May 2001
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Contents Back Issues Jan. 2001 Feb. 2001 March 2001 April 2001 Investing Buy & Sell Stocks for traders Model Portfolio Model Portfolio Update Model Portfolio Chart |
Investors are bombarded every day by the media with the words such as recession, inflation, stagflation, and higher unemployment. Such negative words could prompt an investor to liquidate a portfolio of stocks and go totally into cash, but that is the worst decision (continued in: Investing). Datron Systems Incorporated (NASDAQ symbol: DTSI) produces in-motion satellite television antenna systems, remote sensing satellite earth stations, satellite communication systems, and HF and VHF radios. The company was a first to bring live satellite TV to passengers (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. American Power Conversion Corporation (NASDAQ symbol: APCC) designs, manufactures, and markets surge suppressors, uninterruptible power supplies and related software for computer related equipment. (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 Investors are bombarded every day by the media with the words such as recession, inflation, stagflation, and higher unemployment. Such negative words could prompt an investor to liquidate a portfolio of stocks and go totally into cash, but that is the worst decision an investor could make! When the total value of a stock portfolio falls 50% it is too late to sell all stocks and go into cash. There is only one thing left to do, wait for the market to rebound. In our opinion there is no recession in sight. Although corporations have curtailed their spending on high tech equipment and software, in our opinion this is just a temporary event. The media continues to inform investors that high-tech manufacturers have excessive levels of inventory. Dell Computer Corporation used to turn over its inventory fifty times a year, meaning, on the average it had approximately one week of inventory on hand. This is the best-case scenario. Lets take a look at a typical high-tech company such as Nortel Networks Corporation that makes optical networking equipment, wireless networking equipment, switching and routing equipment. The company’s annual report states that as of December 31, 2000, it had $2 billion of inventories on hand while the annual revenues were $30.275 billion. That would settle the company with less than four weeks of inventory on hand. Surely, in our opinion this is not an excessive level of inventory. On April 18, the Federal Reserve cut short-term interest rates by 50 basis points, or half a percentage point, to 4.5 percent. After the latest rate cut, more homeowners may refinance their homes and as their purchasing power expands, they may continue to buy durable goods such as new cars and furniture. As long as the consumers continue to spend freely and the Fed continues to ease, the economic scenario could start to improve and a recession may be avoided. Yes, the Fed may achieve a soft landing. At this time, a conversion from a traditional IRA into a Roth IRA is probably the last thing on the mind of investor’s. In our opinion, now is the best time to do such a conversion. Anyone may convert a traditional IRA into a Roth IRA. Although the conversion would be considered a taxable distribution from the traditional IRA, it would not be subject to the 10% tax penalty for early withdrawal. The total amount of this conversion would be added to the taxpayer’s annual income, and the tax would be due in the year when the conversion was done, at the taxpayers prevailing tax bracket. Before you convert your traditional IRA into a Roth IRA, consult it with your financial planner, or a CPA. Depending on the situation and the tax bracket of the individual, a financial planner may, or may not advise for the IRA conversion. The Roth IRA has many advantages. One of the biggest advantages is that no taxes are due on qualified withdrawals, while withdrawals from the traditional IRA are taxable. By not having to pay taxes to the government, a retiree may be able to save over $200,000 throughout his or her retirement years. Surely, you could think of many ways to spend $200,000 on yourself and your family. An investor could do a partial conversion. For example, if an investor had a traditional IRA with a total value of $100,000 only $20,000 could be converted into a Roth IRA. This could be done every year, or every other year. In our opinion, now is the best time for investors to convert a part of a traditional IRA into a Roth IRA while stocks are at their lowest level, thus the tax consequences will be minimized. Once again, investors should consult with a financial planner or a CPA to find out if such a conversion is advantageous and what will be its tax consequences. Once again we remind investors to remain calm during this bear market. Do not let your emotions make your investment decisions. Some of the tech-stocks may never again reach such low levels and should be bought now. In our opinion, some of the tech-stocks could ascend to the levels approaching their previous 52-week high and reward speculators with gains as high as three hundred percent during the next two years. Back to Top |
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Buy & Sell
Datron Systems Incorporated (NASDAQ symbol: DTSI) produces in-motion satellite television antenna systems, remote sensing satellite earth stations, satellite communication systems, and HF and VHF radios. The company was a first to bring live satellite TV to passengers on a commercial airliner. Furthermore, the company has demonstrated a high-speed satellite Internet connection in a moving vehicle. The company had another great year. For fiscal year ending March 31, 2000, annual revenues rose to $61.887 million, from $59.084 million for fiscal 1999. Net income rose to $2.5 million, or $0.92 a share, from $1.7 million, or $0.63 a share for fiscal 1999. As of March 31, 2000, the company had $12.2 million of cash, versus $5.5 million on March 31, 1999. Book value rose to $12.58 a share, from $11.65 a share in fiscal 1999. During fiscal 2000, research and development expenses rose to $3.96 million, from $3.269 million in fiscal 1999. The increase was due to higher spending to improve tracking antenna technologies. As