June 2001
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Contents Back Issues Feb. 2001 March 2001 April 2001 May 2001 Investing Buy & Sell Stocks for traders Model Portfolio Sold Bought Model Portfolio Update Model Portfolio Chart |
The volatility in the market remains much higher than in the previous years. Institutional investors continue to dart in and out of different sectors. After reaching low levels in March 2001 tech stocks proceeded to bounce back in April 2001 and were able to hold steady in the beginning of May. This scenario is providing speculators who trade short-term (continued in: Investing). Citrix Systems, Inc. (NASDAQ symbol: CTXS) is a worldwide leader in the application serving software that allows its customers to run any application on any device over any connection, wired, wireless, or the Web. The company operates in 12 countries and has 1,398 employees worldwide. (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. EMC Corporation (NYSE symbol: EMC) is the major supplier of enterprise storage devices, software, and services. The company’s top of the line Symmetrix® system can hold 19 terabytes of data on 384 individual drives. (continued in: Stocks for traders). Advanced Micro Devices, Inc. (NYSE symbol: AMD) manufactures microprocessors, flash memory devices, data communications products and network products. AMD and Intel continue their fierce competition. While the demand for microprocessors continued to grow worldwide in the year 2000, Intel Corporation was not able to produce ( continued in Model Portfolio). |
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Investing The volatility in the market remains much higher than in the previous years. Institutional investors continue to dart in and out of different sectors. After reaching low levels in March 2001 tech stocks proceeded to bounce back in April 2001 and were able to hold steady in the beginning of May. This scenario is providing speculators who trade short-term, with many opportunities to make a quick profit, or a loss, depending on the outcome of each trade. Many investors would like to trade stocks short-term and generate high gains. Unfortunately it is not an easy task to time a stock within a span of time of less than three months. Although a small percentage of speculators are able to generate gains on their shot-term trades, others lose money. Speculator can’t just buy any stock and then expect to sell it a month, or two later at a much higher price. You have to study the price trend of the stock, analyze the chart, and then make your decision. On many occasions, the trade turns against the speculator. For example, speculator bought a stock of XYZ Company in January at $28 per share after analyzing the price trend and its chart. On February 4, the company reported quarterly earnings that met estimates, but analysts expected earnings to exceed estimates, and after the announcement the stock drops four points, to $24 per share. In such a scenario, speculator has three choices. The first choice is to sell the stock at a loss and then use the cash to buy another stock after analyzing its trend. The second choice is to wait short-term for the stock to rebound to its previous level, then sell it and break even. The third choice is to hold this stock long-term, only if it is a blue chip. After several months, or a year, as the quarterly earnings improve and the stock builds a strong upward momentum, speculator could sell it with a gain of 40 percent, or higher. Each speculator will make a different decision depending on previous trading experience and present direction of the market. Speculators should remember that trading stocks short-term is not easy and all of the trades may not be profitable. That is why we repeatedly state in the section “Stocks for traders” that speculators commit no more than 10 percent of their assets for short-term trading. On the other hand, when an investor buys a large-cap stock with an intention of holding it long-term, such a stock has to be monitored at least on a quarterly basis. When 60 shares of Nike, Inc. Class B (NYSE symbol: NKE) were bought on January 26, 1998, at $40.63 per share and added to our Model Portfolio the objective was to hold this stock long-term. On May 11, 1999, the stock of Nike, Inc., rose to a high of $65.50 per share. We continued to hold it in our Model Portfolio because at that time it appeared that this stock was maintaining its upward momentum. In December 1999, the stock of Nike fell below $50 per share. At that time we were not certain if it was a temporary pullback, or an onset of a downward trend, but we were not satisfied with the performance of this stock. That is why a decision was made to sell it, and all 60 shares of Nike Class B were sold on January 31, 2000, at $45.63 per share. The Fed met on May 15, 2001 and cut the funds rate by 50 basis points to 4 percent, from 4.5 percent. Furthermore, the Fed may continue to cut rates in the near future. It usually takes six months for the rate cuts to affect the economy; therefore investors may see the improvement by the end of this year. After the recent gains, tech stocks are bound to pull back and some of them could even test recent support level. This could give investors an opportunity to buy some tech stocks at low levels in June. The market could continue to consolidate during the first half of June and then rally to new highs. Traditionally, the summer rally starts in the middle of June. This year, the summer rally may start at the end of June and could last less than eight weeks. Speculators could buy tech stocks at their present low levels and then sell these by August 2001, to lock in their short-term gain. For a list of stocks to trade, read our section: Stocks for traders. Back to Top |
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Buy & Sell
Citrix Systems, Inc. (NASDAQ symbol: CTXS) is a worldwide leader in the application serving software that allows its customers to run any application on any device over any connection, wired, wireless, or the Web. The company operates in 12 countries and has 1,398 employees worldwide. Citrix Systems, Inc., offers its products through a reseller channel of approximately 7,600 certified solutions network members and distributors worldwide. The company has over 100,000 customers and 24 million end users worldwide. That includes 90 percent of Fortune 500® companies. As of December 31, 2000, there were 199.731 million shares outstanding. For the year of 2000, the revenues rose to $470.446 million, from $403.285 million for 1999. The company reported net income of $94.512 million, or $0.47 a share, versus $116.944 million, or $0.61 a share for 1999. For the year 2000, net income was affected negatively by amortization of goodwill and intangible assets, in the amount of approximately $30.5 million. The company’s balance sheet is very strong and as of December 31, 2000, Citrix Systems, Inc., had $375 million in cash and cash equivalents, and $427.3 million of working capital. Furthermore, as of December 31, 2000, long-term debt, capital lease obligations and put warrants totalled $346.229 million. In the year 2000, Citrix Systems, Inc., announced that it had entered into Application Service Provider partnership agreements with IBM and British Telecom. The company signed a major systems integrator agreement with Compaq to sell Citrix software on its servers and provide professional services support. Furthermore, the company announced Web Enterprise Information Portal licensing agreements with Yahoo! and My SAP.com ™. This stock was a great performer in the year 2000, when it reached a high of $107.40 per share. Then, the stock proceeded in the downward trend. On March 14, 2001, this stock fell to $17.31 per share. As the market proceeded to rally, this stock reversed its downward trend. On May 31, 2001, this stock closed at $23.90 per share. This stock could test its support level of $17.10 per share in the first half of June 2001. Speculators could buy this stock if it were to reach that level. This stock could revisit its resistance level of $36.63 by the end of July 2001, and speculators should sell it immediately. On the other hand, patient investors could buy this stock now and hold it until it reaches approximately $70 per share in the year 2002 (on May 31, price $23.90, dividend nil, and P/E 50). Mail-Well, Inc., (NYSE symbol: MWL) is among the largest diversified printing companies in North America. The company is the largest envelope manufacturer in the world. Furthermore, the company is