March 2001
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Contents Back Issues Nov. 2000 Dec. 2000 Jan. 2001 Feb. 2001 Investing Buy & Sell Stocks for traders Model Portfolio Sold Bought Model Portfolio Chart |
The economy continued to reduce its fast pace and the economic growth fell to just 1.4% in the fourth quarter of 2000. Although the Fed had cut the interest rates by a full 100 basis points, or one percent in January, it may be too little and too late to prevent the economy from further deceleration. In our opinion, at this rate, the economic growth could fall to zero by (continued in: Investing). ACR Group, Inc., (NASDAQ symbol: ACRG) is a major wholesaler and distributor of heating, ventilating, air conditioning and refrigeration equipment and supplies. The company has 39 branch operations in nine states. During the past six years annual revenues have tripled to $126 million in fiscal 2000. (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, Intel Corporation was not able to produce enough chips due to insufficient ( continued in Model Portfolio). |
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Investing The economy continued to reduce its fast pace and the economic growth fell to just 1.4% in the fourth quarter of 2000. Although the Fed had cut the interest rates by a full 100 basis points, or one percent in January, it may be too little and too late to prevent the economy from further deceleration. In our opinion, at this rate, the economic growth could fall to zero by April 2001. As the demand for the durable goods such as refrigerators, furniture, and cars continues to shrink, the companies in the manufacturing sector continue to lower their output through layoffs of thousands of employees. Such actions have affected consumer confidence very negatively and it has fallen to a seven-year low. As a result, the consumers continue to curtail their spending. If this were to continue, the economy may not achieve a soft landing. In our opinion, Federal Reserve Board Chairman Alan Greenspan has waited too long to start easing. It seems that the Chairman’s main concern during 1999 and 2000 was the threat of inflation, and the Fed proceeded to hike the interest rates. The Fed has overestimated the need to hike interest rates, and now the Chairman has to worry about preventing the economy from sliding into a recession. As usual, the fate of the economy rests on the actions of the Federal Reserve Board. Historically, it was the Fed that would drive the economy into a recession through its interest rate hikes, and then would steer it back into an expansionary cycle through a series of interest rate cuts. While there is a probability that Alan Greenspan could achieve a soft landing, if the Fed does not become aggressive in lowering interest rates during the next four months, the economy could still end in a recession. The excessive interest rate hikes that were initiated by the Fed in 1999 had resulted in deflating the stock market bubble. Furthermore, as some of the corporations continue to issue warnings of slower sales for the next two quarters, the prices of their stocks could continue to fall to lower levels. In our opinion, a recession is already reflected in the current prices of equities. We are very optimistic and do not see a recession on the horizon. As long as the Fed continues to ease, even by small increments of 25 basis points, or a quarter of a percent, the economy may achieve a soft landing. If our optimistic scenario were to materialize, some of the equities could rebound to their previous highs during the next six months. Once again, we reiterate our opinion that Nasdaq Composite index could continue to trade in a range between 2300 and 2900 points through the first half of this year. This should not deter some of the stocks from appreciating at a fast pace during the course of several months. We maintain a very positive outlook for the technology sector. In our opinion, a majority of stocks in this sector are oversold. As the revenues and earnings in this sector proceed to improve, investors will start switching out of the old economy stocks into tech stocks. The stocks of some of the tech companies such as Advanced Micro Devices (NYSE symbol: AMD), LSI Logic (NYSE symbol: LSI), and Yahoo Inc., (NASDAQ symbol: YHOO), could double, or even triple during the next six months. Who would have ever thought six months ago that the stock of Yahoo Inc., could fall below $30 per share. Although at the recent low level the stock is still trading at a high price to earnings ratio, the company is generating positive cash flow, unlike other Internet companies that are still losing money. Investors were willing to pay over $200 per share for the stock of Yahoo when analysts hyped it. Now, some of the same analysts continue to downgrade this stock. The company’s business model has not changed and as more users surf the Web, Worldwide, the revenues and earnings of Yahoo could continue to grow in double digits. Five years ago the stock of Yahoo Inc., was trading at approximately $20 per share and it looked as if the company could go bankrupt in a few months. During the next four years, the stock proceeded to go right through the roof and reached a 52-week high of $205.63 per share on March 22, 2000, and that was after four stock splits. Investors who did not buy the stock of Yahoo last year when it was at $205.63 have an opportunity to buy it now for less than one-sixth of that price. If you were to walk into a car dealer’s showroom and saw a brand new car that was previously priced at $30,000 marked down to $5,000 you would buy it right away! Investors are getting similar discount on the stock of Yahoo. Buy this stock now because it may never again reach such a low level. On the other hand, the way this market has been performing, the stock of Yahoo could reach $200 per share in less than two years, and then four years from now may once again trade at a very low level of $30 per share. In our opinion, the stock of Yahoo Inc., could reach $200 per share during the next two years, but investors should not commit more than ten percent of assets to this equity. Back to Top |