of March 31, 2000, the company had a $16 million revolving line of credit. The company does not pay a cash dividend, and does not anticipate doing so in the near future. Datron has a full range of tracking antenna products that can provide TV and Internet connections to all three mobile markets-land, sea, and air. The company has been supplying antennas to business jet market since 1998. The stock reached a high of $19.125 in March 2000, and then proceeded in downward direction. After reaching $14.63 in January 2001, this stock proceeded to pull back and closed at $9.81 per share on April 19, 2001. In our opinion, as the demand for a satellite communication systems continues to expand, the revenues and earnings could continue to grow. This stock could revisit its high of $19.125 per share in 2002. Investors who are willing to hold this stock approximately one year could achieve a gain of one hundred percent (on April 30, price $10.25, dividend nil, and P/E 9). Lesco, Inc. (NASDAQ symbol: LSCO) is a leading manufacturer and distributor of lawn care and golf course products. The company markets its line of products directly to 118,000 customers in 37 states, through 234 service centers. The company’s revenues continue to grow at a fast pace. For the year ending December 31,1999, revenues rose to $460.35 million, from $416.738 million for 1998. The net income rose to $11.6 million, or $1.36 a share, from $5.9 million, or $0.69 a share for 1998. Furthermore, gross margin rose to 33.7%, from 31.9% in 1998. The company plans to increase its revenues at least ten percent annually, by expending its market share. In less than five years, the company more than doubled the number of its service centers. The company plans to focus its expansion in the West Coast market. Lesco, Inc., debt-to-total capitalization percentage was 51.3% as of December 31, 1999, versus 51.5% for the year earlier period. In August 2000, this stock reached a high of $18.375 per share and then proceeded to fall. Furthermore, in September 2000, the stocks fifty day moving average fell below its two hundred day moving average, and from then on this stock proceeded in a downward trend. On April 30, 2001, this stock closed at $12 per share. In our opinion, this stock is oversold. In 2002, this stock could revisit its previous high of $18.375 per share. This stock is for patient investors who may buy it now and hold it approximately one year. In 2002, this stock could revisit its previous high of $18.375 per share (on April 30, price $12.01, annual dividend $0.15, yield 1.2%, and P/E 14). Orbit International Corp. (NASDAQ symbol: ORBT) designs and manufactures customized panels, components and subsystems. The company also makes frequency converters and uninterruptible power supplies. Through its Behlman Electronics subsidiary, the company also manufactures commercial power supplies, frequency converters, and AC power sources. The year of 1999 was difficult for the company, due to the reduction in the U.S. Navy fleet, to which Orbit International supplies a large percentage of its products. For the year of 1999, revenues fell to $12.220 million, from $16.351 million for 1998. The company reported a loss of $1.375 million, or $0.68 a share, versus income of $1.881 million, or $0.81 a share for 1998. For the year of 1999, the company took a charge of $450,000 (or $0.22 a share) against the net income, due to a reduction in deferred tax asset. The company was informed by Nasdaq that it did not meet the requirements to maintain its listing on the Nasdaq National Market System. In September 1999, the Board of Directors unanimously approved a one-for-three reverse stock split that was approved by the shareholders in October 1999. The company’s stock was moved to the Small Cap Market in November 1999. At the end of 1999, the company’s financial condition remained strong, with a 3.2 to 1 ratio of current assets to current liabilities. In 1999, gross profit margin edged lower, to 33.4%, from 41.8% in 1998, due to lower sales and the write down of inventory. As of December 31, 1999, the company had $7.161 million of working capital. Orbit International Corp., continues to operate in a very difficult business environment and is heavily dependant upon military spending, particularly by the Department of the Navy. The company continues to expand its market share and is offering some of its products in commercial and foreign markets. In June 2000, this stock rose rapidly to $4.82 per share. On February 23, 2001, this stock closed at $0.875 per share and then proceeded to build a strong upward momentum finishing at $1.75 per share on March 23, 2001. This stock is thinly traded. Speculators could buy this stock now and sell it as soon as it reaches approximately $4 per share (on April 30, price $1.40, dividend nil, and P/E n/m). Back to Top |
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Stocks for traders Speculators who like to trade frequently could buy stocks listed in this section. Investors should be aware that short-term trading involves much greater risk, and preferably no more than 10% of the portfolio may be invested in these stocks. Many of the stocks in the technology sector should be bought at recent low levels. Speculators could achieve short-term gains up to 100%, or higher, on some of these stocks. 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. On March 30, this timely stock closed at $26.54 per share and we maintained our rating of strong buy. Some of the investors started to lock-in their gains and the stock closed at a low of $19.70 per share due to selling pressure. At this level, investors started buying this stock and it closed at a high level of $31 per share on April 30, 2001. If money flow were to continue its strong upward momentum, this stock could reach approximately $45 per share by the end of May 2001. We are revising our target level downwards to $60 from our previous target of $81 per share. As soon as this stock reaches our target level, 150 shares will be sold and the remaining fifty shares will be held long-term. American Power Conversion Corporation (NASDAQ symbol: APCC) designs, manufactures, and markets surge suppressors, uninterruptible power supplies and related software for computer related equipment. The Company