May 2000
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Contents Back Issues March 2000 April 2000 Investing Buy & Sell Stocks for traders Model Portfolio Bought Model Portfolio Update Model Portfolio Chart |
The high volatility in the market is here to stay and these investors who can’t handle it should change the allocation in their portfolios to 40 percent bonds, 30 percent utilities and approximately 30 percent stocks. Although higher weighing of bonds and utilities in a portfolio would make it more resilient during corrections, it does not have potential to appreciate. (continued in: Investing). American Software, Inc. (NASDAQ symbol: AMSWA) through its subsidiaries develops, markets and supports software solutions designed to automate planning, through Enterprise Resource Planning Software, and operational functions, through Flow Manufacturing and E-Commerce Solutions Software. The Company’s primary customers are chemical, pharmaceutical, and textile manufacturers. As of April 30, 1999, the Company had 682 full time employees, including 275 in product development and technical support. (continued in: Buy & Sell ). Speculators who like to trade frequently could buy stocks listed in this section. Investors should be aware that short-term trading involves much greater risk, and preferably no more than 10% of the portfolio may be invested in these stocks. Some of the stocks in the technology sector could still be bought at recent levels. The sales of computers continue to grow 20% in the United States and Europe, which could propel stocks in this sector to higher levels. Speculators could achieve short-term gains, up to 100% on some of these stocks. (continued in: Stocks for traders). Applied Materials, Inc. (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. The Company produces systems that use physical vapor deposition technology, chemical vapor deposition and oxide etching. (continued in: Model Portfolio). |
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Investing The high volatility in the market is here to stay and these investors who can’t handle it should change the allocation in their portfolios to 40 percent bonds, 30 percent utilities and approximately 30 percent stocks. Although higher weighing of bonds and utilities in a portfolio would make it more resilient during corrections, it does not have potential to appreciate. That is why even a conservative investor should hold several growth stocks in the portfolio, such as Intel Corporation, Applied Materials, Inc., and Microsoft Corporation. Recently, the stock of Microsoft Corporation continued to fall. In our opinion, all of the negative news about Microsoft Corporation has been reported and it is already reflected in the price of the stock. The shares of Microsoft fell from their intra day high of $119 15/16 reached in December 1999, to $69 3/4 per share on April 28, 2000. At $69 ¾ per share the stock was trading at 43 times earnings, which is historically low. Although Justice Department has decided to break up Microsoft Corporation, the Company could appeal this decision, a process that can take up to three years. Even if Microsoft Corporation were divided into two separate companies, with each company issuing separate stock, the sum of parts would be greater than the price of Microsoft’s stock right now. On January 26, 1999, forty shares of Microsoft Corporation were bought at $169 1/8 per share and added to the “Model Portfolio.” The Company issued a 2-for-1 split on March 26, 1999, and now there are 80 shares in the “Model Portfolio.” Although there is uncertainty in this stock, it is already reflected in its low price. On March 31, 2000, Microsoft closed at $106 ¼ per share and we rated it a strong buy. On April 28, the stock closed at $69 ¾ per share and we rate it a screaming buy. Investors who already own this stock could acquire more shares and hold these long-term, at least five years. The latest correction is nor the first, and surely not the last. Although the bears have been predicting the market downfall for several years, to this day it has not happened, but in the meantime there were several corrections. Some of the investors are switching from tech stocks to old economy stocks. Although many of the old economy stocks fell to a low level and some are trading at ten times earnings, the prospect of revenue growth for these companies is minimal. Some of the old economy stocks are slow moving dinosaurs and had underperformed the market during the past six years. For example, one hundred shares of Sara Lee Corporation were bought at $22 per share in April 1994, and added to the “Model Portfolio.” Sara Lee Corporation issued a 2-for-1 stock split on December 21, 1998, and now there are two hundred shares in the “Model Portfolio.” On April 28, 2000, stock of Sara Lee closed at $15 per share, and after six years has generated a gain of only 36 percent. On the other hand, stock of Pfizer, Inc., which was added to the “Model Portfolio” in August 1997, rose 111 percent. Although the stock of Pfizer is in different sector, both are old economy stocks. We will monitor the stock of Sara Lee Corporation and when it reaches a high level it will be sold. The cash proceeds will be used to acquire a stock that has a greater upside potential. Although the Fed has tried to slow down the U.S. economy, it continues to run on all cylinders. During the next meeting, On May 16, the Fed could take stronger action and raise rates by fifty basis points, or half a percent. Such an increase could finally slow the economy to a non- inflationary pace and the Fed could achieve a soft landing. Investors should remain calm during these volatile markets. This isn’t the first correction, and surely it isn’t the last. Corrections are a normal part of the market cycle. The market has to pause, then pull back once in a while, and then again resume its upward momentum. Back to Top |