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Buy & Sell
ACR Group, Inc., (NASDAQ symbol: ACRG) is a major wholesaler and distributor of heating, ventilating, air conditioning and refrigeration equipment and supplies. The company has 39 branch operations in nine states. During the past six years annual revenues have tripled to $126 million in fiscal 2000. The company continues to expand through acquisitions and through internal growth. The annual revenues rose to $126.468 million for the fiscal year 2000, up from $117.887 for the fiscal 1999. For fiscal 2000, the company reported a net income of $4.077 million, or $0.20 a share, up from $3.317 million, or $0.12 a share for fiscal 1999. During fiscal 2000, same store sales rose 5% from sales in fiscal 1999. Furthermore, the company has increased its profit margin by 1.9% during the past two years, to 22.2% in fiscal 2000. In fiscal 2000, the company acquired International Comfort Supply, Inc., located in El Paso, Texas. Although the company reported record revenues and earnings, its stock continued to lag the market. After reaching a high of $1.94 per share in March 2000, the stock proceeded to fall and reached a low level of $0.54 per share in February 2001. In our opinion, due to the fear of recession, the stock is trading at a low level and at the recent price is undervalued. Once the economy improves, there is a strong probability that this stock could revisit its 52-week high of $1.94 per share during the next twelve months. We rate this stock a speculative buy. Investors should be aware that on some days this stock is thinly traded and only one thousand shares change hands (on February 28, price $0.56, dividend Nil, and P/E n/m). Visit the company’s Website at www.acrgroup.com Curtiss-Wright Corporation (NYSE symbol: CW) is a major manufacturer of highly engineered products and services to flow control, motion control and metal treatment industries. Five years ago, the company’s aerospace business was very volatile due to the cyclical nature of new commercial aircraft production. Since then, during the past four years the company has diversified into existing three business segments and is positioned for growth through acquisitions, to create more value for the shareholders. In 1999, the company acquired Ferris Engineering’s pressure-relief valve product line. These spring-loaded and pilot-operated pressure-relief valves are used in refineries, petrochemical/chemical plants and pharmaceutical manufacturing operations. This acquisition allowed Curtiss-Wright Corporation to introduce its own existing line of valves to a wider market. The company had another great year. For the year of 1999, revenues rose to $293.263 million, from $249.413 million for 1998. Net earnings rose to $39.945 million, or $3.82 a share for 1999, up from $29.053 million, or $2.82 a share for 1998. The sales have grown at an annual rate of 17 % while operating income grew 25% annually since 1995. During 1999, the company’s maintenance repair and overhaul division generated $50 million in revenues. The company provides service at four locations for more than 550 airlines and airfreight haulers. In May 2000, this stock traded at a low of $33.54 per share and then proceeded to build a strong upward momentum. By December 2000, this timely stock reached a 52-week high of $51.06 per share. Although the long-term outlook for the company is excellent, in our opinion, at the recent price level the stock is fully valued and does not have much of intermediate upside potential (on February 28, price $47.88, annual dividend $0.52, yield 1.1%, and P/E 15). Investors who own this stock could switch and buy Sun Microsystems (NASDAQ symbol: SUNW) and Nortel Networks Corporation (NYSE symbol: NT). The Fairchild Corporation (NYSE symbol: FA) is a major supplier of fasteners to the aerospace industry, and has a market share above 30%. The company also makes specialty fittings and self-locking nuts. The Fairchild Corporation has 17 plants located throughout North America, Europe and Asia. The company is one of the leading suppliers of fasteners to Airbus, Boeing, Lockheed Martin, and Northrop Grumman. Over the course of the past three years, the company has disposed of its non-core assets, while continuing to expand market share of its aerospace business. During the past four years the revenues have tripled. Fasteners made by The Fairchild Corporation are qualified for Airbus A340 and 500/600 aircraft. Furthermore, the company continues to expand into non-aerospace markets and supplies fasteners for the BMW, Audi, Peugeot, Daimler-Chrysler and Renault cars. The annual revenues fell to $617.322 million for 1999, from $741.176 million for 1998. For 1998, the company reported a loss of $45.911 million, or $1.03 a share, versus income of $45.443 million, or $2.66 a share for 1999. Due to the acquisitions and internal growth total assets rose to $1.329 billion in 1999, from $828.680 million in 1995. In 1995, stockholders’ equity stood at $2.50 a share, and then rose to $16.38 a share in 1999. The Fairchild Corporation has reached a significant size allowing it to issue $225 million of senior subordinated 10.75% ten year bonds in 1999. During 1999 the company spent $30.1 million on capital expenditures and plans to maintain this level in the near future. The aerospace industry is highly cyclical; therefore the demand for the fasteners made by The Fairchild Corporation could rise, or fall significantly, immediately affecting the price of the stock. The stock reached $7.75 per share in March 2000 and then proceeded to descend. Two months later the stock reached a low of $4.50 per share. Afterwards, the stock attempted to retest its high but was not able to break through resistance level and closed at $7.32 per share on August 18, 2000. On February 28, 2001, this stock closed at $6 per share. Although this stock could appreciate long-term, in our opinion, short-term this stock is fully valued and could test its support level of $5 per share during the next