also makes equipment to protect wide area networks (WANs), local area networks (LANs), Internet equipment, telecommunications equipment and integrated services digital network (ISDN) equipment. The Company has manufacturing facilities in the United States, Ireland, Denmark, Switzerland, China and the Philippines. American Power Conversion Corporation is one of the ten major worldwide companies whose sole focus is to provide power protection equipment. As the E-commerce continues to grow, the demand for power protection for servers and other equipment will continue to ascend. The Company plans to expand its line of products to cover end-to-end enterprise solutions. During 1998, the revenues in the North America increased 27 percent, while the sales in Europe, Middle East and Africa were up 38 percent. The Company continues to introduce new products to the market, such as APC Power Stack ™, which is a rack-mount unit designed to protect hubs, routers and switches. During the past ten years, this stock was an excellent performer, and the Company has issued five stock splits. This stock ascended from a low level of $15.88 in May 1999, to $45 per share reached in April 2000. Afterwards, this stock proceeded to fall. In June 2000, we stated that this stock could maintain its downward momentum over the course of the next four months and by October 2000 this stock could fall to approximately $20 per share. Although patient investors could buy this stock and hold it long-term, at least five years, speculators who trade it short - term could achieve higher gains. In addition, we stated that speculators’ should start monitoring this stock in September 2000. Due to the bear market, this stock fell below our projected price level and reached a low of $10.32 per share in December 2000. On January 23, 2001, this stock closed at $18.24 per share, and then pulled back to $11.69 on March 1, 2001. During April, this stock once again proceeded to establish a strong upward trend and closed at $15.38 per share on April 20, 2001. Once this stock breaks through its resistance level of $18.24 per share it could even reach approximately $22.50 per share. At such level, traders should sell it immediately to lock in their gain. On April 30, 2001, this timely stock closed at $14.14 per share and we rate it a strong buy. 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 reach $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 March we have stated that the stock of EMC Corporation could fall to $30 per share during the next two months. By March 12, 2001, this stock had already reached such level. 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 approximately two hundred percent. On April 30, 2001, this stock closed at a low level of $25.20 per share, down $4.12 for the day. Afterwards, as Nasdaq Composite Index moved higher, this stock build a strong upward trend and closed at $45.12 per share on April 20, 2001. On April 30, 2001 this stock closed at $39.60 per share. This stock could test its support level of $30.25 in the beginning of June 2001 and then resume its upward trend. Buy this stock on dips, at approximately $32 per share and sell as soon as it reaches $50 per share. LSI Logic Corporation (NYSE symbol: LSI) makes chips for: cellular phones, satellite set-top boxes, DVD products and personal computers. The company derives 58% of revenues from international sales. LSI Logic has manufacturing facilities in the United States, Europe and Japan. The company may continue to invest 15-17% of revenues in R & D. As the demand for cellular phones and set-top boxes continues to grow in double-digits, the revenues and earnings of LSI Logic could outperform the rest of the companies in the chip sector. This stock closed at $32.63 per share on October 31, 2000 and then proceeded to descend. Due to the bear market in NASDAQ, this stock broke below $20 per share and closed at a low level of $16.43 per share on December 21, 1999, way down from its 52-week high of $90.38. On April 4, 2001, this stock closed at a low level of $13.98 per share. This timely stock is once again building upward momentum and once it breaks through its resistance level of $25, it could reach $35 per share by July 2001. On April 30, 2001, LSI closed at $20.44 per share. In our opinion, due to the strong demand for cellular phones and handheld wireless devices the demand for chips made by LSI will continue to grow. 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 reach our target level of $60 per share before September 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 and we have stated that it could once again test its support level and may fall to approximately $27 per share by the end of March 2001. As the market moved higher, this stock proceeded to establish a strong upward trend and closed at $37.19 on April 20, 2001. Due to the profit taking, this stock edged lower and closed at $32.19 on April 30, 2001. This stock could test its support level of $25.50 by the end of May and then once again resume its upward momentum. As this timely stock nears this level, speculators may buy it. Traders who buy the stock of Computer Associates International below $30 per share may sell it as soon as it reaches approximately $40 per share, to lock-in their gain. Speculators who prefer to hold this stock longer could wait it until it reaches our target level of $78 per share, and then sell it. This stock could reach our target level of $78 per share in January 2002. 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. 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. After closing at a low level of $1.76 per share on April 6, this stock resumed its upward trend and closed at $2.99 per share on April 30, 2001. We maintain our rating of speculative screaming buy. Unisys Corporation (NYSE symbol: UIS) is a major provider of customer services and information services. The Company makes network servers and software. Unisys derives 67 percent of revenues from services, where profit margins are much higher than margins on hardware. 