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Buy & Sell American Software, Inc. (NASDAQ symbol: AMSWA) through its subsidiaries develops, markets and supports software solutions designed to automate planning, through Enterprise Resource Planning Software, and operational functions, through Flow Manufacturing and E-Commerce Solutions Software. The Company’s primary customers are chemical, pharmaceutical, and textile manufacturers. As of April 30, 1999, the Company had 682 full time employees, including 275 in product development and technical support. For the fiscal 1999, ended April 30, 1999, revenues rose to $109.177 million, from $107.472 million for fiscal 1998. The Company reported a loss of $32.817 million, or $1.48 a share, versus an income of $7.795 million, or $0.32 a share for fiscal 1998. In fiscal 1999, the Company took a charge of $26.6 million for asset impairment and purchased R & D that has negatively affected net income. Furthermore, during fiscal 1999, product development costs increased 7 percent. During fiscal 1999, gross margin fell to 41%, down from 54% a year earlier. The Company purchased an 80% majority interest in New Generation Computing that specializes in accounting and manufacturing control software for apparel industry. The Company’s annual report states that the main objective is to become the leading provider of enterprise wide solutions to mid-market distributors. American Software, Inc. plans to increase its market share by expanding its sales and marketing activities. In the past, the Company’s quarterly operating results have fluctuated, and along with these so did the price of the stock. The annual report states that Company typically ships its software products shortly after license agreements are signed, and typically recognizes a substantial portion of its revenue in the last month of a quarter. After reaching a high of $15 1/8 in fiscal 1998, the stock fell to $1 15/16 per share in fiscal 1999. In March 2000, this stock reached a 52-week high of $24 7/16 per share and then proceeded in a downward direction. On April 28, this stock closed at $7 ½ per share. The risk of owning this stock is above average and only speculators should buy it. In our opinion, this stock could continue its downward momentum and fall to approximately $4 per share by July 2000. Speculators could start accumulating this stock at approximately $4 per share and sell when it reaches approximately $16, for a probable short-term gain of 300 percent (price $7 ½, dividend Nil, and P/E 39). Danka Business Systems PLC (NASDAQ symbol: DANKY) is one of the world’s largest suppliers of office imaging equipment, services, parts and supplies. The Company operates throughout 30 countries and distributes Canon, Kodak, Ricoh and Toshiba products. As of March 31, 1999, there were 56.9 million of American Depository Shares (ADS) outstanding. During fiscal 1999 that ended March 31, 1999, the management proceeded to take strategic steps to turn the Company around and took significant restructuring charges. For fiscal 1999, revenues fell to $2.9 billion, from $3.3 billion for fiscal 1998. Including restructuring charges, the Company reported a net loss of $294.8 million, or $5.18 per ADS, versus net income of $65.4 million, or $1.13 per ADS for fiscal 1998. In fiscal 1999, gross profit declined to $994.2 million, from $1.2 billion for fiscal 1998. Furthermore, gross profit as a percentage of retail equipment sales fell to 26.1% in fiscal 1999, from 34.2% in fiscal 1998. Negative press releases regarding the Company’s financial situation led to price discounting to customers that negatively affected gross profit margins. In July of 1999, the Company and its lenders entered into amendments to the Company’s lending agreement. The amendment to the credit agreement secures financing through July 31, 2000. The Company is currently not permitted to pay dividends under the terms of the Credit Agreement. The annual report states that Company has completed the restructuring during fiscal 1999. During fiscal 1999, the Company closed 60 facilities and eliminated 1,400 employees. The Company expects that the reduction program will reduce expenses and generate over $100 million in savings annually. Furthermore, in order to improve profit margins, the Company proceeded to sell certain assets. On June 18, 1999, the Company announced a definitive agreement to sell Danka’s facsimile division, Omni fax, to Xerox Corporation for $45 million in cash. As the lending agreement nears its expiration in July 31, 2000, once again the uncertainty has brought the price of the stock from the high level of $14 1/8 in December 1999, to $4 3/8 per ADS on April 28, 2000. The risk of owning these American Depository Shares is above average, and only speculators may buy these. Speculators should wait until the Company enters into a new credit agreement with its lenders and then start to accumulate these American Depository Shares. After the Company arranges a new credit agreement, these shares could proceed in the upward direction and may revisit 52-week high of $14 1/8 per share during the next eight months (price $4 3/8, dividend Nil, and P/E 16). RDO Equipment Company (NYSE symbol: RDO) is among leading companies specializing in sales, service and rental of construction, transportation, agricultural and material handling equipment. The Company has 66 retail stores in 11 states. As of January 31, 1999, revenues rose to $578.6 million, an increase of approximately 35 percent, from $429.4 million for fiscal 1998. Net income fell to $1.7 million, or 13 cents a share for fiscal 1999, down from $13.3 million, or $1.00 a share for fiscal 1998. The net income for fiscal 1999 was negatively affected by charges related to inventory and asset write-downs, reserve and severance costs totaling $17.2 million. RDO Equipment Company continues to maintain a leadership role in the equipment and truck retail industries in the United States. The Company continues to expand through internal growth and through acquisitions. In February 1999, the