Excerpted from Business Week Online ( AOL)..OMKT mentioned as one of the hot B2B plays for 2000:
<<Business Week: December 27, 1999
Where to Invest -- Strategies for Stocks: The Pros>>
<<The Small-Cap ``Stealth Market'
Mary Lisanti, manager of the Pilgrim Small-Cap Opportunities fund, would like to shout this from a mountaintop: ``Most small-cap stocks are not performing as dismally as they seem!' In fact, Lisanti, whose fund invests in small-cap growth companies, holds that there is a ``stealth bull market' in small-cap stocks, especially in tech, biotech, health care, and retailing. ``Earnings growth in a lot of these stocks is up over 50%,' she says. ``In my mind, that's a bull market.'
Indeed, fourth-quarter earnings for the Russell 2000, an index used to measure the performance of small companies, is up 36% over last year. And next year, small-cap earnings are estimated to grow 42%, with large-cap earnings growing only 17%, according to First Call Corp., an earnings research firm. And while the Russell 2000 has returned 12% year-to-date, the Russell 2000 growth index, which measures the Russell 2000 companies with higher price-to-book ratios and higher forecasted growth, is up 27%. ``As we go back to looking at fundamentals, the market will play to picking individual stocks. Small-caps will benefit from that,' she says.
Lisanti's remarks should not be taken lightly. Her fund, which has $53 million in assets, is up 119.4% year to date. ``Last year we hit bottom in many of these stocks, and they've been coming back,' she says.
``BRICKS AND CLICKS.' For the coming year, Lisanti likes fast-growing tech companies as well as traditional companies that are using technology to gain a competitive edge--``bricks and clicks,' as she calls them. She also looks for outfits with a unique niche.
For example, Lisanti calls TMP Worldwide Inc., a temporary-staffing company based in New York, the ``New Age Kelly services.' The company runs Monster.com, a leading Internet job-recruitment site. Its traditional businesses include one of the largest recruitment advertising agencies and an executive and middle-management search firm. CompuCredit Corp., another ``bricks and clicks,' uses sophisticated software and database analytics to target subprime customers, who are less of a credit risk for card companies. The company's earnings are poised to grow some 70% next year.
Lisanti also likes the burgeoning business-to-business e-commerce industry. ``It's a hot area just beginning to take off,' she says. Both Whittman-Hart Inc. and Open Market Inc. specialize in e-business solutions such as Internet strategies and tools for building Web sites.
In terms of pure technology plays, Lisanti is a fan of semiconductor equipment companies LAM Research Corp. and PRI Automation Inc. ``They're relatively cheap and have products coming out that will render smaller and smaller chips,' she says.
The remainder of Lisanti's picks center around niche companies that are taking advantage of growing trends. She likes Pacific Sunwear of California Inc., a clothing company that makes trendy teen gear. And playing off the pharmaceutical company consolidation theme, King Pharmaceuticals Inc. purchases, markets, and sells smaller product lines from giant drug companies that are too big to bother with them.
Finally, she likes Abgenix Inc., a biotech company that manufactures human antibodies. ``Antibodies are becoming like drugs, they're applicable to a number of illnesses,' she says.
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