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. During April, this stock proceeded to fall and tested its support level of $11.30 on April 24, 2001. On April 30, 2001, this stock closed at $11.94 per share. During the next two months, this stock could once again test its resistance level of $18.93 and if it were to break through this level it could reach approximately $22 per share. We still rate this stock a strong short-term buy and a screaming long-term buy, depending on the objective and the time frame of the investor. 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. In March, this stock has built a strong upward momentum and closed at $20.18 on March 30, 2001. During April this stock proceeded to fall. On April 24, 2001, this stock found strong support level at $15 per share and then proceeded to close at $15.88 per share on April 30, 2001. This stock could retest its resistance level of $20.18 per share in June 2001, and if it were to break through this level it could reach approximately $25 per share. At that level this stock should be sold. 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. On March 30, this stock closed at $36.18 per share. After retesting its support level of $33.50 on April 6, this stock proceeded to establish a strong upward momentum and closed at $37.75 per share on April 30, 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 stock closed at $24.60 per share and we rated it a strong buy. The stock reached an intra-day high of $26.75 on February 15, and then edged lower to close at $21.50 per share on February 28, 2001. On April 30, this timely stock closed at $31 per share. Due to the pricing pressure on chips, the revenues and earnings may not grow as fast as we had projected. We are revising our target level downward to $60 from our previous target of $81 per share. As soon as this stock reaches our target level, one 150 shares will be sold and the remaining fifty shares will be held long-term. Applied Materials, Inc. (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. The Company produces systems that use physical vapor deposition technology, chemical vapor deposition and oxide etching. The demand for the company’s equipment continues to accelerate in line with the growing sales of computers and telecommunication devices. Although short-term, there may be a temporary decline in demand for the equipment made by Applied Materials, in our opinion long-term outlook for the company is excellent. As the demand for chips continues to grow worldwide, the sales of Applied Materials could grow approximately 20 percent annually during the next five years. On October 14, 1997, and on March 16, 2000, Applied Materials split its stock 2-for-1. On April 30, 2001, this stock closed at $54.60 per share. Buy this stock on dips and hold at least four years. Boston Scientific Corporation (NYSE symbol: BSX) is one of the worlds leading companies that designs and markets minimally invasive medical devices. The Company makes coronary stents for less invasive treatment of cardiovascular disease. This stock has reached a high of $47.06 per share on July 19, 1999. 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. We have downgraded this stock to accumulate from a buy. On April 30, 2001, this stock closed at $15.88 per share. As soon as this stock reaches our revised target level of approximately $26 per share it will be sold immediately. CMGI, Inc. (NASDAQ symbol: CMGI) was added to our list “Buy 10 Tech Stocks” on November 10, 2000, at $16.25 per share. We liked the stock then, and at the recent price we like it even more. On January 30, 2001, three hundred shares of CMGI, Inc., were bought at $6.78 per share. Although the risk of owning this stock is high, so is the potential for the appreciation. CMGI, Inc., is one of the worlds largest companies with stakes in the Internet start-ups. The main reason why we like this company is because it has an 83% interest in Alta Vista. CMGI planned to issue an Initial Public Offering in Alta Vista in the beginning of this year, but due to the negative market condition the IPO has been postponed. When the market improves and the company does an IPO on Alta Vista, the stock of CMGI could establish a strong upward trend and may even reach $100 per share during the next twelve months. On April 30, 2001, this stock closed at $2.99 per share. Once this stock reaches our target level of $100 per share, all three hundred shares will be sold to lock in the gain. We would like to remind investors that the risk of owning this stock is high therefore it should only be bought by speculators. To find out more about CMGI, Inc., read the section Stocks for traders. Cisco Systems, Inc. (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. Cisco Systems continues to expand its market share. The annual revenues have grown from $2.2 billion in fiscal 1995, to $12.2 billion in fiscal 1999. John T. Chambers, who is a CEO of Cisco Systems, continues to steer the company on a path to high growth and the long-term outlook for the company is excellent. In our opinion, Cisco Systems, Inc. could continue its acquisition spree and the annual revenues may reach $50 billion in six years. Cisco Systems, Inc., is positioned to offer the latest equipment to service providers, such as IP internetworking technology which allows to host Internet applications and expand their service from basic voice traffic to broadband which can carry data, provide Internet access, and video conferencing. On March 23, 2000, this stock split 2-for-1. During the past five months this stock continued to fall. On April 30, 2001, this stock closed at a low level of $16.98 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, 2001. On April 30, 2001, this stock closed at $17.50 per share. Patient investors could buy this stock and hold it five years. 