Company acquired a Volvo truck dealership with two stores located in Dallas and Fort Worth, Texas. The revenue levels usually decrease during the first and the fourth quarters due to the growing season and a general slowdown in the construction industry at the end of the year. These factors affect the price of the stock, that could fluctuate in a wide range during these quarters. Furthermore, high interest rates and the fear of recession are major factors that will affect the price of the stock. At the present time, the stock is trading at an extremely low level, as if the U.S. economy were to go into recession. As long as the Fed manages to achieve a soft landing, this stock could reverse its downward trend and proceed in the upward direction. This stock reached a 52-week high of $10 3/8 per share in May 1999. On April 28, this stock closed at $5 ½ per share. In our opinion, this stock has reached its bottom and could revisit its recent high by the end of the year. Investors could start accumulating this stock, and sell as soon as it reaches approximately $10 per share, for a probable gain of approximately 100 percent (price $5 1/2, dividend Nil, and P/E 11). Q Logic Corporation (NASDAQ symbol: QLGC) is a leading designer of semiconductors and board-level input/output (I/O) products. These products provide a high-performance connection between computer systems and disk drives, or tape drives. There are 72 million shares outstanding. The Company had a great year. For fiscal 1999, ended March 28, 1999, revenues rose to $117.18 million, from $81.39 million for fiscal 1998. Earnings rose to $0.35 a share, from $0.21 a share for fiscal 1998. The growth of revenues continues to accelerate and revenues rose from 33% in the first quarter, to 54% in the fourth fiscal quarter of 1999. For fiscal 1999, revenues rose 44% and it was the third consecutive year of record revenues. Furthermore, the gross profit margin rose to 64%in fiscal 1999, from 58% in fiscal 1998. Q Logic Corporation does not own manufacturing facilities and relies on several independent foundries to make its semiconductor products. The Company does not have a long-term supply contracts, and these foundries are not obligated to supply products to the Company for any specific period. If the supply from any of these foundries were interrupted, it would negatively affect the revenues. The Company issued a 2-for-1 split in February 1999, and in August 1999. This stock was a great performer and reached a high level of $203 ¼ in March 2000. Afterwards, this stock proceeded in a downward direction at an extremely fast pace and closed at $100 5/16 per share on April 28. It could take a while until this stock reaches a bottom. There is a probability that this stock could fall to $45 per share by August 2000. Although this stock has a great upside potential, the risk of owning it is high and only speculators should acquire it. As the revenues and earnings continue to grow, in our opinion this stock could reach $150 per share. Speculators who buy this stock below $50 could achieve a short-term gain of 200 percent (price $100 5/16, dividend Nil, and P/E nm). Sony Corporation (NYSE symbol: SNE) is a leading manufacturer of electronics, and game consoles. The Company is engaged in insurance, through Sony Life Insurance Co., Ltd. Furthermore, the Company makes and distributes recorded music, and is engaged in television business through Sony Pictures Entertainment. As of March 31, 1999, the Company had 177,000 employees. There are 410.439 million shares outstanding. For fiscal 1999, ended March 31, 1999, revenues rose to $56.622 billion, an increase of 0.6% from fiscal 1998. Net income edged lower, to $1.492 billion, down 19.4% from fiscal 1998. For fiscal 1999, Company reported earnings of $3.26 a share. In fiscal 1999, the Company reorganized the internal structure of the Electronics business into three main business units: the Home Network Company, the Personal IT Network Company, and the Core Technology & Network Company. Furthermore, Sony Computer Entertainment, which is responsible for the development of PlayStation, was designated as another main business unit related to Electronics business. In addition, the Company has decentralized its operations and has transferred management authority to these Companies. The Company plans to improve the profitability of its electronics business by consolidating existing 70 manufacturing facilities into 55 by the end of March 2003. Furthermore, the Company plans to reduce the number of employees by approximately 10% by the end of March 2003. In February 2000, American Depository Shares reached a 52-week high of $314 ¾ per share. The quarterly revenues fluctuate and historically reach the highest level in the third fiscal quarter that ends in December, when the sales almost double from the previous quarter. After the third fiscal quarter revenues fall as much as 80 percent. As the quarterly revenues fall, so do the earnings and along with these, the price of Sony shares. When the Company starts selling its new PlayStation, the revenues could rise substantially, but it could take several months until the sales of PlayStation accelerate. In our opinion, during the next four months, the shares of Sony Corporation may continue in the downward direction and could fall to approximately $140 per share during the next four months. Although long-term these shares have a great upside potential, investors should abstain from acquiring these and wait until August. If by August 2000, the stock were to reach approximately $140 a share, investors could start accumulating these and then sell as soon as these shares reach approximately $280 for a probable short-term gain of 100 percent (price $225 5/8, annual dividend $0.46, yield 0.2 %, and P/E 61). Back to Top |