two months. Sell this stock now (on February 28, price $6, dividend Nil, and P/E n/m). Northrop Grumman Corporation (NYSE symbol: NOC) is a major company operating in the Integrated Systems and Aerostructures, Electronic Sensors and Systems, and Information Technology segments of aerospace and defense industry. The Integrated Systems and Aerostructures division designs, develops, and manufactures aircraft and aircraft subassemblies. The Electronic Sensors and Systems division designs, develops, and manufactures electronic systems and components for military and commercial use. The Information Technology division designs, develops, operates and supports computer systems for scientific and management information. The Integrated Systems and Aerostructures division makes B-2 bomber, and is the principal subcontractor to Boeing Company on the F/A-18 fighter/ground-attack aircraft. Northrop Grumman builds approximately 40 percent of F/A-18 aircraft. The Electronic Sensors and Systems division makes airborne fire control radar used aboard F-16 fighters throughout the world, and the Longbow Hellfire missile for the U.S. Army’s AH-64 Apache attack helicopter. The Information Technology division is a leading provider of advanced information technologies, systems and services, that provide communications, computers, intelligence, surveillance, base and range report. Among its customers is Department of Defense, state and local governments. Northrop Grumman Corporation had another great year. For the year of 1999, revenues rose to $8.995 billion, from $8.902 billion for 1998. Net income rose to a record $467 million, or $6.69 a share, versus $194 million, or $2.79 a share for 1998. Operating margin as a percentage of sales rose to 10.8%, from 8.5% in 1998. The company continues to expand through internal growth and through acquisitions. During the next four years, annual revenues could reach $12 billion. In March 2000, the company’s Electronic Sensors and Systems division won a contract worth more than $1 billion to supply radar and electronic warfare systems for a fleet of 80 F-16 aircraft being produced by Lockheed Martin for the United Arab Emirates. On March 2, 2000, the stock closed at a low level of $43.50 per share. Afterwards, the stock proceeded to build a strong upward momentum and closed at $79.25 per share on May 17, 2000. The stock continued its upward trend and closed at $93.94 per share on February 28, 2001. In our opinion, this stock is fully valued and there is not much of intermediate upside potential. Although President George W. Bush plans to increase military budget, in our opinion it is already reflected in the price of this stock (on February 28, price $93.94, annual dividend $1.60, yield 1.7%, and P/E 12). Investors who bought this stock at a lower level could sell it now to lock in their gains and buy World Com (NASDAQ symbol: WCOM) and Cisco Systems (NASDAQ symbol: CSCO). 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 has added a selection of mid-priced storage devices. During 1999, EMC Corporation shipped over 10,000 software licenses that generated $822 million in revenue. EMC Corporation plans to spend $1.7 billion on R&D through 2000 and 2001. Approximately 75% of this expense will be applied toward development of software. Although EMC Corporation’s hardware and software is the most expensive, 98 percent of customers are willing to recommend it to their colleagues and business associates. As Internet continues to grow and hundreds of millions of people go online during the next decade, we project that the need for storage devices could continue to grow in high double-digits. In our opinion, EMC Corporation’s annual revenues could grow ten-fold, and reach $60 billion in 10 years. During the past decade, this was the top performing stock on NYSE and has risen 81,000 percent since January 1, 1990. The Company consistently splits its stock, and the most recent stock split was 2-for-1 on June 5, 2000. 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 1,600 percent. At such rate of return, $2,000 invested in this stock now, could be worth $32,000 after ten years. During the recent carnage in the technology sector this stock proceeded to fall and closed at $39.76 per share on February 28, 2001. In this type of a market, the stock of EMC Corporation could fall to $30 per share during the next two months. In our opinion, the annual revenues of this large-cap behemoth could grow 28% annually during the next two years. Even if it takes two years for this stock to rebound to its previous level of $103.18 per share, investors who buy it now could achieve a long-term gain of 150 percent. We rate this stock a strong long-term buy. LSI Logic Corporation (NYSE symbol: LSI) makes chips for: cellular phones, satellite set-top boxes, DVD products and personal computers. The company derives 58% of revenues from international sales. LSI Logic has manufacturing facilities in the United States, Europe and Japan. The company may continue to invest 15-17% of revenues in R & D. As the demand for cellular phones and set-top boxes continues to grow in double-digits, the revenues and earnings of LSI Logic could outperform the rest of the companies in the chip sector. This stock closed at $32.63 per share on October 31, 2000 and then proceeded to descend. Due to the bear market in NASDAQ this stock broke below $20 per share and closed at a low level of $16.43 per share on December 21, way down from its 52-week high of $90.38. On 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. 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 200 percent. This timely stock could break through its resistance level of $25 and reach a high of $30 per share in the beginning of April 2001. If the money flowing into this stock were to rise substantially, this stock could even reach $35 per share in April 2001. This timely stock could reach our target level of $60 per share before August 2001. 