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, 1999, this stock closed at $6.25 per share. Afterwards, this timely stock proceeded to build a strong upward momentum and closed at $12.44 per share on January 31, 2001. On April 30, 2001, this stock closed at $10.28 per share and we rate it a strong buy. Once this stock reaches our revised target level, two hundred shares will be sold immediately. The remaining 150 shares will be held long-term, at least three years. Delia’s, Inc. (NASDAQ symbol: DLIA) sells a variety of apparel and accessories for young women. The Company conducts sales through its Web site and through brick and mortar stores. This stock reached a 52-week high of $40 per share in April 1999, and then proceeded to fall along with other Internet stocks. By November 1999, this stock reached a low of $5.50 per share. Afterwards, the stock proceeded to rise, buoyed by optimistic expectations of higher holiday sales and reached an intra-day high of $13.25 in November 1999. On April 30, 2001, this stock closed at $2.96 per share and we 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, Delia’s, Inc. merged with iTurf, Inc. and after the conversion of existing stock into the newly issued shares, now there are 342 shares in our Model Portfolio. Dell Computer Corporation (NASDAQ symbol: DELL) is the third largest computer manufacturer in the world. The Company makes personal computers, notebook computers, servers and workstations. On March 5, 1999, the Company issued a 2-for-1 stock split, the seventh in the past eight years. On March 22, 2000, the stock reached an intra-day high of $59.68 per share. Then, the stock proceeded to fall. Due to the sell-off of stocks of box makers, this stock broke through its support level. On November 30, 2000, this stock closed at $19.25 per share. The stock continued its downtrend and reached a low of $16.25 per share. On February 7, 2001, this stock reached an intra-day high of $27.50 per share. Two weeks later, on February 21, this stock tested its support level of $20.43 per share. On April 30, 2001, this timely stock closed at $26.24 per share. At the present level this stock presents a great buying opportunity. Although it is not likely that the stock of Dell Computer Corporation will appreciate at such a fast pace as it did between 1994 and 1999, in our opinion, the stock could generate a gain of approximately 1,500% in six years. Ericsson LM Telephone (NASDAQ symbol: ERICY) is a leading supplier of mobile phones and telecommunications equipment. The Company’s main manufacturing facilities are located in Sweden. Ericsson’s telecom equipment is among the most advanced in the world. The sales of equipment have increased significantly in China and surpassed the sales in U.S. Ericsson LM Telephone projects that by the year 2003 the number of mobile phone users could reach over 800 million. The long-term outlook for Ericsson is excellent. ADR’s of Ericsson split 4-for-1 on May 8, 2000. On April 30, 2001, ADR’s closed at a low level of $6.43. 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 April 30, 2001, this stock closed at $30.91 per share. Buy this stock on dips 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 April 30, 2001, this stock closed at a very low level of $2.17 per share, and we rate it a speculative strong buy. LSI Logic Corporation (NYSE symbol: LSI) makes chips for: cellular phones, satellite set-top boxes, DVD products and personal computers. The company derives 58% of revenues from international sales. LSI Logic has manufacturing facilities in the United States, Europe and Japan. The company may continue to invest 15-17% of revenues in R & D. As the demand for cellular phones and set-top boxes continues to grow in double-digits, the revenues and earnings of LSI Logic could outperform the rest of the companies in the chip sector. This stock closed at $32.63 per share on October 31, 2000 and then proceeded to descend. Due to the bear market in NASDAQ this stock broke below $20 per share and closed at a low level of $16.43 per share on December 21, way down from its 52-week high of $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. This timely stock closed at $20.47 on April 30, 2001. In our opinion, due to the strong demand for cellular phones and handheld wireless devices the demand for chips made by LSI will continue to grow. This stock will be sold as soon as it reaches approximately $60 per share for a probable short-term gain of approximately two hundred percent. Lucent Technologies, Inc., (NYSE symbol: LU) is the largest manufacturer of the telecommunications equipment. Lucent Technologies makes fiber-optic equipment and optical network equipment that allows the phone companies to increase the capacity and to provide a high speed Internet access. 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. 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 hundred shares will be held long-term, at least ten years. On January 31, 2001, this stock closed at $18.60 per share. Afterwards, this stock proceeded to test its support level and closed at $9.97 on March 30, 2001. This stock broke through its support level in April and then slowly proceeded in upward direction. On April 30, 2001, this stock closed at $10.01 per share. We rate this stock a strong long-term buy. Investors who already own this stock may add to their position. Microsoft Corporation (NASDAQ symbol: MSFT) is the largest maker of software. The operating system made by Microsoft is used in the majority of computers. The Company has no debt and has approximately $17 billion in cash and short- term investments. 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 stock closed at $67.75 per share on April 30, 2001. Buy this stock on dips and hold long-term. Motorola Inc. (NYSE symbol: MOT) is a major supplier of cellular phones, semiconductors, and pagers. The stock of Motorola continued to fall and reached an intra day low of $14 per share, an eight year low, on March 22, 2001. This stock is trading at such a low level, as if the U.S. economy were to enter a recessionary stage, even though it may not. Christopher Galvin who is the CEO of Motorola, could once again steer the company on a path of high growth and profitability. The stock of Motorola was held in our Model Portfolio between February 1995, and April 1997. On April 23, 1997, all 50 shares of Motorola were sold at $57.50 per share, with a loss of 5%. On the same day, the funds received from the sale of shares of Motorola were used to buy 50 ADRs of Nokia Corporation at $58.88. To cover the balance of this trade, $179.85 of cash was deducted from the cash position in our Model Portfolio. Nokia continues to be the second best performer in our Model Portfolio. The stock of Motorola is great for trading. Its recent 52-week high was $61.54 per share. In our opinion, this stock could reach $50 per share in 2002, and once it does it will be sold. On April 30, 2001, this stock closed at $15.55 per share and we maintain our buy rating. 