the top label supplier to the North American food, beverage, and consumer products industries. Mail-Well can print labels on any material, such as paper, foil, metal, plastic, and synthetic materials. Last, but not least, Mail-Well is the top supplier to North America’s printing distributors. The company had another great year. For the year of 1999, revenues rose to $1.848 billion, from $1.505 billion for 1998. Net income rose to $64.5 million, or $1.20 a share, from $47.6 million, or $0.94 a share for 1998. During 1999, gross profit margin rose to 23.2% from 21.2% in 1998. The company continues to expand through internal growth and acquisitions. In February 2000, Mail-Well acquired 91% of common stock outstanding of American Business Products at $20 per share in a cash tender offer. American Business Products was later merged with a subsidiary owned by Mail-Well. The total cost of this acquisition was approximately $333.6 million. American Business Products reported sales of $475.9 million for year 1999. Mail-Well entered into an $800 million senior secured credit facility in February 2000. The company used the proceeds to finance the acquisition of American Business Products and refinance the unsecured revolving loan facilities. Mail-Well will have to repay this loan over the course of six years. In the year 2002, the company will have to make an annual debt payment of $206.034 million. On February 15, 2001, this stock closed at $7.45 per share. Speculators may buy this stock on dips preferably below $5 per share. This stock could reach approximately $7.50 per share during the next three months, and once it does, speculators should sell it immediately. Speculators should be aware that this stock is thinly traded (on May 31, price $5.40, dividend nil, and P/E 19). McAfee.com Corp. (NASDAQ symbol: MCAF) provides comprehensive PC security delivered over the Web. The company delivers online version of VirusScan, UnInstaller, FirstAid, Oil Change, Personal Firewall, the Wireless Security Center, and the Internet Privacy Service. For an annual subscription fee, customers can purchase a subscription to McAfee.com Personal Firewall. This firewall provides security on broadband and narrowband connections to the Internet, thus preventing hackers from accessing personal computer files. This system works in the background, while it consistently monitors all Internet communications. It makes a PC invisible to hackers on the network by not responding to unknown communications. In addition, “file sharing” is disabled by default to protect information contained on the PC. It works with all dial-up connections, most cable modems, DSL, and wireless. McAfee.com Personal Firewall will ask the consumer whether or not an application should be trusted when it detects first communication with the Internet. In November 2000, the company expanded its offerings to include, on preview basis .NET Initiative. It was a managed application service for small to medium sized businesses that offered Security.NET; HelpDesk.Net and Productivity.NET. These services were available on preview basis through April 2001. During the year 2000, the company announced many new strategic partnerships. McAfee.com and MSN initiated a program to provide Clinic Services to MSN Hotmail users. Through this service McAfee.com provides the virus scanning software to automatically scan all inbound and outbound e-mail attachments for Hotmail’s 89 million users. Alongside of this service, the company offers a subscription to McAfee.com Clinic services. By the end of the year 2000, McAfee.com was one of the Web’s most popular destinations and averaged over 600,000 visitors each day. McAfee.com is fairly new company and as of January 31, 2001, had 148 employees and 12 contractors. For the year of 2000, the revenues rose to $46.866 million, from $24.497 million for 1999. The company reported a loss of $27.469 million, or $0.62 a share, versus a loss of $27.926 million, or $0.76 a share for 1999. As of December 31, 2000, there were 44 million shares outstanding, versus 36.55 million shares outstanding in the previous year. The stockholders equity edged lower, to $55.481 million, from $55.991 million in 1999. McAfee.com Corp., had a combined total of $71.4 million of cash and marketable securities, with $8.3 million payable to Network Associates out of this amount. In the year 2000, McAfee.com Corp., acquired Signal9 Solutions Canada Inc., for approximately $18 million in cash and shares of its Class A Common Stock. The company has incorporated Signal9’s products, including ConSeal Private Desktop and ConSeal PC Firewall into its McAfee Personal Firewall service. McAfee.com Corp., derives additional revenue from banner ads placed on its Web site. As more people visit this Web site, the stream of revenues generated from placement of banner ads could grow significantly. Since initial public offering on December 2, 1999, the company’s common stock has traded on NASDAQ National Market. Shortly after the IPO the stock reached a high of $55.50 in the first quarter of the year 2000. Later on during the year, as the Internet stocks were pummeled this stock fell to a 52-week low of $2.63 per share on December 27, 2000. The company’s annual report states that this stock could remain very volatile and its price may be affected by a variety of factors such as new products introduced by the company, trends in the software or e-commerce industries, general market conditions, and changes in estimates by securities analysts. Furthermore, the company may need additional financing to develop new products and to fund more rapid expansion. If McAfee.com Corp., were not able to obtain additional financing, the growth of its future revenues and earnings could be affected very negatively. Furthermore, if McAfee.com Corp., were unable to effectively sell renewal subscriptions for its services, its revenue stream could fall substantially, thus negatively affecting its earnings. In our opinion, this Internet stock is not for the faint of heart and may be bought only by speculators. Although the probable reward from appreciation of this stock during the next twelve months could be high, the risk of losing ones capital invested in this equity is also significant. On May 22, 2001, this timely stock rocketed to $12.50 per share, up $4.40 for the day. Speculators could buy this stock on a pull back, preferably below $10 per share. This company has arrangements with Original Equipment Manufacturers to bundle its products and services with their Internet services, software and hardware products. The most significant are these with Compaq, Hewlett Packard, Microsoft and SBC Communications. In our opinion, these arrangements could provide the company with a significant revenue stream, thus lifting its earnings per share and the price of its stock. Once again, this stock could be bought by speculators who may be rewarded with a probable gain of 400% during the next twelve months (on May 31, price $11.01, dividend nil, and P/E n/m). 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. EMC Corporation (NYSE symbol: EMC) is the major supplier of enterprise storage devices, software, and services. The company’s top of the line Symmetrix® system can hold 19 terabytes of data on 384 individual drives. EMC Corporation has over 17,000 employees worldwide. EMC Corporation acquired Data General in October 1999, and that added a selection of mid-priced storage devices. During 1999, EMC Corporation shipped over 10,000 software licenses that generated $822 million in revenue. EMC Corporation plans to spend $1.7 billion on R&D through 2000 and 2001. Approximately 75% of this expense will be applied toward development of software. Although EMC Corporation’s hardware and software is the most expensive, 98% of customers are willing to recommend it to their colleagues and business associates. As Internet continues to grow and hundreds of millions of people go online during the next decade, we project that the need for storage devices could continue to grow in double-digits. In our opinion, EMC Corporation’s annual revenues could grow ten-fold, and reach $60 billion in 10 years. During the past decade, this was the top performing stock on NYSE. The company consistently splits its stock, and the most recent stock split was 2-for-1 on June 5, 2000. After the split, the stock continued to ascend and closed at $103.18 per share on September 20, 2000. Although we don’t expect this stock to appreciate at previous pace during the next decade, it could provide investors with a gain