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Stocks for traders Speculators who like to trade frequently could buy stocks listed in this section. Investors should be aware that short-term trading involves much greater risk, and preferably no more than 10% of the portfolio may be invested in these stocks. Some of the stocks in the technology sector could still be bought at recent levels. The sales of computers continue to grow 20% in the United States and Europe, which could propel stocks in this sector to higher levels. Speculators could achieve short-term gains, up to 100% on some of these stocks. Sold: People Soft, Inc., (NASDAQ symbol: PSFT). On March 31, the stock of this enterprise resource planning software maker closed at $20 per share. We stated on March 31, “There is a probability that this stock has already reached its top and could proceed in the downward direction. Speculators should sell this stock and use the proceeds to buy shares of Boston Scientific Corporation." 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. Boston Scientific was founded in Watertown, MA in 1979. Through acquisitions, the annual revenues have grown to $2.2 billion in 1998, from just $2 million in 1979. On November 30, 1998, the Company issued a 2-for-1 stock split. The stock has reached a 52-week high of $47 1/16 on July 19, 1999. Afterwards, the stock proceeded to fall at a fast pace and by October 1999, fell to an intra-day low of $17 9/16 per share. Afterwards, the stock proceeded in the upward direction and reached an intra-day high of $25 7/8 in January. During the recent correction, the stock tested its bottom again and closed at $17 7/8 per share on February 25. This stock has already formed a double bottom. Afterwards, the stock proceeded in the upward direction and on April 19, 2000, broke through the $25 resistance level, finishing the day at $25 ¼ per share. This stock continued its strong upward momentum and closed at $26 ½ per share on April 28, 2000. On March 31, this stock closed at $21 5/16 and we rated it a screaming buy. At the recent price level, we still maintain our rating of screaming buy. This stock could reach $37 per share during the next two months. At that price level, the stock should be sold immediately. Monitor: Maxtor Corporation (NASDAQ symbol: MXTR) manufactures and markets disk drives for personal computers. The company sells its products to Original Equipment Manufacturers, distributors and retailers. For the fiscal 1999, ended January 1, 2000, revenues rose to $2.486 billion, from $2.409 billion for fiscal 1998. The Company reported a loss of $50.1 million, or $0.48 a share for fiscal 1999, versus a net income of $31.2 million, or $0.47 a share for fiscal 1998. Maxtor Corporation has tremendously improved its financial position, and as of January 1, 2000, total stockholders equity stood at $255.3 million, versus a deficit of $327.5 million for fiscal 1996. The Company has decreased its inventory level. Furthermore, the Company generated $82 million in cash from operations in the fourth quarter. At the end of the year, the Company had $353.9 million of cash and marketable securities, versus $227.6 million in the previous year. This stock reached a high of $21 ¼ in January of 1999. Afterwards, due to the oversupply of disk drives and price competition, the stock proceeded in the downward direction and fell to a low level of $4 15/16 on August 12, 1999. This stock closed at $6 1/16 per share on November 30, 1999, and we started recommending it to speculators in December. At that time we stated that this stock could reach $15 per share. After reaching an intra-day high of $8 5/16 on January 27, 2000, the stock pulled back and closed at $6 ¼ per share on February 22, 2000. Last month, we have raised the target level to $16 per share. This stock closed at $14 3/16 per share on March 24, and then pulled back slightly below $10 per share. By April 28, this timely stock rebounded to $11 15/16 and could reach $16 per share during the next six weeks. Monitor this stock closely and sell as soon as it reaches approximately $16 per share, to lock in a short-term gain. TJX Companies, Inc. (NYSE symbol: TJX) is the leading off-price retailer of apparel and home fashions. The Company operates T.J.Maxx ® stores, Marshalls ®, and A.J.Wright off-price retail stores in the United States. In Canada, the Company operates Winners Apparel Ltd. And in United Kingdom T.K. Maxx ™, off-price apparel stores. In addition, the Company operates Home Goods stores in United States that offer giftware, rugs, lamps, and accent furniture. For the fiscal 1998, that ended January 30, 1999, revenues rose to $7.95 billion, from $7.39 billion for fiscal 1997. Net income rose to $424 million, or $1.29 a share, from $305 million, or $0.91 a share for fiscal 1997. As of January 30, 1999, there were 334.6 million shares outstanding, versus 349.6 million shares a year earlier. After completing a $250 million stock repurchase program, the Company announced in October 1998, that it plans to repurchase $750 million of its common stock over several years. The Company has repurchased 17.6 million shares at a cost of $501.1 million by October 30, 1999. All share repurchases were funded by internal cash flow. In our opinion, as the Company continues to buy back its stock, the earnings could increase by 10 percent, due to the lower quantity of shares outstanding. TJX Companies, Inc., plans to open over 150 new stores during the next three years. The Company’s annual report states “_ _ _ we continue to be confident in our ability to grow earnings per share by 15-20%.” The stock reached a 52-week high of $37 per share in April 1999, and then proceeded to fall and closed at $15 per share on March 13, 2000. Afterwards, this stock proceeded to build upward momentum and closed at $22 1/4 on March 31. Monitor this stock closely and buy it when it pulls back to $18 per share. On April 28, this stock closed at $19 3/16 per share and could reach our target level. As soon as this stock reaches $18 per share, buy it and hold until it reaches our target level of $27 per share. Once the stock reaches this level, it should