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 $34.19 on April 30, 2001. Buy these ADRs on dips and hold long-term, at least seven years. Nortel Networks Corp. (NYSE symbol: NT) is the leading provider of networking solutions, including optical networking solutions and wireless networking systems. During the past four months this stock has fallen to a low level, due to the fear of a slowdown of orders for fiber-optic network equipment. The stock is way off from its 52-week high of $86 per share. Although this stock could trade at a low level during a quarter, or two, as soon as the growth of revenues reaches 50%, this stock may once again resume its strong upward trend. In our opinion, this stock could revisit its 52-week high in less than twelve months. The Internet is not going away. Quiet the opposite is happening. Each month millions of new users are accessing the Internet. This greatly increases the demand for bandwidth therefore the demand for the equipment made by Nortel Networks will continue to grow worldwide. On April 30, 2001, this timely stock closed at $15.30 per share and we rate it a screaming long-term buy. One hundred shares of Nortel Networks will be held in our Model Portfolio until the stock reaches $80 per share and then all 100 shares will be sold. Office Depot, Inc. (NYSE symbol: ODP) is a major retailer of office products, with stores located in the United States and Canada. The Company also conducts sales through its Web site at www.officedepot.com and through a catalog. 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 $14.19 per share on a heavy volume of 4.45 million shares, and then proceeded to fall. Four weeks later, on May 12, the stock closed at $11 per share, on a low volume of 688,000 shares. Then, on May 26, the stock fell $3 from the previous close, and finished the day at $7.32 per share, on a very heavy volume of 16 million shares. In our opinion, this stock has a strong upside potential. On April 30, 2001, this stock closed at $9.50 per share and we rate it a strong buy. This stock will be held in our Model Portfolio until it reaches our target level of $19 per share, and then all four hundred shares will be sold, for a probable long-term gain of one hundred 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 April 30, 2001, the stock of PepsiCo closed at $43.81 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 one hundred 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 April 30, 2001, this stock closed at $43.30 per share. Buy this stock on dips and hold long-term. Sun Microsystems, Inc.(NASDAQ symbol: SUNW) is among the major suppliers of hardware to the Internet. The company continues to introduce new servers, competitively priced, in order to expand its market share. Sun Microsystems revenues have doubled during the past three years, to $19 billion. In our opinion, the company could attain a greater market share during this economic slowdown, and once again double its annual revenues in three years. As additional hundreds of millions of users access the Internet, the demand for servers could grow 50% annually during the next five years. This stock will be held in our Model Portfolio approximately three years, and as soon as it generates a gain of 400%, all of the shares will be sold. This stock closed at $17.12 per share on April 30, 2001, and we rate it a strong buy. Vertical Net, Inc., (NASDAQ symbol: VERT) is an Internet incubator that owns and operates 55 Websites designed as online business-to-business communities. These Websites, known as vertical trade communities are grouped in several industry sectors such as Advanced Technologies, Communications, Environmental, Food and Packaging, Food Service, Healthcare, Manufacturing and Metals, Textile and Apparel, and Service. This stock was featured in our “Buy & Sell” section in August 2000. At that time, we have stated that this stock could fall to approximately $35 per share. Furthermore, we have stated that the risk of owning this B2B start up is high, therefore this stock could only be bought by speculators. Who would have known then that this stock would break through a $35 level and reach a ridiculously low price of $2.68 per share on February 23, 2001. In August 2000, we have stated that this stock could ascend to $140 per share, short-term. We maintain our price target level, but it could take this stock approximately two years to reach it. Once again, we would like to reiterate that this stock is not for the faint of heart and may be bought only by speculators. These two hundred shares will be held in our Model Portfolio until the stock reaches approximately $140 per share, and then these 200 shares will be sold to lock in long-term capital gain. On April 30, 2001, this stock closed at $1.93 per share and we rate it a speculative screaming buy. WorldCom, Inc., (NASDAQ symbol: WCOM) has already grown from a small telecommunications provider to a behemoth, through mergers and acquisitions. This stock is down from its 52-week high of $52.50 per share. On September 14, 1998, World Com merged with MCI Communications Corporation. Once this merger was finalized, World Com was in possession of one of the worlds largest and most advanced digital networks that connect local markets in the United States to more than 280 countries and locations worldwide. On August 4, 1998, the company acquired a 51.79% voting interest and 19.26% economic interest in Embratel, a national telecommunications provider in Brazil. World Com plans to continue expanding globally through mergers and acquisitions. In our opinion, at the recent price level this stock is undervalued and has a potential to reach $50 per share during the next twelve months. As soon as this stock reaches our target level of $50 per share, all one hundred shares will be sold to lock in a probable short-term gain of 120 percent. On April 30, this stock closed at $18.25 and we rate it a strong buy. Yahoo Inc., (NASDAQ symbol: YHOO) is a global Internet media company that provides comprehensive information and shopping services to over 140 million users worldwide. The company’s Website www.yahoo.com is the most visited site and has the highest name recognition. Yahoo Inc., continues to provide the widest choice of content that