of approximately 1,600 percent. At such rate of return, $2,000 invested in this stock now, could reach approximately $32,000 after ten years. Patient investors may buy this stock at its low level and hold it ten years. On the other hand, speculators who like to see short-term results may trade this stock. During the recent carnage in the technology sector this stock proceeded to fall and closed at $39.76 per share on February 28, 2001. In March we stated that the stock of EMC Corporation could fall to $30 per share during the next two months. By March 12, 2001, this stock had already reached such low level. On April 30, 2001, this stock closed at a low level of $25.20 per share, down $4.12 for the day. Afterwards, as Nasdaq Composite Index moved higher, this stock build a strong upward trend and closed at $45.12 per share on April 20, 2001. On May 31, 2001, EMC closed at $31.60 per share. If this stock were to break through its support level of $30.25 then it could fall to the next support level of $25 per share by June 19, 2001, and then resume its upward trend. Monitor this stock on the daily basis and buy it at its lowest level. This timely stock could reach approximately $50 per share by the end of July 2001, and once it does, speculators should sell it immediately to lock in their short-term gain. Advanced Micro Devices, Inc., (NYSE symbol: AMD) manufactures microprocessors, flash memory devices, data communications products and network products. AMD and Intel continue their fierce competition. While the demand for microprocessors continued to grow worldwide in the year 2000, Intel Corporation was not able to produce enough chips due to insufficient manufacturing capacity. During that time AMD was able to increase its market share. AMD could continue to spend large percentage of its gross revenues on research and development and try to keep pace with Intel by introducing faster processors to the market. As AMD sells a larger quantity of higher priced processors, the average selling price will continue to rise, thus improving profit margins. The stock 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. During the sell-off in chip stocks, this stock closed at $13.81 per share on December 29, 2000. On January 31, 2001, this timely stock closed at $24.60 per share and we rated it a strong buy. Some of the traders started to lock-in their gains and the stock closed at a low of $19.70 per share due to selling pressure. At this level, investors started buying this stock and it closed at a high level of $31 per share on April 30, 2001. After reaching a high of $32.95 on May 2, 2001, this timely stock proceeded to fall. Approximately two weeks later this stock closed at $27.20 per share on May 14, 2001. On May 21, this timely stock broke through its resistance level and closed at $34.40 per share. On May 31, 2001, this timely stock closed at $28.25 per share and we maintain our rating of strong short-term buy. Last month we revised our target level downwards to $60 from our previous target of $81 per share. As soon as the stock of Advanced Micro Devices reaches our target level speculators should sell it to lock in their gain. American Power Conversion Corporation (NASDAQ symbol: APCC) designs, manufactures, and markets surge suppressors, uninterruptible power supplies and related software for computer related equipment. The company also makes equipment to protect wide area networks (WANs), local area networks (LANs), Internet equipment, telecommunications equipment and integrated services digital network (ISDN) equipment. The company has manufacturing facilities in the United States, Ireland, Denmark, Switzerland, China and the Philippines. American Power Conversion Corporation is one of the ten major worldwide companies whose sole focus is to provide power protection equipment. As the E-commerce continues to grow, the demand for power protection for servers and other equipment will continue to ascend. The company continues to introduce new products to the market, such as APC Power Stack ™, which is a rack-mount unit designed to protect hubs, routers and switches. During the past ten years, this stock was an excellent performer, and the company has issued five stock splits. This stock ascended from a low level of $15.88 in May 1999, to $45 per share reached in April 2000. Afterwards, this stock proceeded to fall. On January 23, 2001, APCC closed at $18.24 per share, and then pulled back to $11.69 on March 1, 2001. During April, this stock once again proceeded to establish a strong upward trend and closed at $15.38 per share on April 20, 2001. Last month we stated that once this stock breaks through its resistance level of $18.24 per share it could reach approximately $22.50 per share. At such level, speculators should sell it immediately to lock in their gain. On May 21, 2001, this timely stock broke through its resistance level and closed at $19.13 per share. By the end of the month, this timely stock closed at $16.24 per share on May 31, 2001. Speculators should monitor APCC daily and sell it as soon as it reaches our target level of $22.50 per share. 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, 1999, way down from its high of $90.38. On April 4, 2001, LSI closed at a low level of $13.98 per share. As the market rebounded LSI built a strong upward trend and closed at $20.44 per share on April 30, 2001. In our opinion, due to the strong demand for cellular phones and handheld wireless devices the demand for chips made by LSI will continue to grow. 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 approximately 200 percent. This timely stock could reach our target level of $60 per share before September 2001. On May 31, 2001, this timely stock closed at $18.31 per share. We rate LSI a strong short-term buy. As soon as this stock reaches our target level of approximately $60 per share, speculators should sell it immediately to lock in their gain. 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. After reaching a high of $79.44 in January 2000, the stock proceeded to descend and closed at $24.78 per share on July 31, 2000. Due to the bear market in NASDAQ, this stock proceeded to descend and closed at a low level of $19.50 on December 29, 2000. Afterwards, this timely stock proceeded to establish a strong upward trend and closed at $37.50 per share on January 30, 2001. On February 28, this stock closed at $31.19 per share and we stated that it could once again test its support level and may fall to approximately $27 per share by the end of March 2001. As the market moved higher, this stock proceeded to establish a strong upward trend and closed at $37.19 on April 20, 2001. Due to the profit taking, this stock edged lower and closed at $32.19 on April 30, 2001. Last month we stated that this stock could test its support level of $25.50 by the end of May 2001 and then once again resume its upward momentum. As this timely stock nears this level, speculators may buy it. On May 11, 2001, CA closed at $27.50 per share. By the end of the month, this timely stock rebounded and closed at $28.36 per share on May 31, 2001. Traders who buy the stock of Computer Associates International below $30 per share may sell it as soon as it reaches approximately $40 per share by the end of July 2001, to lock-in their short-term gain. CMGI, Inc., (NASDAQ symbol: CMGI) finds, acquires, develops and operates Internet companies. It is one of the worlds largest Internet investment companies. CMGI consists of three venture capital funds. CMGI, Inc. has developed a strategy to acquire start-up Internet companies, and then either sell them out right, or sell a minority interest and reinvest the proceeds. The company has a history of acquiring successful Internet companies. CMGI, Inc. acquired a majority stake in Alta Vista, while Compaq retained 17% equity ownership in the Alta Vista business. To find out more about Alta Vista, visit the company’s Web site at www.altavista.com and to find out more about CMGI, Inc., visit the company’s Web site at www.CMGI.com In our opinion, tremendous growth opportunities are ahead. 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 four years. This stock has been in a downtrend since March 2000. On September 27, 2000, this stock broke through our initial target level of $28 and closed at $26.63 per share. Due to the tremendous sell-off in the Internet sector, this stock broke through our revised target level of $23 per share and closed at $15.38 on October 17, 2000. Afterwards, this stock proceeded to reach new lows and closed at $1.76 per share on April 6, 2001. On May 4, 2001, this stock closed at $6.22 per share. As more money continues to flow into this stock it could slowly build upward momentum. On May 31, 2001, CMGI closed at $4.20 per share. We are maintaining our target level of $90 per share but this stock could reach this level a year later than originally projected, probably in the first half of the year 2002. We maintain our rating of speculative screaming buy. 