Salomon Smith Barney Is Bullish On Technology Stocks In 4th Quarter
Dow Jones Online News, Wednesday, November 03, 1999 at 11:02
NEW YORK -(Dow Jones)- The fourth quarter of 1999 is the best time
for investors to buy U.S. technology and telecommunications stocks as
consumers spend more on Internet purchases before Christmas, said
Salomon Smith Barney on Wednesday.
"But make sure to get out (of these stocks) before they announce
earnings in January," said Andrew Barrett, Salomon Smith Barney vice
president and chief technology strategist, warning that consumer-based
technology stocks often peak at the beginning of the year.
Barrett recommended that up to 40% of an equity portfolio should be
devoted to U.S. technology stocks, and the fourth quarter will be the
best time to make the move.
"Technology and telecommunications is the single most important
sector this year and going onto the new millennium," said Barrett, at a
luncheon Wednesday in Hong Kong. He predicts compound earnings growth
from the sector will reach 9% through 2001.
The fourth quarter is the best time to invest in these companies for
a quick profit because the approach of Christmas will see a staggering
increase in consumer spending over the Internet.
A low inflationary environment as forecast by Salomon, which expects
the U.S. Federal Reserve to lower interest rates in the second quarter
of 2000, will also help boost the technology sector, as lower interest
rates will encourage consumer spending, Barrett said.
For trading buys, the strategist recommends companies with wide
consumer bases such as America Online Inc. (AOL), Yahoo Inc.(YHOO) and
Amazon.com Inc.(AMZN).
The biggest force supporting a portfolio overweight on technology
stocks is the shift from enterprise-driven to consumer-driven demand for
the vast majority of technology products, the strategist said.
"Of every piece of equipment sold now in the U.S., 55% are
technology-based," said Barrett.
Online advertising, which forms a core source of revenue for these
companies, will generate $11.5 billion in revenue in the U.S. by 2003,
Barrett said.
The strategist also expects e-commerce spending by online customers
to multiply to $1.3 trillion by 2003, from about $100 billion in 1999.
Also, by 2003, over 60% of all e-commerce transactions will be taking
place in the Pacific rim region, Barrett predicts.
For longer-term buys, Salomon Smith Barney is particularly bullish
about semiconductor stocks, especially as the recent Taiwan earthquake
has created a shortage in the market.
Both Applied Micro Circuits Corp. (AMCC) and Broadcom Corp. (BRCM)
will be good long-term buys, Barrett said.
Enterprise software companies such as Oracle Corp. (ORCL), Mercury
Interactive Corp. (MERQ), as well as telecommunications concerns like
Motorola Inc. (MOT), Nokia Corp. (NOK) and Telefon AB LM Ericsson
(ERICY) are also on the investment bank's long-term buy list.
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