has generated an average of 465 million page views per day in December 1999, an increase of 178 percent from December 1998. The Company provides Web content around the world in 12 languages. As the advertising market on the Web continued to grow, in the fourth quarter of 1999, there were 3,550 advertisers, versus 2,225 in the same quarter of 1998. Average revenue per advertiser rose to $57,000 in the fourth quarter of 1999, from $34,000 in the fourth quarter of 1998. Advertising revenues on the Web in the United States alone are projected to reach over $8 billion annually in two years. Yahoo Inc., could receive 20 percent of these revenues; thus we estimate that the company’s annual revenue could grow to approximately $1.6 billion in the year 2002. Yahoo Inc., is among the few Internet companies that already generate positive cash flow. We project that this stock could rise twenty-fold from present level, during the next four years. The risk of owning this stock is above average and it is not for a timid investor. This timely stock will be held in our Model Portfolio until it reaches our target level of $300 per share and then these one hundred shares will be sold. On April 30, 2001, this stock closed at $20.18 per share. This stock could pull back to approximately $15 per share and speculators should buy it immediately at that level. Back to Top |
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Model Portfolio Update
Nortel Networks Corporation (NYSE symbol: NT) had another excellent year. For the year ending December 31, 2000, annual revenues rose to $30.275 billion, from $21.287 billion for 1999. Sales in the United States accounted for 60% of revenues, sales in Canada 5%, and other countries 35%. For the year 2000, the company reported a loss of $3.470 billion, or $1.17 a share, versus a loss of $351 million, or $0.13 a share for 1999. Gross margin edged slightly higher, to 43.5% in the year 2000, versus 43.3% in 1999. During the year 2000, the company spent $4 billion on research and development, up from $2.992 billion in 1999. Nortel Networks wrote off $3.944 billion of goodwill in 2000, versus $1.207 billion in 1999. Furthermore, the company took a charge of $1.491 billion for in-process research and development expenses, versus a charge of $252 million in 1999. Excluding these charges, Nortel Network had earnings of $0.74 a share. During the year 2000, shareholders equity rose to $29.109 billion, versus $13.072 billion in 1999. During the year 2000, Nortel Networks acquired nine companies. On January 28, 2000 Nortel Networks acquired Qtera Corporation, a manufacturer of ultra-long-reach optical networking systems. The company expects this product to begin contributing to its revenues in the second quarter of 2001. On March 16, 2000, Nortel Networks acquired Clarify, Inc., a provider of eBusiness front office solutions. This software product began to contribute to Nortel’s revenues in the second quarter of 2000. On March 23, 2000, Nortel Networks acquired Promatory Communications, Inc., a developer of Digital Subscriber Line platforms for high speed Internet access. This product began to contribute to revenues in the third quarter of 2000. Xros, Inc., was acquired on June 2, 2000. This company is a developer of fully photonic switching. Nortel Networks projects that this product will begin contributing to consolidated revenues in the second half of 2001. On June 23, 2000, Nortel Networks acquired Core Tek, Inc., a developer of optical components. Nortel Networks estimates that all of the projects will be completed and would begin contributing to consolidated revenues by the second quarter of 2001. Architel Systems Corporation was acquired on July 1, 2000. This company was a global leader in software systems. By now, all three of these software systems have been completed and are contributing to Nortel’s consolidated revenues. On September 5, 2000, the company acquired EPiCON, Inc., along with an in-process research and development project comprised of a software management platform to manage the deployment, installation and use of remote applications on remote PCs running Windows operating system. Nortel expects this product to start contributing to consolidated revenues by the end of the second quarter of 2001. Alteon Web Systems, Inc., was acquired on October 5, 2000. The company was a leader in content switching and had four products in development. A majority of projects were completed and are already contributing to Nortel Network’s consolidated revenues. On October 19, 2000, Nortel Networks acquired Sonoma Systems, a developer of high-speed integrated video, data and voice communications delivery simultaneously over a single connection. This product will allow service providers to deliver integrated voice and data services over their existing Asynchronous Transfer Mode infrastructure. By now this product is already contributing to Nortel’s consolidated revenues. Nortel Networks could continue to acquire businesses with the innovative technology, in the future, but the pace of acquisitions could be much slower. The company continues to expand its market share worldwide. During the previous years this stock was a great performer. A one hundred dollar investment in the stock of Nortel Networks in December 1995, has risen to $963.60 by December 1999. On December 2000, the value edged lower to $612.58. Nortel Networks maintains a leading position as a provider of networking solutions, including optical networking solutions and wireless networking systems to service providers around the world. Among its customers are local exchange carriers, global carriers, Internet service providers, cable television companies, and hosting service providers. Due to the severe drop in demand for the company’s products, the stock fell below $15 per share, down from a high of $89 reached in the third quarter of 2000. In our opinion, this downturn is temporary and the sales could start to expand by the third quarter of this year. Furthermore, Nortel Networks could continue to expand its sales worldwide and the annual revenues could double by the year 2004. There is a strong probability that this stock could generate a return of 600% during the next two years. This stock will be held in our Model Portfolio until it reaches