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. In September of 1999, this stock reached a high of $49.68 and then proceeded to fall. In February 2000, the stock proceeded to revisit its high, but after a strong resistance at $35 level descended once again. Due to the sell-off in the tech sector, this stock continued to descend and closed at $9.54 per share on July 27, 2000. In January 2001, we stated that this stock could retest its recent high, but in our opinion will find strong resistance at $20 level. Nevertheless, if this were to happen, it could provide speculators with a short-term gain of approximately $7.25 per share, or 60 percent, during the next six weeks. After reaching a high of $18.91 on February 16, 2001, this stock proceeded to fall and on April 17, 2001, tested its resistance level and closed at $11.30 per share. In June 2001, money flowing into this stock could rise and UIS could reach approximately $22.50 per share before September 2001. On May 31, 2001, this timely stock closed at $11.94 per share and we maintain our rating of strong short-term buy. Boston Scientific Corporation (NYSE symbol: BSX) is among the worlds leading companies that design and market minimally invasive medical devices. The company makes coronary stents for less invasive treatment of cardiovascular disease. The stock has reached a high of $47.06 on July 19, 1999. Afterwards, the stock proceeded to fall at a fast pace and by October 1999, fell to an intra-day low of $17.55 per share. This stock closed at a low level of $12.88 per share on November 30, 2000. We have downgraded this stock to accumulate from buy. In March, this stock has built a strong upward momentum and closed at $20.18 on March 30, 2001. During April this stock proceeded to fall. On April 24, 2001, this stock found strong support level at $15 and proceeded to close at $15.88 per share on April 30, 2001. By the end of May, this stock closed at $17.32 per share, on May 31, 2001. This stock could retest its resistance level of $20.18 per share in June 2001. If money flowing into this stock continues to improve, this timely stock could break through its resistance level and reach our target level of approximately $25 per share by August 2001. Once BSX reaches our target level, speculators should sell it 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 per share, up $3.38, on March 28, 2000. Money is flowing into stocks in this sector and this timely stock proceeded to build a strong upward momentum. On January 31, 2001, this timely stock closed at $39.19 and then pulled back and closed at $35.26 per share on February 28, 2001. On April 6, 2001, this stock tested its support level and closed at $33.61 per share. Afterwards, money flowing into this equity rose substantially and the stock closed at $38.55 on May 3, 2001. On May 31, 2001, this timely stock closed at $39.60 per share. If this stock were to break through its resistance level of $39.85, it could reach approximately $45 per share by the end of July 2001. We maintain a short-term buy rating on this stock. The Fed started lowering interest rates in January and this should improve earnings in this sector. The stock of Bank One Corporation could reach our target level of $50 per share during the next four 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 in the year 2000, Intel Corporation was not able to produce enough chips due to insufficient manufacturing capacity. During that time AMD was able to increase its market share. AMD could continue to spend large percentage of its gross revenues on research and development and try to keep pace with Intel by introducing faster processors to the market. As AMD sells a larger quantity of higher priced processors, the average selling price will continue to rise, thus improving profit margins. The stock of AMD reached a 52-week high of $94.63 per share on June 21, 2000 (after the 2-for-1 split that was issued on August 22, 2000, this high was adjusted to $47.32). Before the Company issued the split, the stock was already in a downtrend. Although this timely stock could be held long-term, speculators who trade it short-term may achieve better return on investment. Worldwide demand for microprocessors continues to grow 17 percent annually. At this time chipmakers do not have sufficient manufacturing capacity to meet this growing demand and that will guarantee that every processor made, will be sold almost immediately. Starting in September, the sales of chips typically rise and the demand reaches the highest level by December. On January 31, 2001, this stock closed at $24.60 per share and we rated it a strong buy. The stock reached an intra-day high of $26.75 on February 15, and then edged lower to close at $21.50 per share on February 28, 2001. On May 31, 2001, this timely stock closed at $28.25 per share. Due to the pricing pressure on chips, the revenues and earnings may not grow as fast as we had projected. We revised our target level downward to $60 from our previous target of $81 per share. As soon as this stock reaches our target level, 150 shares will be sold and the remaining fifty shares will be held long-term. Applied Materials, Inc. (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. The Company produces systems that use physical vapor deposition technology, chemical vapor deposition and oxide etching. The demand for the company’s equipment continues to accelerate in line with the growing sales of computers and telecommunication devices. Although short-term, there may be a temporary decline in demand for the equipment made by Applied Materials; in our opinion long-term outlook for the company is excellent. As the demand for chips continues to grow worldwide, the sales of Applied Materials could grow approximately 20 percent annually during the next five years. On October 14, 1997, and on March 16, 2000, Applied Materials split its stock 2-for-1. On May 31, 2001, AMAT closed at $49.93 per share. Buy this stock on dips and hold at least four years. Boston Scientific Corporation (NYSE symbol: BSX) is one of the worlds leading companies that designs and markets minimally invasive medical devices. The Company makes coronary stents for less invasive treatment of cardiovascular disease. This stock has reached a high of $47.06 per share on July 19, 1999. By November 30, 2000, this stock fell to $12.88 per share. We downgraded this stock to accumulate from a buy. On May 31, 2001, this stock closed at $17.32 per share. As soon as this stock reaches our revised target level of approximately $25 per share it will be sold immediately. CMGI, Inc. (NASDAQ symbol: CMGI) was added to our list “Buy 10 Tech Stocks” on November 10, 2000, at $16.25 per share. We liked the stock then, and at the recent price we like it even more. On January 30, 2001, three hundred shares of CMGI, Inc., were bought at $6.78 per share and added to our Model Portfolio. Although the risk of owning this stock is high, so is the potential for the appreciation. CMGI, Inc., is one of the worlds largest companies with stakes in the Internet start-ups. The main reason why we like this company is because it has an 83% interest in Alta Vista. CMGI planned to issue an Initial Public Offering in Alta Vista but due to the negative market condition the IPO has been postponed. When the market improves and the company does an IPO on Alta Vista, the stock of CMGI could establish a strong upward trend and may even reach $90 per share in the first half of the year 2002. On May 31, 2001, this stock closed at $4.20 per share. Once this stock reaches our revised target level of $90 per share, all three hundred shares will be sold to lock in the gain. We would like to remind investors that the risk of owning this stock is high therefore it should only be bought by speculators. To find out more about CMGI, Inc., read the section Stocks for traders. Cisco Systems, Inc. (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. Cisco Systems continues to expand its market share. The annual revenues have grown from $2.2 billion in fiscal 1995, to $12.2 billion in fiscal 1999. John T. Chambers, who is a