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. For the fiscal 2000, ended March 31, 2000, revenues rose to $6.1 billion, from $4.666 billion for fiscal 1999. Net income rose to $696 million, or $1.25 a share, from $626 million, or $1.11 a share for fiscal 1999. The Company took a charge of $800 million for purchased research and development. In our opinion, without this charge earnings could have been as high as $2.68 a share. Computer Associates International acquired Platinum Technology International for $3.5 billion in cash. The Company also acquired Sterling Software, Inc. As of March 31, 2000, total outstanding debt reached $5.4 billion. During fiscal 2000, the Company generated $1.566 billion of cash from operations and in our opinion it is sufficient to cover the repayment of debt. In our opinion, the short-term and the long-term outlook for the Company is very good. As the debt level falls, earnings could reach $2.50 a share for fiscal 2002, thus propelling the stock to a probable level of approximately $98 per share. After reaching a 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. This stock could once again test its support level and may fall to approximately $27 per share by the end of March 2001. As this timely stock nears this level, it should be bought by speculators and held until it reaches our target level of $78 per share. Once this stock reaches our target level, it should be sold immediately to lock in the short-term gain. In our opinion, this timely stock has potential to reach our target level during the next six months. CMGI, Inc., (NASDAQ symbol: CMGI) finds, acquires, develops and operates Internet companies. It is one of the worlds largest Internet investment companies. CMGI consists of three venture capital funds. CMG Ventures III that was launched in 1998 has a minority interest in Raging Bull www.ragingbull.com a web site dedicated to investors, and a minority interest in Virtual, Inc. CMGI, Inc. has developed a strategy to acquire start-up Internet companies, and then either sell them out right, or sell a minority interest and reinvest the proceeds. The company has a history of acquiring successful Internet companies. David Wetherell, who is a CEO of CMGI, Inc., continues to steer the company on the Internet path to high growth. In our opinion, the best decision was to form a strategic partnership with Compaq Computer Corporation (NYSE symbol: CPQ). CMGI, Inc. acquired a majority stake in Alta Vista, while Compaq retained 17% equity ownership in the Alta Vista business. Through this partnership, both companies plan to establish Alta Vista as one of the worlds leading Internet networks. To find out more about Alta Vista, visit the company’s Web site at www.altavista.com and to find out more about CMGI, Inc., visit the company’s Web site at www.CMGI.com In our opinion, tremendous growth opportunities are ahead. Although the stock of CMGI is trading at a high P/E ratio, in our opinion earnings could grow 60% annually and bring the price to earnings ratio down to a reasonable P/E 50 in two years. On January 12, 2000, the company issued a 2-for-1 stock split. It was a fourth 2-for-1 stock split issued during the past three years. This stock has been in a downtrend since March 2000. On September 27, 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 $5.59 per share on December 29, 2000. This stock could reach approximately $90 per share during the second half of 2001. On the other hand, this is a very conservative target level and there is a probability that this stock could test its previous high of $163.50 per share toward the end of 2001. Although patient investors could acquire this stock and hold it long-term, due to the high volatility and a wide trading range, speculators could trade this stock. On February 28, 2001, this stock closed at $4.06 per share and we maintain our rating of screaming buy. Advanced Micro Devices, Inc., (NYSE symbol: AMD) manufactures microprocessors, flash memory devices, data communications products and network products. AMD and Intel continue their fierce competition. While the demand for microprocessors continued to grow worldwide, Intel Corporation was not able to produce enough chips due to insufficient manufacturing capacity. During that time AMD was able to increase its market share. AMD could continue to spend large percentage of its gross revenues on research and development and try to keep pace with Intel by introducing faster processors to the market. As AMD sells a larger quantity of higher priced processors, the average selling price will continue to rise, thus improving profit margins. The stock of AMD reached a 52-week high of $94.63 per share on June 21, 2000 (after the 2-for-1 stock split that was issued on August 22, 2000, this high was adjusted to $47.32). Before the Company issued the split, the stock was already in a downtrend. Although this timely stock could be held long-term, speculators who trade it short-term may achieve better return on investment. Worldwide demand for microprocessors continues to grow 17 percent annually. At this time chipmakers do not have sufficient manufacturing capacity to meet this growing demand and that will guarantee that every processor made, will be sold almost immediately. 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. This stock maintained its upward trend and closed at $26.24 on February 15, 2001. On February 28, this timely stock closed at $21.50 per share and we maintain our rating of strong buy. During the first half of 2001, AMD could reach approximately $81 per share and speculators should sell it immediately to lock-in a probable gain of 250 percent, or higher. Unisys Corporation (NYSE symbol: UIS) is a major provider of customer services and information services. The Company makes network servers and software. Unisys derives 67 percent of revenues from services, where profit margins are much higher than margins on hardware. The Company projects that in a few years, services business could generate approximately 75 percent of annual revenues. In September of 1999, the stock reached a high of $49.68 and then during the following months fell below $25 per share. In February 2000, the stock proceeded to revisit its high, but