be sold, for a probable short-term gain of approximately 50 percent. Bank One Corporation (NYSE symbol: ONE) is among the largest bank holding companies in the United States. Due to the losses in its credit card division, earnings fell and the stock reached a low of $ 24 7/16 per share on March 7, 2000, after reaching a 52-week high of $63 9/16 in May of 1999. After Bank One announced that James Dimon, formerly of Citigroup Inc., would become its CEO, the stock proceeded to rise and closed at $34 ¼, up $3 3/8 on March 28. Although mister Dimon is a bright young man, in mid-forties, who was a rising star at Citigroup, Inc., no one knows how long it will take him to turn Bank One Corporation around. Therefore, this stock can be bought by speculators who are willing to wait a year, or longer. On April 28, this stock closed at $30 ½ per share. This stock could pull back to approximately $28 per share and speculators could start accumulating it at that level. James Dimon could turn this bank holding company around, and perhaps a year from now this stock could reach $50 per share. Speculators, who buy this stock at approximately $28 per share, could achieve a gain of $21 per share, or 72 percent. Callaway Golf Company (NYSE symbol: ELY) designs and manufactures premium golf clubs. Professional golfers who use these superior golf clubs had more wins than golfers using equipment made by competitors. Callaway Golf derives 34% of revenues from sales in the United States. After closing at $14 9/16 on November 30, this stock continued its strong upward momentum and closed at $17 11/16 on December 31, 1999. On April 28, 2000, this stock closed at $16 5/8 per share and at this price level we rate it a strong buy. As the volume grows and the stock builds upward momentum, it could reach approximately $29 per share during the next ten months. If the stock were to reach this level, it should be sold immediately. Milacron Inc. (NYSE symbol: MZ) formerly known as Cincinnati Milacron Inc. is a major supplier of machine tools, mold bases, plastics machinery and grinding wheels. Milacron Inc. employs 13,000 people in 30 plants worldwide. In the year of 1997, Milacron’s joint venture in India increased production by 75% and the company plans to increase the plants capacity. After reaching a low of $14 ½ per share, the stock proceeded to ascend and rose to $23 3/16 in June 1999. During the past four weeks, this stock proceeded to build a strong upward momentum and on April 28, closed at $18 1/4 per share. This timely stock is trading at nine times earnings. Furthermore, the stock pays an annual dividend of $0.48 per share, yielding 2.9%. We maintain buy rating on this stock. Speculators should buy this stock now, and sell as soon as it reaches approximately $21 per share. Western Digital Corporation (NYSE symbol: WDC) is a major manufacturer of hard disk drives that are used in variety of computers. During the years of 1996 and 1997 the stock had appreciated at a fast pace and rose from $8 1/8 to $54 ¾ per share. Due to the manufacturing overcapacity and intense competition, the stock of Western Digital proceeded in a downward direction in September 1997, and reached a bottom by the end of 1999. That was then. Now, as the sales of computers continue to grow 20 percent worldwide, the demand has caught up with capacity and the prices for hard disk drives have firmed. During March of this year this stock proceeded to build a strong upward momentum. Money is flowing into the stocks of hard drive manufacturers. We have revised our opinion on this stock upwards, to a strong buy. Speculators should buy this stock now. On April 28, this stock closed at $6 7/8 per share and if it were to reach $15 during the next six months sell it immediately for a probable short-term gain of approximately 100 percent. Iomega Corporation (NYSE symbol: IOM) designs and manufactures zip drives and cartridges. Although unit sales continue to rise revenues remain flat. Several major PC manufacturers already offer Iomega drives as standard equipment. In the year of 1997, the Company relocated its manufacturing facility from Roy, Utah to Penang, Malaysia. In the beginning of the year, this stock proceeded to build upward momentum and closed at $4 1/16 per share on January 31. During the recent correction this stock was resilient and edged slightly lower to close at $3 5/8 per share on April 28, 2000. Speculators could acquire a small position in this stock and sell it as soon as it reaches approximately $9 per share, for a probable gain of 150 percent. Quantum Corporation is a major manufacturer of hard drives for systems ranging from personal computers to PC workstations, and servers. The company also makes tape drives, and solid-state disk drives. In May 1998, the Board of Directors authorized the Company to repurchase approximately 14 million shares of its common stock. The stock was previously listed on NASDAQ under the symbol: QNTM. The management of Quantum Corporation has decided to issue two tracking stocks, the Hard Disk Drive (symbol: HDD) and the Storage Systems Group (symbol: DSS). Both stocks trade on NYSE. On April 28, Quantum HDD closed at $11 11/16 per share, while Quantum DSS closed at $11 3/4 per share. We maintain our buy rating on both stocks. In our opinion, the stock of Storage Systems Group could double during the next twelve months. The stock of the Hard Disk Drive division could reach $17 during the next six months and it should be sold immediately at that level. Back to Top |