CEO of Cisco Systems, continues to steer the company on a path to high growth and the long-term outlook for the company is excellent. In our opinion, Cisco Systems, Inc. could continue its acquisition spree and the annual revenues may reach $50 billion in six years. Cisco Systems, Inc., is positioned to offer the latest equipment to service providers, such as IP internetworking technology which allows to host Internet applications and expand their service from basic voice traffic to broadband which can carry data, provide Internet access, and video conferencing. During the past six months this stock continued to fall. On May 31, 2001, this stock closed at $19.26 per share. At this level we rate this stock a screaming buy. Investors who already own this stock could add to their position. Hold this stock at least ten years. Compaq Computer Corp. (NYSE symbol: CPQ) is the second largest computer manufacturer in the world. The Company designs and makes notebook personal computers, servers, consumer PCs and networking equipment. The turnaround is taking longer than expected. Although revenues continue to grow, the earnings are still below the levels reached three years ago, therefore we are changing our rating on this stock from a long-term buy, to a hold. The company sold 83% of interest in Alta Vista Web site to CMGI, Inc. Compaq Computer Corp. retained 17% equity in the Alta Vista. Both companies will promote this site. In the future it could become one of the top three sites and generate substantial amount of revenues. Due to the sell-off in the tech sector, this stock broke through its support level and closed at $15.05 per share on December 29, 2000. During January this stock proceeded to rebound and closed at $23.71 per share on January 31, 2001. On May 31, 2001, this stock closed at $15.99 per share. As soon as this stock reaches approximately $29 per share it will be sold immediately. Compuware Corporation (NASDAQ symbol: CPWR) makes software that manages corporate networks, and improves productivity. The revenues are growing at a fast pace, and for the fiscal 1999, reached $1.65 billion. The stock of Compuware Corporation reached $40 per share in December 1999. On March 31, 2000, we have stated that there is a probability that this stock could fall to $16 per share during the next three months. When this stock fell below $13 per share, an additional 200 shares were bought at $12.38 on April 14, 2000. Due to the negative sentiment for this sector, we revised our target level to $28 per share, from $35 per share. On December 29, 1999, this stock closed at $6.25 per share. Afterwards, this timely stock proceeded to build a strong upward momentum and closed at $12.44 per share on January 31, 2001. On May 31, 2001, this stock closed at $11.03 per share and we rate it a strong buy. Once this stock reaches our revised target level, two hundred shares will be sold immediately. The remaining 150 shares will be held long-term, at least three years. Delia’s, Inc. (NASDAQ symbol: DLIA) sells a variety of apparel and accessories for young women. The Company conducts sales through its Web site and through brick and mortar stores. This stock reached a 52-week high of $40 per share in April 1999, and then proceeded to fall along with other Internet stocks. By November 1999, this stock reached a low of $5.50 per share. Afterwards, the stock proceeded to rise, buoyed by optimistic expectations of higher holiday sales and reached an intra-day high of $13.25 in November 1999. On April 30, 2001, this stock closed at $2.96 per share and we rated it a speculative buy. As the market rebounded this stock closed at $4.84 per share on May 31, 2001. 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, Delia’s, Inc. merged with iTurf, Inc. and after the conversion of existing stock into the newly issued shares, now there are 342 shares in our Model Portfolio. Dell Computer Corporation (NASDAQ symbol: DELL) is the third largest computer manufacturer in the world. The Company makes personal computers, notebook computers, servers and workstations. On March 5, 1999, the Company issued a 2-for-1 stock split, the seventh in the past eight years. On March 22, 2000, the stock reached an intra-day high of $59.68 per share. Then, the stock proceeded to fall. Due to the sell-off of stocks of box makers, this stock broke through its support level. On November 30, 2000, this stock closed at $19.25 per share. The stock continued its downtrend and reached a low of $16.25 per share. On February 7, 2001, this stock reached an intra-day high of $27.50 per share. Two weeks later, on February 21, this stock tested its support level of $20.43 per share. On May 31, 2001, this timely stock closed at $24.36 per share. At the present level this stock presents a great buying opportunity. Although it is not likely that the stock of Dell Computer Corporation will appreciate at such a fast pace as it did between the year 1994 and 1999, in our opinion, this stock could generate a gain of approximately 1,500% in six years. Ericsson LM Telephone (NASDAQ symbol: ERICY) is a leading supplier of mobile phones and telecommunications equipment. The company’s main manufacturing facilities are located in Sweden. Ericsson’s telecom equipment is among the most advanced in the world. The sales of equipment have increased significantly in China and surpassed the sales in U.S. Ericsson LM Telephone projects that by the year 2003 the number of mobile phone users could reach over 800 million. The long-term outlook for Ericsson is excellent. ADR’s of Ericsson split 4-for-1 on May 8, 2000. On May 31, 2001, ADR’s closed at a low level of $6.40. 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. The company continues to switch production to 0.18 micron manufacturing process that yields more semiconductors from each wafer. The stock of Intel Corporation has kept rising ever since 30 shares were bought in March of 1995, at $78.25 per share. The company issued a 100% stock dividend on June 22, 1995, another one on July 14, 1997, a 2-for-1 stock split on April 11, 1999, and another 2-for-1 split on July 30. Since the original 30 shares were bought, after these stock splits there were 480 shares in the portfolio. On October 30, 2000, two hundred shares were sold and now there are 280 shares in our Model Portfolio. This stock continued to fall and closed at $30.06 per share on December 29, 2000. As the institutional investors proceeded to buy this stock, it rebounded and closed at $37 per share on January 31, 2001. On May 31, 2001, this stock closed at $27.01 per share. Buy this stock and hold long-term. Internet Capital Group (NASDAQ symbol: ICGE) is a venture capital group that owns a stake in over 52 Internet companies. This venture capital group owns a stake in Vertical Net, a group of online trading communities where transactions for parts and raw materials are made among corporations. In July 2000, this stock traded at $45.18 per share and then proceeded to fall. Due to the carnage in the Internet sector this stock closed at a low of $3.28 per share on December 29, 2000, down from its high of $143.55 reached in March 2000. Afterwards, this stock proceeded to build a slow upward momentum and closed at $6.44 per share on January 31, 2001. There is a very slight probability that this stock could revisit its high of $143.55 per share during the next two years. We will monitor this stock closely. As soon as this stock reaches approximately $130 per share, one hundred and fifty shares will be sold immediately. The remaining fifty shares will be held long-term. On May 31, 2001, this stock closed at a very low level of $2.14 per share, and we rate it a speculative strong buy. LSI Logic Corporation (NYSE symbol: LSI) makes chips for: cellular phones, satellite set-top boxes, DVD products and personal computers. The company derives 58% of revenues from international sales. LSI Logic has manufacturing facilities in the United States, Europe and Japan. The company may continue to invest 15-17% of revenues in R & D. As the demand for cellular phones and set-top boxes continues to grow in double-digits, the revenues and earnings of LSI Logic could outperform the rest of the companies in the chip sector. This stock closed at $32.63 per share on October 31, 2000 and then proceeded to descend. Due to the bear market in NASDAQ this stock broke below $20 per share and closed at a low level of $16.43 per share on December 21, way down from its 52-week high of $71.32. On January 31, 2001, this stock closed at $24.75 per share. This stock broke