due to strong resistance at $35 level proceeded to descend once again. Due to the sell-off in the tech sector, this stock continued to descend and closed at $9.54 per share on July 27, 2000. In January 2001, we have 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. On the other hand, patient investors could buy this stock now and hold until it revisits its previous high of $49.68 per share reached during September 1999. As the services business continues to grow, profit margins could accelerate and the earnings for the year 2001 could rise above $2 a share, the stock could break through the previous high and provide investors with a probable gain of $40 per share, or 300 percent in approximately one year. On February 16, 2001, this stock approached $20 level but found strong resistance and closed at $18.93 per share. On February 28, this stock closed at $16.38 per share. This stock could test its support level of $12.50 by the end of March. We still rate this stock a strong short-term buy and a screaming long-term buy, depending on the objective and the time frame of the investor. Boston Scientific Corporation (NYSE symbol: BSX) is one of the worlds leading companies that designs and markets minimally invasive medical devices. The company makes coronary stents for less invasive treatment of cardiovascular disease. The stock has reached a high of $47.06 on July 19, 1999. Afterwards, the stock proceeded to fall at a fast pace and by October 1999, fell to an intra-day low of $17.55 per share. 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. On February 28, 2001, this stock closed at $16.49 per share. We have revised our target level for this stock to $26 per share, from $34 per share. As some of the investors switch from tech stocks into defensive stocks such as BSX, this stock could reach our revised target level of $26 per share by July 2001. As soon as this stock 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 up $3.38 on March 28, 2000. In April we stated that this stock could pull back to approximately $28 per share and speculators could start accumulating it at that level. On May 8, the stock of Bank One Corporation reached an intra-day low of $28.75 and then resumed its upward momentum. Money is flowing into stocks in this sector and this timely stock proceeded to build a strong upward momentum. On January 31, this timely stock closed at $39.19 and then pulled back and closed at $35.26 per share on February 28, 2001. We maintain a buy rating on this stock. The Fed started lowering interest rates in January and this should improve earnings in this sector. This stock could reach our target level of $50 per share during the next five months. Once this stock reaches our target level, speculators should sell it immediately. Back to Top |
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Model Portfolio Advanced Micro Devices, Inc. (NYSE symbol: AMD) manufactures microprocessors, flash memory devices, data communications products and network products. AMD and Intel continue their fierce competition. While the demand for microprocessors continued to grow worldwide, Intel Corporation was not able to produce enough chips due to insufficient manufacturing capacity. During that time AMD was able to increase its market share. AMD could continue to spend large percentage of its gross revenues on research and development and try to keep pace with Intel by introducing faster processors to the market. As AMD sells a larger quantity of higher priced processors, the average selling price will continue to rise, thus improving profit margins. The stock of AMD reached a 52-week high of $94.63 per share on June 21, 2000 (after the recent 2-for-1 split this high was adjusted to $47.32). Before the Company issued the split, the stock was already in a downtrend. Although this timely stock could be held long-term, speculators who trade it short-term may achieve better return on investment. Worldwide demand for microprocessors continues to grow 17 percent annually. At this time chipmakers do not have sufficient manufacturing capacity to meet this growing demand and that will guarantee that every processor made, will be sold almost immediately. Starting in September, the sales of chips typically rise and the demand reaches the highest level by December. On August 31, this stock closed at $37.63 per share. During September this stock proceeded to descend, broke through our initial target level of $24 per share and closed at $23.63 on September 29, 2000. On January 31, 2001, this timely 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. We maintain our rating of strong buy. In our opinion, this stock could reach approximately $81 per share during the first half of 2001. As soon as this stock reaches our target level, one hundred and fifty shares will be sold and the remaining fifty shares will be held long-term. Albertson’s, Inc. (NYSE symbol: ABS) is the second largest food-drug chain in the United States. After the merger with American Stores Company that was finalized on June 23, 1999, Albertson’s operates over 2,400 stores in 38 states. Among the stores operated by the Company are Albertson’s, Save-On, Osco Drug, Lucky Stores, Jewel, and Acme Markets. The merger will allow the Company to achieve greater economy of scale, thus improving profit margins. Last year, on June 1, 2000, the stock closed at $38.87 per share. Three years ago the stock of Albertson’s displayed a similar trading pattern and it could once again repeat itself. Typically, the fourth fiscal quarter that ends in January is the best in this sector. We have revised the time frame that it could take this equity to reach our target level. On February 20, 2001, two hundred shares of Albertson’s were sold at $28.88 per share (read: Sold). Applied Materials, Inc. (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. The Company produces systems that use physical vapor deposition technology, chemical vapor deposition and oxide etching. The demand for the company’s equipment continues to accelerate in line with the growing sales of computers and telecommunication devices. Applied Materials estimates that the market for wafer fabricating equipment could double in two years to $43 billion annually. 