resume its strong upward momentum, but in the meantime this stock will be very volatile. Although these timely shares may not appreciate at previous fast pace, this stock could generate a gain of 700% in six years. The stock will be held long-term, at least five years. On May 31, this stock closed at $62 9/16 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. The ADR’s continue their strong upward momentum. American Depository Receipts (ADRs) closed at $51 7/8 on May 31. Buy and hold long-term. PepsiCo, Inc. (NYSE symbol: PEP) makes soft drinks, Doritos, Sun Chips, Ruffles potato chips and Lays potato chips. For 1999, revenues edged lower to $20.4 billion, from $22.3 billion for 1998. Net income rose to $2 billion, or $1.37 a share from $1.99 billion, or $1.31 a share for 1998. In 1998, PepsiCo acquired Tropicana and several snack chip businesses in Europe, Australia and Chile. In the past forty years, PepsiCo sales grew an average of 16% per year. After the Company had spun-off its restaurants in 1997, the return on assets employed rose from 9.5% in 1996, to 16.2% in 1997. PepsiCo continues to buy back its stock. Recently, this stock proceeded to bounce back and closed at $40 11/16 on May 31. As some investors take their profits in their tech-stocks and switch into old economy stocks, the shares of PepsiCo could proceed in the upward direction. Buy 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 May 31, this stock closed at $44 1/2 per share. Buy and hold long-term. Sara Lee Corp. (NYSE symbol: SLE) is an international producer of frozen and fresh baked goods, meats and consumer products. Revenues remained flat for fiscal 1999, at $20 billion, unchanged from fiscal 1998. For fiscal 1999, company reported earnings of $1.27 a share, versus a loss of $0.60 a share for fiscal 1998. Fiscal 1998 was affected negatively by a restructuring charge of $2 billion. Sara Lee split its stock 2-for-1 on December 21, 1998. Recently this stock fell to a 52-week low of $13 5/8 per share on March 7. On May 31, this stock closed at $18 per share. We rate this stock a strong buy. Xerox Corporation (NYSE symbol: XRX) is the worlds largest maker of copier equipment, digital monochrome and color publishing equipment. The Company sells its products and provides services in more than 170 countries. For the year of 1998, revenues rose to $19.4 billion, and 62 percent came from service, supplies, financing, and other recurring revenues. The company’s annual report states that $100 invested in Xerox stock at the end of 1990, grew to $1,266 by the end of 1998. The stock is trading at thirteen times earnings, and is down 56 percent from its 52-week high of $63 15/16 per share. One hundred shares of Xerox Corporation will be sold as soon as the stock reaches $60 per share and the remaining 100 shares will be held long-term, at least five years. On May 31, this stock closed at $27 1/8 per share. In our opinion, this blue chip stock is oversold. We maintain a strong buy rating on this stock. Back to Top |
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Model Portfolio Chart 5-31-2000
Cash $6,246
a) The quantity of shares was adjusted for a 100% stock dividend issued by Intel Corporation on June 22, 1995, a 2-for-1 stock split issued on July 14, 1997, and a 2-for-1 stock split issued on April 11, 1999. b) The quantity of shares was adjusted for a 100% stock dividend issued by PepsiCo on June 3rd, 1996. c) The quantity of shares was adjusted for a 100% stock dividend issued by Applied Materials, Inc. on October 14, 1997 and a 2-for-1 stock split issued on March 16, 2000. d) The quantity of ADR’s was adjusted for a 2-for-1 split issued by Nokia Corporation on April 16, 1998, 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. f) The quantity of shares was adjusted for a 2-for-1 stock split issued by Sara Lee Corporation on December 21, 1998. g) The quantity of shares was adjusted for a 2-for-1 stock split issued by Merck on February 17,1999. h) The quantity of shares was adjusted for a 2-for-1 stock split issued by Microsoft on March 26, 1999. i) The quantity of shares was adjusted for a 3-for-1 stock split issued by Pfizer on June 30, 1999. j) The quantity of shares was adjusted for a 2-for-1 stock split issued by Cisco on March 23, 2000. Back to Top |