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Model Portfolio Applied Materials, Inc. (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. The Company produces systems that use physical vapor deposition technology, chemical vapor deposition and oxide etching. For the fiscal year ended October 31, 1999, revenues rose to $4.86 billion, a 20 percent increase from $4.04 billion for fiscal 1998. Net income rose to $748 million, or $1.89 a share, from $417 million, or $1.10 a share for fiscal 1998. The demand for the company’s equipment continues to accelerate in line with the growing sales of computers and telecommunication devices. Applied Materials estimates that the market for wafer fabricating equipment could double in three years to $43 billion annually. The long-term outlook for the Company is excellent. On October 14, 1997, and on March 16,2000, Applied Materials split its stock 2-for-1. On April 28, this stock closed at $101 13/16 per share. Buy this stock on dips and hold long-term. Boston Scientific Corporation (NYSE symbol: BSX) is one of the worlds leading companies that designs and markets minimally invasive medical devices. The Company makes coronary stents for less invasive treatment of cardiovascular disease. This stock has reached a high of $47 1/16 per share on July 19, 1999. A month later, the stock proceeded to fall at a very fast pace and by October 1999, fell to an intra-day low of $17 9/16 per share. Afterwards, this stock proceeded in the upward direction and reached an intra-day high of $25 7/8 in January 2000. During the recent correction, the stock tested its bottom again, and closed at $17 7/8 per share on February 25, 2000. This stock has already formed a double bottom, and if it were to break through $25 resistance level it could proceed in the upward direction. On April 28, this stock closed at $26 1/2 per share and we maintain our rating of screaming buy. Our objective is to hold this stock short-term, with a target level of $37 per share. Monitor this stock very closely and as soon as it reaches $37 per share, sell it immediately. Cisco Systems, Inc. (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. For fiscal 1999, that ended July 31, revenues rose to $12.2 billion, a 43% increase from $8.5 billion for fiscal 1998. Net income rose to $2.096 billion, or $0.62 a share, from $1.355 billion, or $0.42 a share for fiscal 1998. Cisco Systems continues to expand its market share. The annual revenues have grown from $2.2 billion in fiscal 1995, to $12.2 billion in fiscal 1999. John T. Chambers, who is a CEO of Cisco Systems, continues to steer the company on a path to high growth. Since 1994 the stock of Cisco Systems, Inc. has risen twenty-fold and the long-term outlook for the company is excellent. In our opinion, Cisco Systems, Inc. could continue its acquisition spree and the annual revenues might reach $50 billion in six years. Cisco Systems, Inc., is positioned to offer the latest equipment to service providers, such as IP internetworking technology which allows to host Internet applications and expand their service from basic voice traffic to broadband which can carry data, provide Internet access, and video conferencing. On March 23, 2000, this stock split 2-for-1. On April 28, this timely stock closed at $69 21/64 per share. Buy this stock now and hold at least ten years. Compaq Computer Corp (NYSE symbol: CPQ) is the second largest computer manufacturer in the world. The Company designs and makes notebook personal computers, servers, consumer PCs and networking equipment. For the fourth-quarter, revenues edged lower, to $10.6 billion, from $10.9 billion for the same quarter in 1998. The turnaround is taking longer than expected. Although revenues continue to grow, the earnings are still below the levels reached two years ago, therefore we recommend this stock to patient investors who are willing to hold it at least five years. The Company has efficient manufacturing operation and manages to turn over its inventory of PCs eleven times per year. Compaq sold 83% of interest in Alta Vista web site to CMGI Inc. Compaq retained 17% equity in the Alta Vista. Both companies will promote this site. In the future it could become one of the top five sites and generate substantial amount of revenues. This stock has a strong potential to gain 500% in five years. On April 28, 2000, this stock closed at $29 3/16 per share and we rate it a long-term buy. Compuware Corporation (NASDAQ symbol: CPWR) makes software that manages corporate networks, and improves productivity. The revenues are growing at a fast pace, and for the fiscal 1999, reached $1.65 billion. The stock of Compuware Corporation reached $40 per share in December 1999. On March 31, we stated that there is a probability that this stock could fall to $16 per share during the next three months. When this stock fell below $13 per share, an additional 200 shares were bought at $12 3/8 on April 14, 2000. This stock could reach $35 per share during the next five months, and once it does, these two hundred shares will be sold immediately. The remaining 150 shares will be held long-term, at least three years. Delias, Inc. (NASDAQ symbol: DLIA) sells a variety of apparel and accessories for young women. The Company conducts sales through its Web site and through brick and mortar stores. This stock reached a 52-week high of $40 per share in April 1999, and then proceeded to fall along with other Internet stocks. After reaching a 52-week high of $40 per share in April 1999, the stock proceeded to fall and by November reached a 52-week low of $5 ½ per share. Afterwards, the stock proceeded to rise, buoyed by optimistic expectations of higher holiday sales and reached an intra-day high of $13 ¼ per share in November 1999. During the recent correction in the Internet sector, this stock proceeded to fall and closed at a low level of $3 1/16 per share on April 28, 2000. This stock will be held in the Model Portfolio until it reaches our target level of $35 per share and then all of 200 shares will be sold. Dell Computer Corporation (NASDAQ symbol: DELL) is the third largest computer manufacturer in the world. The Company makes personal computers, notebook computers, servers and workstations. For the fiscal year ended January 29, 1999, revenue rose to $18.2 billion, a 48% increase from $12.3 billion for fiscal 1998. Earnings rose to $1.05 a share, from $0.64 a share for fiscal 1998. On March 5, 1999, the