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 February 28, this stock closed at $42.25 per share. Buy this stock now 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. A month later, the stock proceeded to fall at a very fast pace and by October 1999, fell to an intra-day low of $17.43 per share. On June 30, this stock closed at $21.94 per share and then proceeded to descend. After reaching $19.06 on September 11, this stock proceeded to fall and closed at $12.88 per share on November 30, 2000. On February 28, this stock closed at $16.49 per share. We have downgraded this stock to accumulate from buy. Speculators who are willing to wait, could buy this stock now and if it were to reach our revised target level of $26 per share by July 2001, sell it immediately. 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. 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 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. On March 23, 2000, this stock split 2-for-1. During the past five months this stock continued to fall. On February 28, this stock closed at a ridiculously low level of $23.69 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 two years ago, therefore we recommend this stock to patient investors who are willing to hold it at least five years. The Company has efficient manufacturing operation and manages to turn over its inventory of PCs eleven times per year. Compaq sold 83% of interest in Alta Vista Web site to CMGI, Inc. Compaq retained 17% equity in the Alta Vista. Both companies will promote this site. In the future it could become one of the top three sites and generate substantial amount of revenues. This stock has a strong potential to gain 500% in five years. Due to the sell-off in the tech sector, this stock broke through its support level and closed at $15.05 per share on December 29, 2000. During January this stock proceeded to rebound and closed at $23.71 per share on January 31. On February 28, this stock closed at $20.20 per share. Patient investors could buy this stock and hold it long-term. Compuware Corporation (NASDAQ symbol: CPWR) makes software that manages corporate networks, and improves productivity. The revenues are growing at a fast pace, and for the fiscal 1999, reached $1.65 billion. The stock of Compuware Corporation reached $40 per share in December 1999. On March 31, 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 have revised our short-term target level to $28 per share, from $35 per share. On December 29, this stock closed at $6.25 per share. Afterwards, this timely stock proceeded to build a strong upward momentum and closed at $12.44 per share on January 31. On February 28, this timely stock closed at $10.31 per share and we rate it a strong buy. Once this stock reaches our revised target level, these two hundred shares will be sold immediately. The remaining 150 shares will be held long-term, at least three years. Delia’s, Inc. (NASDAQ symbol: DLIA) sells a variety of apparel and accessories for young women. The Company conducts sales through its Web site and through brick and mortar stores. This stock reached a 52-week high of $40 per share in April 1999, and then proceeded to fall along with other Internet stocks. By November 1999, this stock reached a low of $5.50 per share. Afterwards, the stock proceeded to rise, buoyed by optimistic expectations of higher holiday sales and reached an intra-day high of $13.25 in November 1999. On February 28, 2001, this stock closed at $3.84 per share and we rate it a speculative buy. This stock will be held in the Model Portfolio until it reaches our revised target level of $25 per share and then all of the shares will be sold. Recently, Delias, Inc. merged with iTurf, Inc. and after the conversion of existing stock into the newly issued shares, 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 February 28, this timely stock closed at $21.88 per share. This stock could once again resume its upward trend and reach approximately $32 per share by the end of March. At the present level this stock is oversold and presents a great buying opportunity. Although it is not likely that the stock of Dell Computer will appreciate at such a fast pace as it did during the past five years, in our opinion, the stock could generate a gain of 1,500% in six years. Ericsson LM Telephone (NASDAQ symbol: ERICY) is a leading supplier of mobile phones and telecommunications equipment. The Company’s main manufacturing facilities are located in Sweden. Ericsson’s telecom equipment is among the most advanced in the world. The sales of equipment have increased significantly in China and surpassed the sales in U.S. Ericsson LM Telephone projects that by the year 2003 the number of mobile phone users could rise to over 800 million. The long-term outlook for Ericsson is excellent. ADR’s of Ericsson split 4-for-1 on May 8, 2000. On February 28, ADR’s closed at $8.28. Buy these ADR’s now and hold at least seven years. Intel Corporation (NASDAQ symbol: INTC) is the leading manufacturer of microprocessors. The Company has high name recognition, and still has approximately 85% share of the market. For 1999, revenues rose to $29.4 billion, from $26.3 billion for 1998. Net income rose to $7.3 billion, or $2.11 a share, from $6.1 billion, or $1.73 a share for 1998. The Company continues to switch production to 0.18 micron manufacturing process that yields more semiconductors from each wafer. During the past ten years earnings grew 32% annually. The stock of Intel Corporation has kept rising ever since 30 shares were bought in March of 1995, at $78.25 per share. The Company issued a 100% stock dividend on June 22, 1995, another one on July 14, 1997, a 2-for-1 stock split on April 11, 1999, and another 2-for-1 split on July 30. Since the original 30 shares were bought, after these stock splits there were 480 shares in the portfolio. On October 30, 2000, two hundred shares were sold and now there are 280 shares in 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 February 28, this stock closed at $28.56 per share. At this level the stock is a screaming buy. 