Why CMGI is rallying everyday?
<<Wth the Internet boom, investors have had little problem
finding breakthrough products and services. But exceptional
management remains rare, and momentum advisor Carlton Lutts
says his 30 years of investing taught him that great
management is usually the top reason for a firm's success.
"When we discover one of the best minds on the Internet, we do
more than get excited. We get our investment dollars ready,"
he says.
Lutts is referring to David Wetherell, CEO of Internet
incubator CMGI (CMGI). The firm owns stakes in over 50
Internet companies, and each has a synergy with another under
the CMGI umbrella. Lutts says CMGI is riding high on a string
of hits including Lycos, Critical Path, Chemdex, Silknet
Software and Yahoo (via its GeoCities acquisition). CMGI's
purchase of AltaVista from Compaq should prove to be its "most
important move all year," Lutts says, as he predicts the
portal will soon be in hot pursuit of Yahoo, Excite and Lycos.
Lutts quotes Wetherell as saying fast-growing web investments
are "risk free" as growth provides security. "With that in
mind, we know of no better way to invest in the entire
Internet than through CMGI," Lutts says. Stock in CMGI agrees
as it recently rocketed to all-time highs. Lutts sees strong
investor accumulation as proof that a major uptrend in the
stock has legs. "Our advice is to buy now and hold on
tightly," he says.>>
<<Momentum advisor Don Rowe is both bullish and concerned about
the stock market in 2000. "The problem, as I have often stated
often, is a flood of money chasing a shrinking supply of
stocks," he says. As a result, three booming areas
(technology, Internet and telecom) are hiding a stealth bear
market as every other sector is either falling or locked in a
trading range. Overvaluation will continue as long as the Fed
creates money to battle Y2K worries, pension funds keep
growing rapidly, and foreign money pours into the US market.
"Where this will all end absolutely no one knows. But the best
strategy is to purchase stocks in the only three sectors that
are rising in price," he says.
Rowe recommends a basket of Internet, tech and telecom stocks
and mutual funds to play this phenomenon, and one of the
stocks he recommends is EMC Corporation (EMC). Rowe says the
world's leading provider of enterprise storage systems,
software and services is "the information storage and
management solution of choice" for all major computing
platforms in business today. Major clients include the largest
banks, financial service firms, telecom providers, airlines,
retailers and manufacturers as well as the government,
universities and scientific institutions.
A Fortune 500 company, EMC recently placed ninth on Business
Week's "Info Tech 100" list of the best performing technology
companies, Rowe says. Q3 earnings grew 53% on a sales rise of
33%. Rowe maintains a buy recommendation on EMC.
>>
<<Oracle (ORCL) is on a roll, and option advisor Bernie
Schaeffer bets good times will continue for the database
leader. The Internet explosion continues to be a boon for
Oracle's core database software business; in fact, the firm's
database product is fast becoming the dominant software for e-
commerce on the web. Plus, a strong pipeline of new products
means the firm poised to profit from post-Y2K opportunities.
Management is also gaining market share on its applications
side and plans $1 billion in cost cuts over the next 18
months.
Investors started bidding up shares of Oracle in late October
1999, when they sold in the mid-$40s. They have not looked
back since; Oracle closed in record high territory at $96 on
December 20, 1999. The most recent bit of good news came on
December 14, when the company announced it beat analyst
estimates by $0.04 per share.
"Despite this impressive showing, investors have taken a
decidedly pessimistic slant toward Oracle," Schaeffer says. He
points out that the stock's put/call ratio is now above 98.4%
of all readings he has taken over the past 12 months. But he
adds that the shares themselves have already blown past most
resistance from these pessimistic option plays. Plus, the
amount of open calls is "relatively light and shouldn't be
able to threaten a continued advance," Schaeffer says. On
December 16, 1999, Schaeffer advised buying the March 85 call
(ORQCQ).>>
<<Compelling "Buy On Dip" Leaders (AOL)
Ballooning P/E multiples make Stephen Quickel about adding to
current positions in leading growth stocks. But instead of
abandoning such stocks, the momentum investor advises adding
on dips. "Opportunities often arise to make very advantageous
additions to one's holdings when leading stocks dip in price
for a day or two," Quickel says. So he just changed most of
his "buy" recommendations to "buy on dips" for all three of
his model portfolios. "When great stocks with sound
fundamentals and huge growth prospects yo-yo downward (as much
as they have recently), you owe it to yourself to snap up some
shares," he says.
One such stock is America Online (AOL). The online service
boasts more than 17 million paying subscribers and the top
brand among all Internet stocks. Analysts predict AOL will see
32% revenue growth in 2000 mostly from subscriber growth (22
million estimated subscribers by EOY 2000) but also from
advertising and e-commerce. Though shares are expensive,
management has proven its prowess in a number of key areas
including growing revenues from a diverse line of businesses,
marketing expertise, and maintaining brand recognition. AOL
traded at $86 on December 21, 1999, but sold at just above $70
in early December.
"If we liked Cisco Systems (CSCO) at $101, how can we not like
it at $92," Quickel said, referring to the networking leader's
mid-December 1999 price dip. Stock in the networking leader
quickly rebounded and sold at $104 on December 21, but Quickel
is keeping an eagle eye out for further price dips. Analysts
project 41% revenue growth for Cisco in 1999 on stronger-than-
expected sales to service providers. Cisco's competition is
increasing but so is its huge market opportunity, particularly
for equipment that combines voice and data onto a single
network for carriers.>>
<<Collins Offers a Top E-Commerce Play (VRSN)
One of ace growth advisor Jim Collins' top Internet picks is a
play on darling areas like e-commerce and secure email, home
banking and credit card purchsing. Verisign (VRSN) offers the
trust services companies and individuals need to conduct
secure e-commerce and communications over the Internet as well
as intra-and extranets. Collins says major alliances with the
likes of Microsoft, Cisco, AT&T and Visa make Verisign's
proprietary WorldTrust software platform a good bet going
forward.
Collins is excited about the national prospects for a recent
Verisign development in California. The company just became
the state's first licensed "Certification Authority." This
means Verisign can now enable legal paperless communication
among public entities in the state. A similar program is
slated soon for the General Services Administration allowing
online transactions between citizens and the government.
Another is due for the Department of Defense to do secure e-
commerce transactions with 350,000 trading partners.
Verisign's financial picture seems as secure as the e-commerce
the company enables. Stock in Verisign just split 2-1, and it
keeps breaking into ever-higher territory on rising trading
volume. Verisign's Q3 was its first profitable quarter for
both operating and net income, and revenues of $22.8 were 117%
more than the same quarter last year. Collins maintains
positions in Verisign in all of his model portfolios.>>
ALL THE FROM INVESTOOL LETTER........ |