Company has issued a 2-for-1 stock split, the seventh in the past seven years. During the past twelve months the price of the stock has almost stood still compared to the previous years. Recently, the stock started to build upward momentum and reached an intra-day high of $59 11/16 per share on March 22. This stock could pull back to approximately $47 per share, and than slowly rise to $65 per share during the next four months. Although it is not likely that the stock of Dell Computer will appreciate at such a fast pace as it did during the past five years, in our opinion, the stock could generate a gain of 1,200% in six years. This stock closed at $50 1/8 per share on April 28, and we rate it a strong buy. Buy this stock now and hold long-term, at least five years. Ericsson LM Telephone (NASDAQ symbol: ERICY) is a leading supplier of mobile phones and telecommunications equipment. The Company’s main manufacturing facilities are located in Sweden. Ericsson’s telecom equipment is among the most advanced in the world. The sales of equipment have increased significantly in China and surpassed the sales in U.S. Ericsson LM Telephone projects that by the year 2003 the number of mobile phone users could rise to over 800 million. The long-term outlook for Ericsson is excellent. ADR’s of Ericsson closed at $88 7/16 on April 28, 2000. Buy on dips and hold long-term. Intel Corporation (NASDAQ symbol: INTC) is the leading manufacturer of microprocessors. The Company has high name recognition, and still has approximately 85% share of the market. For 1999, revenues rose to $29.4 billion, from $26.3 billion for 1998. Net income rose to $7.3 billion, or $2.11 a share, from $6.1 billion, or $1.73 a share for 1998. The Company continues to switch production to 0.18 micron manufacturing process that yields more semiconductors from each wafer. As the sales of cellular phones continue to grow, the demand for chips made by Intel could accelerate throughout the year 2000. During the past ten years earnings grew 32% annually. The stock of Intel Corporation has kept rising ever since 30 shares were bought in March of 1995, at $78 ¼ per share. The Company issued a 100% stock dividend on June 22, 1995, another one on July 14, 1997, and a 2-for-1 stock split on April 11, 1999. Since the original 30 shares were bought, now there are 240 shares in the portfolio. During the past three months this stock has build a strong upward momentum, and if it were maintained these timely shares could reach approximately $190 by the end of this year. On April 28, this stock closed at $126 13/16 per share. Buy this stock and hold long-term. Merck & Co., Inc. (NYSE symbol: MRK) manufactures a variety of pharmaceutical products. Major brand names include Vasotec, Mevacor, Zocor, Crixivan, and Propecia. For the fourth-quarter revenues rose to $8.97 billion from $7.5 billion for the same quarter in 1998. Net income rose to $1.57 billion, or 67 cents a share, from $1.4 billion, or 58 cents a share for the fourth-quarter a year earlier. Merck & Co. split its stock 2-for-1 on February 17,1999, and now there are one hundred shares in the Model Portfolio. This stock closed at $69 1/2 on April 28. Buy this stock and hold long-term. Microsoft Corporation (NASDAQ symbol: MSFT) is the largest maker of software. The operating system made by Microsoft is used in the majority of computers. The Company has no debt and has approximately $17 billion in cash and short- term investments. For fiscal 1999, ended June 30, 1999, revenues rose to $19.747 billion, from $15.262 billion for fiscal 1998. Net income rose to $7.785 billion, or $1.42 a share, from $4.490 billion, or $0.84 a share for fiscal 1998. Stockholders equity rose to $28.438 billion from $16.627 billion for fiscal 1998. On March 29, 1999, the Company issued a 2-for-1 stock split. The anti-trust trial continues to affect the stock negatively. While the Justice Department accuses Microsoft Corporation of wielding a monopoly power, the company denies any wrongdoing. Is the break-up of Microsoft Corporation the only solution? Of course not. As soon as this chapter in Microsoft’s history is closed, the stock could resume its strong upward momentum, but in the meantime this stock will be very volatile. Although these timely shares may not appreciate at previous fast pace, this stock could generate a gain of 700% in six years. The stock will be held long-term, at least five years. On April 28, this stock closed at $69 3/4 per share. At this price level we rate this stock a screaming buy. Investors, who already own this stock, could add to their position. Nokia Corporation (NYSE symbol: NOK) is the world’s second largest manufacturer of mobile phones. The Company is located in Finland, with subsidiaries in the United Kingdom and China. Nokia derives 56% of its revenues from sales in Europe and 44% from sales in other continents. The long-term outlook for Nokia is excellent as the demand for company’s products grows worldwide. The Company issued a 2-for-1 split on April 16, 1998, one on April 11, 1999, and a 4-for-1 split on April10, 2000. The ADR’s continue their strong upward momentum. American Depository Receipts (ADRs) closed at $56 1/8 on April 28. Buy on dips and hold long-term. PepsiCo, Inc. (NYSE symbol: PEP) makes soft drinks, Doritos, Sun Chips, Ruffles potato chips and Lays potato chips. For 1999, revenues edged lower to $20.4 billion, from $22.3 billion for 1998. Net income rose to $2 billion, or $1.37 a share from $1.99 billion, or $1.31 a share for 1998. In 1998, PepsiCo acquired Tropicana and several snack chip businesses in Europe, Australia and Chile. In the past forty years, PepsiCo sales grew an average of 16% per year. After the Company had spun-off its restaurants in 1997, the return on assets employed rose from 9.5% in 1996, to 16.2% in 1997. PepsiCo continues to buy back its stock. Recently, this stock proceeded to bounce back and closed at $36 11/16 on April 28. As some investors take their profits in