through its support level of $19.80 and closed at $16.11 per share on February 28, 2001. This timely stock closed at $18.31 on May 31, 2001. In our opinion, due to the strong demand for cellular phones and handheld wireless devices the demand for chips made by LSI will continue to grow. This stock will be sold as soon as it reaches approximately $60 per share for a probable short-term gain of approximately two hundred percent. Lucent Technologies, Inc., (NYSE symbol: LU) is the largest manufacturer of the telecommunications equipment. Lucent Technologies makes fiber-optic equipment and optical network equipment that allows the phone companies to increase the capacity and to provide a high speed Internet access. On October 30, 2000, an additional 200 shares of Lucent were bought at $20.75 per share and added to our Model Portfolio. Now, there is a total of 250 shares in our Model Portfolio. As soon as this stock reaches our target level, 150 shares will be sold. The remaining hundred shares will be held long-term, at least ten years. On January 31, 2001, this stock closed at $18.60 per share. Afterwards, this stock proceeded to test its support level and closed at $9.97 on March 30, 2001. This stock broke through its support level in April and then slowly proceeded in upward direction. On May 31, 2001, this stock closed at $7.88 per share. We rate this stock a speculative long-term buy. Investors who already own this stock may add to their position. Microsoft Corporation (NASDAQ symbol: MSFT) is the largest maker of software. The operating system made by Microsoft is used in the majority of computers. The company has no debt and has approximately $17 billion in cash and short- term investments. The anti-trust trial affected the stock negatively. While the Justice Department accused Microsoft Corporation of wielding a monopoly power, the company denied any wrongdoing. Is the break-up of Microsoft Corporation the only solution? Of course not. As soon as this chapter in Microsoft’s history is closed, the stock could resume its strong upward momentum, but in the meantime this stock will be very volatile. Although these timely shares may not appreciate at previous fast pace, this stock could generate a gain of 700% in six years. This stock will be held long-term, at least five years. On December 29, 2000, this stock closed at $43.38 per share and we rated it a screaming buy. This stock closed at $69.18 per share on May 31, 2001. Buy this stock on dips and hold long-term. Motorola Inc. (NYSE symbol: MOT) is a major supplier of cellular phones, semiconductors, and pagers. The stock of Motorola continued to fall and reached an intra day low of $14 per share, an eight year low, on March 22, 2001. This stock is trading at such a low level, as if the U.S. economy were to enter a recessionary stage, even though it may not. Christopher Galvin who is the CEO of Motorola, could once again steer the company on a path of high growth and profitability. The stock of Motorola was held in our Model Portfolio between February 1995, and April 1997. On April 23, 1997, all 50 shares of Motorola were sold at $57.50 per share, with a loss of 5%. On the same day, the funds received from the sale of shares of Motorola were used to buy 50 ADRs of Nokia Corporation at $58.88. To cover the balance of this trade, $179.85 of cash was deducted from the cash position in our Model Portfolio. Nokia continues to be the second best performer in our Model Portfolio. The stock of Motorola is great for trading. In our opinion, this stock could reach $50 per share in the year 2002, and once it does it will be sold. On May 31, 2001, this stock closed at $14.70 per share and we maintain our buy rating. Nokia Corporation (NYSE symbol: NOK) is the world’s largest manufacturer of mobile phones. The Company is located in Finland, with subsidiaries in the United Kingdom and China. Nokia derives 56% of its revenues from sales in Europe and 44% from sales in other continents. The long-term outlook for Nokia is excellent, as the demand for company’s products grows worldwide. The Company issued a 2-for-1 split on April 16, 1998, one on April 11, 1999, and a 4-for-1 split on April10, 2000. These timely ADRs closed at $29.24 on May 31, 2001. Buy these ADRs on dips and hold long-term, at least seven years. Nortel Networks Corp. (NYSE symbol: NT) is the leading provider of networking solutions, including optical networking solutions and wireless networking systems. During the past four months this stock has fallen to a low level, due to the fear of a slowdown of orders for fiber-optic network equipment. The stock is way off from its 52-week high of $86 per share. Although this stock could trade at a low level during a quarter, or two, as soon as the growth of revenues reaches 50%, this stock may once again resume its strong upward trend. In our opinion, this stock could revisit its 52-week high in less than twelve months. The Internet is not going away. Quiet the opposite is happening. Each month millions of new users are accessing the Internet. This greatly increases the demand for bandwidth therefore the demand for the equipment made by Nortel Networks will continue to grow worldwide. On May 31, 2001, this timely stock closed at $13.33 per share and we rate it a screaming long-term buy. One hundred shares of Nortel Networks will be held in our Model Portfolio until the stock reaches approximately $80 per share and then this stock will be sold. 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. On April 12, 2000, the stock rose to $14.19 per share on a heavy volume of 4.45 million shares, and then proceeded to fall. Then, on May 26, 2000, the stock fell $3 from the previous close, and finished the day at $7.32 per share, on a very heavy volume of 16 million shares. In our opinion, this stock has a strong upside potential. On May 31, 2001, this stock closed at $9.14 per share and we rate it a strong buy. This stock will be held in our Model Portfolio until it reaches our target level of $19 per share, and then all four hundred shares will be sold, for a probable long-term gain of approximately one hundred percent. PepsiCo, Inc. (NYSE symbol: PEP) makes soft drinks, Doritos, Sun Chips, Ruffles potato chips and Lays potato chips. In 1998, PepsiCo acquired Tropicana and several snack chip businesses in Europe, Australia and Chile. 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. This stock has run-up during the past six months and in our opinion is trading near its full valuation level. Short-term, this stock does not have much of upside potential therefore we have revised our rating from a buy to a hold. On January 31, 2001, one hundred share of PepsiCo were sold at $44.06 per share, with a gain of approximately 198 percent. The remaining one hundred shares of PepsiCo were sold on May 31, 2001, at $45.42 per share (read: Sold). Pfizer, Inc. (NYSE symbol: PFE) is a diversified manufacturer of pharmaceuticals and consumer products. Among its brand name pharmaceutical products is Norvasc for hypertension and Zoloff for depression. The latest addition is Viagra, a pill for erectile dysfunction. The company issued a 3-for-1 stock split on June 30, 1999. Warner-Lambert agreed to be acquired by Pfizer, Inc. The shareholders will receive 2.75 shares of Pfizer stock for each share of Warner-Lambert stock. The deal is valued at $85 billion. After the merger is completed, Pfizer, Inc., will become a pharmaceutical behemoth with extensive R & D department. The long-term outlook for the company is excellent. On May 31, 2001, this stock closed at $42.89 per share. Buy this stock on dips and hold long-term. Sun Microsystems, Inc.