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. Just four months ago, in July this stock traded at $45.18 per share and then proceeded to fall. Due to the carnage in the Internet sector this stock closed at a low of $3.28 per share on December 29, 2000, down from its 52-week high of $212 per share. Afterwards, this stock proceeded to build a slow upward momentum and closed at $6.44 per share on January 31. There is a very slight probability that this stock could revisit its 52-week high of $212 per share during the next twelve months. We will monitor this stock closely. As soon as this stock reaches approximately $150 per share, one hundred and fifty shares will be sold immediately. The remaining fifty shares will be held long-term. On February 28, this timely stock closed at $3.84 per share, near its support level and we rate it a speculative strong buy. Lucent Technologies, Inc., (NYSE symbol: LU) is the largest manufacturer of the telecommunications equipment. Lucent Technologies makes fiber-optic equipment and optical network equipment that allows the phone companies to increase the capacity and to provide a high speed Internet access. During the year of 1999, the stock continued its strong upward momentum and reached a 52-week high of $84 3/16 per share in December. Then, in January 2000, the stock fell at an extremely fast pace and closed at a 52-week low of $49.79 per share. Afterwards, the stock proceeded to ascend and reached an intra-day high of $75.38 per share on March 1, 2000. During the recent correction, the stock tested its bottom again. As the telecommunications providers buy new equipment, the annual revenues of Lucent could grow in double digits. In our opinion, the long-term outlook for the company is excellent. On October 30, 2000, an additional 200 shares of Lucent were bought at $20.75 per share. Now, there is a total of 250 shares in our Model Portfolio. This stock is for patient investors who are willing to wait two years for the stock to reach $80 per share. As soon as this stock reaches our target level, one hundred and fifty shares will be sold and the remaining 100 shares will be held long-term, at least ten years. Due to the sell-off in this sector, the stock closed at a low of $13.50 per share on December 29, 2000. On January 31, 2001, this timely stock closed at $18.60 per share. Afterwards, this stock proceeded to test its support level and closed at $11.59 per share on February 28, 2001. We maintain our rating of screaming long-term buy on this large-cap stock. Merck & Co., Inc. (NYSE symbol: MRK) manufactures a variety of pharmaceutical products. Major brand names include Vasotec, Mevacor, Zocor, Crixivan, and Propecia. The company derives 34 percent of revenues from international sales. Merck continues to spend substantial percentage of gross revenues, on research and development. Merck & Co. split its stock 2-for-1 on February 17, 1999, and now there are one hundred shares in our Model Portfolio. On February 28, 2001, this stock closed at $80.20 per share. We are revising our rating on this stock to a hold from a buy. Investors who already own this stock may continue to hold it 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. On March 29, 1999, the Company issued a 2-for-1 stock split. The anti-trust trial affected the stock negatively. While the Justice Department accused Microsoft Corporation of wielding a monopoly power, the company denied any wrongdoing. Is the break-up of Microsoft Corporation the only solution? Of course not. As soon as this chapter in Microsoft’s history is closed, the stock could resume its strong upward momentum, but in the meantime this stock will be very volatile. Although these timely shares may not appreciate at previous fast pace, this stock could generate a gain of 700% in six years. This stock will be held long-term, at least five years. On December 29, 2000, this stock closed at $43.38 per share and we rated it a screaming buy. This timely stock closed at $59 per share on February 28. Buy this stock and hold long-term. Nokia Corporation (NYSE symbol: NOK) is the world’s second largest manufacturer of mobile phones. The Company is located in Finland, with subsidiaries in the United Kingdom and China. Nokia derives 56% of its revenues from sales in Europe and 44% from sales in other continents. The long-term outlook for Nokia is excellent, as the demand for company’s products grows worldwide. The Company issued a 2-for-1 split on April 16, 1998, one on April 11, 1999, and a 4-for-1 split on April10, 2000. These timely ADRs closed at a ridiculously low price of $22 on February 28, 2001, and at this level we rate these a screaming buy. Hold these ADRs at least seven years. Office Depot, Inc. (NYSE symbol: ODP) is a major retailer of office products, with stores located in the United States and Canada. The Company also conducts sales through its Web site at www.officedepot.com and through a catalog. For the year of 1999, revenues rose to $10.27 billion, from $9 billion for 1998. Earnings rose to $0.69 a share, from $0.60 a share for 1998. On April 12, 2000, the stock rose to $14 3/16 per share on a heavy volume of 4.45 million shares, and then proceeded to fall. Four weeks later, on May 12, the stock closed at $11 per share, on a low volume of 688,000 shares. Then, on May 26, the stock fell 3 from the previous close, and finished the day at $7.32 per share, on a very heavy volume of 16 million shares. and through a catalog. In our opinion, this stock has a strong upside potential. On February 28, the stock closed at $9.20 per share. This stock is trading at eleven times earnings, and at this low level 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 200 percent. PepsiCo, Inc. (NYSE symbol: PEP) makes soft drinks, Doritos, Sun Chips, Ruffles potato chips and Lays potato chips. For 1999, revenues edged lower to $20.4 billion, from $22.3 billion for 1998. Net income rose to $2 billion, or $1.37 a share from $1.99 billion, or $1.31 a share for 1998. In 1998, PepsiCo acquired Tropicana and several snack chip businesses in Europe, Australia and Chile. In the past forty years, PepsiCo sales grew an average of 16% per year. After the Company had spun-off its restaurants in 1997, the return on assets deployed rose from 9.5% in 1996, to 16.2% in 1997. On February 28, stock of PepsiCo closed at $46.08 per share. This stock has run-up during the past six months and in our opinion is trading near its full valuation level. Short-term this stock does not have much of upside potential therefore we have revised our rating from a buy to a hold. 