their tech-stocks and switch into old economy stocks, the shares of PepsiCo could proceed in the upward direction. Buy and hold long-term. Pfizer, Inc. (NYSE symbol: PFE) is a diversified manufacturer of pharmaceuticals and consumer products. Among its brand name pharmaceutical products is Norvasc for hypertension and Zoloff for depression. The latest addition is Viagra, a pill for erectile dysfunction. For 1999, revenues rose to $16.2 billion, up 20 percent from $13.54 billion for 1998. Net income edged lower, to $3.18 billion, or 82 cents a share, from $3.35 billion, or 85 cents a share for 1998. All data is adjusted for the 3-for-1 stock split issued on June 30, 1999. Warner-Lambert agreed to be acquired by Pfizer, Inc. The shareholders will receive 2.75 shares of Pfizer stock for each share of Warner-Lambert stock. The deal is valued at $85 Billion. After the merger is completed Pfizer, Inc., will become a pharmaceutical behemoth with extensive R & D department. The long-term outlook for the Company is excellent. On April 28, this stock closed at $42 1/8 per share. Buy and hold long-term. Sara Lee Corp. (NYSE symbol: SLE) is an international producer of frozen and fresh baked goods, meats and consumer products. Revenues remained flat for fiscal 1999, at $20 billion, unchanged from fiscal 1998. For fiscal 1999, company reported earnings of $1.27 a share, versus a loss of $0.60 a share for fiscal 1998. Fiscal 1998 was affected negatively by a restructuring charge of $2 billion. Sara Lee split its stock 2-for-1 on December 21, 1998. Recently this stock fell to a 52-week low of $13 5/8 per share on March 7. On April 28, this stock closed at $15 per share. We rate this stock a strong buy. Xerox Corporation (NYSE symbol: XRX) is the worlds largest maker of copier equipment, digital monochrome and color publishing equipment. The Company sells its products and provides services in more than 170 countries. For the year of 1998, revenues rose to $19.4 billion, and 62 percent came from service, supplies, financing, and other recurring revenues. The company’s annual report states that $100 invested in Xerox stock at the end of 1990, grew to $1,266 by the end of 1998. The stock is trading at thirteen times earnings, and is down 56 percent from its 52-week high of $63 15/16 per share. One hundred shares of Xerox Corporation will be sold as soon as the stock reaches $60 per share and the remaining 100 shares will be held long-term, at least five years. On April 28, this stock closed at $26 1/2 per share. In our opinion, this blue chip stock is oversold. We maintain a strong buy rating on this stock. Back to Top |
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Bought On April 12, the stock of Compuware Corporation (NASDAQ symbol: CPWR) fell 7 ½ in the morning, to $12 ½ per share. When 150 shares of Compuware were bought on January 31, 2000 at $21 1/16 and added to the “Model Portfolio”, we stated that this stock could fall to $16 per share during the next four months. Due to the major sell-off, this stock fell to a lower level. On April 14, an additional 200 shares of Compuware Corporation were bought at $12 3/8 per share and added to the “Model Portfolio.” There is a probability that this stock could reach $35 per share during the next five months and once it does, these two hundred shares will be sold immediately. The remaining 150 shares of Compuware will be held long-term, at least three years. Model Portfolio Update Merck & Co., Inc. (NYSE symbol: MRK) had another great year. For 1999, revenues rose to $32.714 billion, up 22% from $26.898 billion for 1998. Net income rose to $5.89 billion, or $2.45 a share, from $5.25 billion, or $2.15 a share for 1998. The Company spent approximately $2.1 billion on research during 1999, and plans to spend approximately $2.4 billion during 2000. Although several medicines made by Merck & Co. including Vasotec, Mevacor, Pepcid, Prinivil and Prilosec are going off patent between 2000 and 2001, the Company has new products in different stages of development. Merck acquired SIBIA Neurosciences, a biotechnology firm, to strengthen its central nervous system research in the United Kingdom and Canada. During 1999, the Company invested $1.7 billion in production capacity and research facilities. Merck-Medco is the world’s largest on-line pharmacy, dispensing more than 50,000 prescriptions each week. In 1999, Merck-Medco enhanced its Internet site, www.merckmedco.com , Merck-Medco’s 12,000 employees meet the needs of 52 million plan members. In 1999, Merck-Medco generated $15.23 billion in revenues, or 46% of total annual revenues derived by Merck & Co. in 1999. Merck & Co., Inc. continues to form strategic ventures with other pharmaceutical companies. The long-term outlook for the Company is excellent and we maintain our buy rating on the stock. Back to Top |
Model Portfolio Chart 4-28-2000
Cash $6,175 b) The quantity of shares was adjusted for a 100% stock dividend issued by PepsiCo on June 3rd, 1996. c) The quantity of shares was adjusted for a 100% stock dividend issued by Applied Materials, Inc. on October 14, 1997 and a 2-for-1 stock split issued on March 16, 2000. d) The quantity of ADR’s was adjusted for a 2-for-1 split issued by Nokia Corporation on April 16, 1998, a 2-for-1 split issued on April 11, 1999, and a 4-for-1 split issued on April 10, 2000. e) The quantity of ADR’s was adjusted for a 2-for-1 split issued by Ericsson Telephone on May 22, 1998. f) The quantity of shares was adjusted for a 2-for-1 stock split issued by Sara Lee Corporation on December 21, 1998. g) The quantity of shares was adjusted for a 2-for-1 stock split issued by Merck on February 17,1999. h) The quantity of shares was adjusted for a 2-for-1 stock split issued by Microsoft on March 26, 1999. i) The quantity of shares was adjusted for a 3-for-1 stock split issued by Pfizer on June 30, 1999. j) The quantity of shares was adjusted for a 2-for-1 stock split issued by Cisco on March 23, 2000. Back to Top |