(NASDAQ symbol: SUNW) is among the major suppliers of hardware to the Internet. The company continues to introduce new servers, competitively priced, in order to expand its market share. Sun Microsystems revenues have doubled during the past three years, to $19 billion. In our opinion, the company could attain a greater market share during this economic slowdown, and once again double its annual revenues in three years. As additional hundreds of millions of users access the Internet, the demand for servers could grow 50% annually during the next five years. This stock will be held in our Model Portfolio approximately three years, and as soon as it generates a gain of 400%, all of the shares will be sold. On May 31, 2001, this stock closed at $16.47 per share and we rate it a strong buy. Vertical Net, Inc., (NASDAQ symbol: VERT) is an Internet incubator that owns and operates 55 Websites designed as online business-to-business communities. These Websites, known as vertical trade communities are grouped in several industry sectors such as Advanced Technologies, Communications, Environmental, Food and Packaging, Food Service, Healthcare, Manufacturing and Metals, Textile and Apparel, and Service. This stock was featured in our “Buy & Sell” section in August 2000. At that time, we have stated that this stock could fall to approximately $35 per share. Furthermore, we have stated that the risk of owning this B2B start up is high, therefore this stock could only be bought by speculators. Who would have known then that this stock would break through a $35 level and reach a ridiculously low price of $2.68 per share on February 23, 2001. In August 2000, we have stated that this stock could ascend to $140 per share, short-term. We maintain our price target level, but it could take this stock approximately two years to reach it. Once again, we would like to reiterate that this stock is not for the faint of heart and may be bought only by speculators. These two hundred shares will be held in our Model Portfolio until the stock reaches approximately $140 per share, and then these 200 shares will be sold to lock in long-term capital gain. On May 31, 2001, this stock closed at $2.18 per share and we rate it a speculative screaming buy. WorldCom, Inc., (NASDAQ symbol: WCOM) has already grown from a small telecommunications provider to a behemoth, through mergers and acquisitions. This stock is down from its 52-week high of $52.50 per share. On September 14, 1998, World Com merged with MCI Communications Corporation. Once this merger was finalized, World Com was in possession of one of the worlds largest and most advanced digital networks that connect local markets in the United States to more than 280 countries and locations worldwide. On August 4, 1998, the company acquired a 51.79% voting interest and 19.26% economic interest in Embratel, a national telecommunications provider in Brazil. World Com plans to continue expanding globally through mergers and acquisitions. In our opinion, at the recent price level this stock is undervalued and has a potential to reach $50 per share during the next twelve months. As soon as this stock reaches our target level of $50 per share, all one hundred shares will be sold to lock in a probable short-term gain of approximately 120 percent. On May 31, 2001, this stock closed at $17.84 per share and we rate it a strong buy. Yahoo Inc., (NASDAQ symbol: YHOO) is a global Internet media company that provides comprehensive information and shopping services to over 140 million users worldwide. The company’s Website www.yahoo.com is the most visited site and has the highest name recognition. Yahoo Inc., continues to provide the widest choice of content that has generated an average of 465 million page views per day in December 1999, an increase of 178 percent from December 1998. The Company provides Web content around the world in 12 languages. As the advertising market on the Web continued to grow, in the fourth quarter of 1999, there were 3,550 advertisers, versus 2,225 in the same quarter of 1998. Average revenue per advertiser rose to $57,000 in the fourth quarter of 1999, from $34,000 in the fourth quarter of 1998. Advertising revenues on the Web in the United States alone are projected to reach over $8 billion annually in two years. Yahoo Inc., could receive 20 percent of these revenues; thus we estimate that the company’s annual revenue could grow to approximately $1.6 billion in the year 2002. Yahoo Inc., is among the few Internet companies that already generate positive cash flow. We project that this stock could rise twenty-fold from present level, during the next four years. The risk of owning this stock is above average and it is not for a timid investor. This timely stock will be held in our Model Portfolio until it reaches our target level of $300 per share and then these one hundred shares will be sold. On May 31, 2001, this stock closed at $18.11 per share. This stock could pull back to approximately $15 per share in June 2001, and speculators could buy it immediately at that level. Back to Top |
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Sold On May 31, 2001, one hundred shares of PepsiCo Inc., (NYSE symbol: PEP) were sold at $45.42 per share, with a gain of approximately 199 percent. This stock was held in our Model Portfolio approximately seven years. In July of 1994, one hundred shares of PepsiCo were bought at $30.63 per share and added to our Model Portfolio. The company issued a 100% stock dividend on June 3rd, 1996, and since then there were 200 shares of PepsiCo in our Model Portfolio (thus, the cost basis of this stock, adjusted for the stock dividend is $15.32 per share). Although this stock was a steady performer, in our opinion, at the recent price level these shares are fully valued. A decision was made to sell this stock and use cash proceeds to buy a tech stock. This is the remainder of 200 shares of PepsiCo Inc. that were in our Model Portfolio. On January 30, 2001, one hundred shares of PepsiCo were sold at $44.06 per share. As of now, our position in the stock of PepsiCo is closed. Bought On May 31, 2001, three hundred shares of Oracle Corporation (NASDAQ symbol: ORCL) were bought at $15.26 per share and added to our Model Portfolio. Oracle Corporation is the world’s second largest software company. The company makes database management system software. Approximately 90% of corporate Web sites are using Oracle’s database software. In the year of 1999, Oracle Corporation consolidated its computer system from approximately 40 locations around the world, down to two locations. The company launched its Internet store and all of its sales will be made through this online storefront. Oracle Corporation has already achieved annual savings of $1 billion from this E-engineering. This stock fell from its 52-week high of $46.47 to as low as $13 per share. There is a probability that this stock could test its support level of $13 during the first two weeks of June. Once the summer rally starts, this stock could break through its recent resistance level and reach approximately $25 per share, perhaps in July 2001. As soon as this stock reaches our target level of approximately $25 per share, all of the shares will be sold immediately and the cash will be added to the existing cash in our Model Portfolio. To cover the balance of this trade, $76 of cash was deducted from the cash position in our Model Portfolio. Now there is $605 of cash left in our Model Portfolio. After the trades done on March 20, 2001, and May 31, 2001, our Model Portfolio is heavily weighed in tech stocks. The risk of such asset allocation is much greater than owning a portfolio of stocks in several different sectors. Model Portfolio Update Advanced Micro Devices, Inc. (NYSE symbol: AMD) had a great year. For the year ending December 31, 2000, annual revenues rose to $4.644 billion, from $2.858 billion for 1999. The company reported a net income of $983 million, or $2.89 a share, versus a loss of $88.94 million, or $0.30 a share for 1999. As of December 31, 2000, the company had $1.434 billion of working capital, versus $499.2 million one year earlier. Long-term debt edged lower to $1.168 billion from $1.427 billion in 1999. Stockholders equity rose to $3.172 billion, from $1.979 billion in 1999. Advanced Micro Devices, Inc., spent $641.8 million on research and development, versus $635.8 million in 1999. The return on equity rose to 38.2% versus a loss of 4.5% in 1999. As the company continued to pay off its debt, debt as a percentage of capital fell to 26.9% from 41.9% in 1999. As of December 31, 2000, the company had 14,435 employees, versus 13,354 employees in the previous year. In the year 2000, the gross margin rose to 46% from 31% in 1999. The company was able to achieve a higher gross margin due to the expansion of sales of higher priced processors. In 1999, Advanced Micro Devices, Inc., introduced its high performance Athlon™ microprocessor. The demand for this processor was tremendous and its sales have accounted for $1.6 billion out of $2.3 billion PC processor revenues for the year 2000. Advanced Micro Devices, Inc., was able to expand its market share for PC processors, to 17% in the year 2000. The company continues to spend a substantial amount of its revenues on research and development. In the year 2000, AMD received 1,055 new patents and ranked 12 in the world in the number of patents issued. The company continues to introduce new