approximately $80 per share, and then it will be sold to lock in the gain. On April 30, 2001, this stock closed at $15.30 per share and we rate it a screaming buy. Yahoo, Inc. (NASDAQ symbol: YHOO) had another great year. For the year ending December 31, 2000, revenues rose to $1.110 billion, from $591.786 million for 1999. The net income rose to $70.776 million, or $0.13 a share, up from $47.811 million, or $0.09 a share for 1999. For the year 2000, net income was affected negatively by a $163.2 million write-down of equity investments. Revenues generated from the business services accounted for 10 percent of total revenues. Operating cash flow (earnings before interest, taxes, depreciation and amortization) rose to $411 million, up 117 percent from the previous year. As of December 31, 2000, the company had $1.7 billion of cash and marketable securities. Furthermore, the company has no debt. As of December 31, 2000, the company had 3,259 employees. Yahoo’s consumer base continues to expand and by December 31, 2000, grew to more than 180 million people. The average daily page views climbed to 900 million in December 2000, approximately double for the same month a year ago. Yahoo, Inc., continues to expand its service and last year launched Yahoo Argentina and Yahoo India. Furthermore, the company has a 70% stake in Yahoo Europe, and a 67% stake in Yahoo Korea. The company continues to introduce new products; among them is Yahoo by Phone (http://phone.yahoo.com) that allows people to communicate by using both voice and text. This service provides access to personalized My Yahoo (http://my.yahoo.com) content over the telephone by calling 1-800-MY-YAHOO. Furthermore, the company introduced an improved version of Yahoo Messenger (http://messenger.yahoo.com) that allows consumers to place PC-to-phone calls to anywhere within the continental United States. After the company makes improvements to this service, Yahoo, Inc., plans to charge a fee that will be much lower than traditional long-distance plans. The advertising revenues on the Web are projected to reach approximately $8 billion in the year 2002. In our opinion, Yahoo, Inc., could receive 30% of these revenues; thus its annual revenue could grow to $2.4 billion in the year 2002. Furthermore, once the company starts charging a fee for its Messenger Service that allows consumers to place PC-to-phone calls anywhere within the continental United States it could add approximately $500 million annually to the company’s revenues in its initial stage. Yahoo, Inc., has a great name recognition and has established a global base that has allowed more than 13,000 stores to merchandise, and sell their products in over 15 countries. Yahoo has been recognized as the Web’s No. 1 portal shopping destination and it enabled over $4.4 billion in transactions during the year 2000. Yahoo Auctions (http://auctions.yahoo.com) started charging a nominal listing fee, and in our opinion this could add an additional $400 million to annual revenues in the year 2002. Yahoo’s stock has been very volatile and during 2000, ranged from $237.50 to $25.625 per share. At its high, the stock was trading at a price to earnings ratio of over 1000 during the year 2000. Analysts recommendations and media reports relating to trends in Internet stocks, and the stock market can greatly affect the price of the stock of Yahoo, Inc. Due to the high volatility, this stock is not for the faint of heart. In our opinion, Internet will continue to expand and the viewers will spend more time online. As the company adds more services that will generate additional revenue, we estimate that the annual revenues could reach approximately $3 billion for the year 2002. As the revenues expand, so will the earnings. Furthermore, in March 2001, the company had authorized a stock repurchase program. The company may acquire up to $500 million of its outstanding common stock in the open market over the course of the next two years. Once this stock repurchase program is completed there will be approximately 5% less shares outstanding and this could increase earnings per share by an additional five cents in the year 2002. The risk of owning this stock is above average and it is not for the timid investor. This timely stock will be held in our Model Portfolio until it reaches our target level of $300 per share and then these one hundred shares will be sold. On April 30, 2001, the stock closed at $20.18 and we rate it a speculative screaming buy. This stock could pull back to approximately $15 per share during the next four weeks and if it does investors could average down and buy more shares. Back to Top |
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Model Portfolio Chart 4-30-2001
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. h) The quantity of shares was adjusted for a 2-for-1 stock split issued by Microsoft Corporation on March 26, 1999. i) The quantity of shares was adjusted for a 3-for-1 stock split issued by Pfizer on June 30, 1999. j) The quantity of shares was adjusted for a 2-for-1 stock split issued by Cisco Systems, Inc. on March 23, 2000. k) Two hundred shares of Delia’s, Inc., were bought in December 1999, at $7.19 per share. After Delia’s, Inc., merged with i Turf, Inc., these shares were converted into newly issued stock and now there are 342 shares in our Model Portfolio. The original acquisition cost has been adjusted to $4.20 per share. After the trades done on March 20, 2001, our Model Portfolio is heavily weighed in tech stocks. The risk of such asset allocation is much greater than owning a group of stocks in several sectors. Furthermore, more stocks will be held short-term. Although it is not likely that a typical investor will acquire all of the stocks that are in our Model Portfolio, each investor has to be aware beforehand that short-term trading is risky, and will greatly increase tax liability. Between April 1994 and July 1998, a total of $28,336 of cash was invested in the Model Portfolio. Due to the excellent performance of the technology stocks, over the course of six years the total value of the portfolio has risen to $145,374 as of June 30, 2000. Our Model Portfolio has generated a gain of $117,038, or 413 percent in just six years. 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 |