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 100 shares of PepsiCo will be held 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. 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 February 28, 2001, this stock closed at $45 per share. Buy this stock on dips and hold long-term. Back to Top |
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Sold On February 20, 2001, two hundred shares of Albertson’s, Inc., (NYSE symbol: ABS) were sold at $28.88 per share. These shares were bought on September 22, 2000, at $20.75 per share, with proceeds received from the sale of two hundred shares of Sara Lee Corporation at $20.06 per share. Although our initial target level for Albertson’s was $36 per share, a decision was made to sell this stock now to lock in the short-term gain, and to use the proceeds from this trade to buy tech stocks at a discount. While there is a slight probability that the stock of Albertson’s could reach our target level of $36 per share, the stock would have to attain this level before March 12, 2001. Albertson’s Inc., will report earnings for the fourth quarter during the week of March 12, 2001. If the earnings do not meet analysts’ estimates, the stock could fall to $25 per share. On the other hand, the company could report earnings that are better than expected and the stock could continue to ascend to our target level of $36 per share. Our latest rule is: Any stock that was bought for a short-term trade may be sold after a few months, as soon as it generates a substantial gain. A stock may be sold before it reaches our target level, especially if the company is about to announce its earnings. We will not hold such a stock in our Model Portfolio during earnings announcement and risk losing our paper gains if the company were to announce earnings that are lower than expected. This timely stock of Albertson’s has generated a gain of $8.13 per share, or 39% in just five months. By the way, the stock of Sara Lee Corporation closed at $21.79 per share on February 20, 2001. Bought Cash proceeds received from the trade listed above were used to buy stocks of three companies. On February 20, 2001, one hundred shares of LSI Logic Corporation were bought at $19.25 per share. This stock has been featured in our section of “Stocks for traders” since December 2000, and it is also on our list: Buy 10 Tech Stocks. We maintain our target level of $60 per share for this stock. This timely stock could reach our target level before August 2001. As soon as this stock reaches our target level, 100 shares will be sold to lock in a short-term gain. On the same day, February 20, 2001, two hundred shares of Vertical Net, Inc., (NASDAQ symbol: VERT) were bought at $3.72 per share. This Internet incubator 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. Furthermore, the company provides catalogs, career services, and also conducts auctions. 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. At the recent price level, we rate this stock a speculative screaming buy. Speculators who bought this stock when it was at a higher level, could add to their position. In August 2000, we have stated that this stock could ascend to $140 per share, short-term. We maintain our target level, but it could take this stock approximately two years to reach this level. 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. The remainder of the cash was used to buy 100 shares of Yahoo Inc., (NASDAQ symbol: YHOO) a global Internet media company at $27.32 per share, on February 20, 2001. The company 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 100 shares will be sold. After these trades there was $315 of cash left and it was added to the existing cash in our Model Portfolio. Back to Top |
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Model Portfolio Chart 2-28-2001
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). b) The quantity of shares was adjusted for a 100% stock dividend issued by PepsiCo, Inc. on June 3rd, 1996. (There were 200 shares of PepsiCo on January 29, 2001. On January 30, 2001, one hundred shares were sold and now there are 100 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. g) The quantity of shares was adjusted for a 2-for-1 stock split issued by Merck & Co. Inc. on February 17,1999. h) The quantity of shares was adjusted for a 2-for-1 stock split issued by Microsoft Corporation on March 26, 1999. i) The quantity of shares was adjusted for a 3-for-1 stock split issued by Pfizer on June 30, 1999. j) The quantity of shares was adjusted for a 2-for-1 stock split issued by Cisco Systems, Inc. on March 23, 2000. 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. Between April 1994 and July 1998, a total of $28,336 of cash was invested in the Model Portfolio. Due to the excellent performance of the technology stocks, over the course of six years the total value of the portfolio has risen to $145,374 as of June 30, 2000. Our Model Portfolio has generated a gain of $117,038, or 413 percent in just six years. Investors who are just starting out should not be deterred by the size of our Model Portfolio. Notice that a total of $28,336 was invested over the course of four years, averaging an investment of $7,000 per year. Investors who are just starting out could invest as little as $2,000 each year, but be consistent and invest that amount every year. After several years, investor could have a portfolio consisting of several blue-chip stocks. Back to Top |