products to the marketplace. Advanced Micro Devices, Inc., was the first to introduce a seventh-generation PC processor and the first to use copper interconnect technology in an x86 processor. The company was also the first to use a 200-MHz bus, scalable to 400-MHz. The company was the first to break the gigahertz barrier when it introduced the 1-GHz Athlon™ processor on March 6, 2000. In the year 2000, the company was able to achieve a near-flawless start up of its Fab 30 Dresden facility. By the year-end the production at this new chip making facility reached approximately 50% capacity. The company plans to ramp up production at Fab 30 to full capacity in the fourth quarter of the year 2001. Advanced Micro Devices, Inc., continues to extend its collaboration with third-party chipset manufacturers and motherboard suppliers. There are already 50 motherboard suppliers supporting the AMD Athlon™ and AMD Duron™ processors. Furthermore, the company’s AMD-760 ™ MP chipset, which supports two processors, will allow the company to enter the market for workstations and server applications. Advanced Micro Devices, Inc., states in its annual report that it believes it will grow faster than the industry. Furthermore, the company plans to introduce its Hammer Family of 64-bit processors in the first half of the year 2002. The company formed FASL, a joint venture with Fujitsu Limited in 1993, to make Flash memory devices in a manufacturing facility in Aizu-Wakamatsu, Japan. FASL is in the process of finishing its second Flash memory device wafer fabrication facility that will cost approximately $1.1 billion when fully equipped. Furthermore, construction on the third wafer fabrication facility was started in July 2000 and is expected to cost $1.5 billion when fully equipped. Cash generated by FASL operations and borrowing by FASL has funded capital expenditures for the construction of these facilities. In our opinion, the company could continue to expand its market share. This stock could remain volatile and is not for the faint of heart. As the demand for the PC processors made by the company continues to expand, the revenues and earnings could improve. In our opinion, this stock could reach our target level of $60 per share during the next three months and once it does speculators should sell it immediately. On May 31, 2001, this timely stock closed at $28.25 per share and we maintain our rating of short-term buy. Ericsson LM Telephone (NASDAQ symbol: ERICY) remains in the top tier of leading suppliers of mobile phones and telecommunications equipment. For the year ending December 31, 2000, annual revenues rose to 273.569 billion Swedish Krona, versus 215.403 billion Swedish Krona for 1999. Net income rose to 21.018 billion Swedish Krona, or 2.65 Krona a share, versus 12.130 billion Krona, or 1.54 Krona a share for 1999. Operating income was affected negatively by a restructuring provision of 8 billion Krona in Consumer Products division. During the year 2000, the company has achieved an adjusted operating margin of 6.1%, excluding capital gains from the sale of Juniper Networks shares in December. Due to the higher expenditures for research and development, operating expenses rose to 33% of sales, above the company target level of 30%. The operating margin rose to 11.4% versus 8.2% for 1999. The company’s long-term goal is to grow faster than the market. Furthermore, the company plans to achieve a return on capital employed of 20% to 25% and a positive cash flow before strategic acquisitions. Ericsson LM Telephone plans to achieve growth of at least 20% and an operating margin of at least 10%. Consumer Products division posted losses for the year 2000. While the global handset volume rose 47% from 278 million units sold in 1999 to approximately 410 million units sold in 2000, this division was not able to keep pace with the demand due to the shortages of key components. Ericsson LM Telephone restructured this division and took a provision of 8 billion Krona. During the year 2000, sales of handsets made by Consumer Products division rose to 43.3 million, an increase of 38% from the previous year. Although the company lost some market share in handset sales, it was able to maintain its number three position among the handset vendors. The company acquired Microwave Pover Devices Inc., a developer of multi-carrier power amplifiers in November 2000. Furthermore, the company formed a joint venture with Microsoft Inc., and entered into a partnership with Juniper Networks to deliver data- ready Mobile Internet solutions. Ericsson LM Telephone continues to participate along with other industry leaders in the Symbian joint venture for EPOC operating system for mobile devices. Furthermore, the company is participating in the 3G Partnership Program for further development of the 3G standard. Ericsson LM Telephone is already preparing for a massive rollout of 3G networks starting at the end of the year 2001. In our opinion, the year 2000 and the beginning of the year 2001 was a temporary setback for the company. The company outsourced its manufacturing to Solectron and Flextronics. In our opinion, this was the step in the right direction and should improve the profit margin in the long run. We project that outsourcing its manufacturing operations could bring the Consumer Products division in the black by the end of year 2001, thus improving the earnings of Ericsson LM Telephone. In the long run, outsourcing manufacturing could improve gross profit margin by 2%, or more. Once the rollout of 3G networks gains momentum, the revenues derived from the sales in this segment alone could lift earnings by 30% in the year 2002. These ADR’s are for patient investors. Although these ADR’s could trade in a narrow range during the next five months, by the end of the year 2002, these timely ADR’s could reach $24 and investors who buy these now could achieve a gain of 300%. On May 31, 2001, these ADR’s closed at $6.40 and we rate them a strong long-term buy. Back to Top |
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Model Portfolio Chart 5-31-2001
a) The quantity of shares was adjusted for a 100% stock dividend issued by Intel Corporation on June 22, 1995, a 2-for-1 stock split issued on July 14, 1997, a 2-for-1 stock split issued on April 11, 1999 and a 2-for-1 stock split issued on July 30, 2000. (There were 480 shares of INTC on October 29, 2000. On October 30, 2000, two hundred shares were sold and now there are 280 shares). c) The quantity of shares was adjusted for a 100% stock dividend issued by Applied Materials, Inc. on October 14, 1997 and a 2-for-1 stock split issued on March 16, 2000. d) The quantity of ADR’s was adjusted for a 2-for-1 split issued by Nokia Corporation on April 16, 1998, a 2-for-1 split issued on April 11, 1999, and a 4-for-1 split issued on April 10, 2000. e) The quantity of ADR’s was adjusted for a 2-for-1 split issued by Ericsson Telephone on May 22, 1998, and a 4-for-1 split issued on May 8, 2000. h) The quantity of shares was adjusted for a 2-for-1 stock split issued by Microsoft Corporation on March 26, 1999. i) The quantity of shares was adjusted for a 3-for-1 stock split issued by Pfizer on June 30, 1999. j) The quantity of shares was adjusted for a 2-for-1 stock split issued by Cisco Systems, Inc. on March 23, 2000. k) Two hundred shares of Delia’s, Inc., were bought in December 1999, at $7.19 per share. After Delia’s, Inc., merged with i Turf, Inc., these shares were converted into newly issued stock and now there are 342 shares in our Model Portfolio. The original acquisition cost has been adjusted to $4.20 per share. After the trades done on March 20, 2001, and the recent trades done on May 31, 2001, our Model Portfolio is heavily weighed in tech stocks. The risk of such asset allocation is much greater than owning a portfolio of stocks in several sectors. Furthermore, more stocks will be held short-term. Although it is not likely that a typical investor will acquire all of the stocks that are in our Model Portfolio, each investor has to be aware beforehand that short-term trading is risky, and will greatly increase tax liability. Between April 1994 and July 1998, a total of $28,336 of cash was invested in the Model Portfolio. Due to the excellent performance of the technology stocks, over the course of six years the total value of the portfolio has risen to $145,374 as of June 30, 2000. Our Model Portfolio has generated a gain of $117,038, or 413 percent in just six years (as of June 30, 2000). 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 |