SATURDAY GROUP: Don?t Panic!
Page: 1, 2
individualinvestor.com
Editor-in-Chief: Jono Steinberg (4/15/00)
How are you feeling? What is going through your mind? Are you scared, tired, worried, confident, confused? Think now?s a time to bottom-fish? What are your favorite stocks? Tell us on our Bull Sessions board.
Triggered by a higher than expected Consumer Price Index (CPI), stocks got slammed on Friday.
Despite the panic selling, I am steadfast in my belief that prices will rebound and I am predicting a significant market rally starting next week.
The core CPI?which excludes food and energy--rose by 0.4%, twice the 0.2% increase that many economists had forecasted. This was the largest increase in the core rate of the CPI in five years.
While this number is seemingly inflationary, and the Federal Reserve will almost certainly hike rates by another quarter of a percent when it meets on May 16, I do not believe that we are entering a period of sustained high inflation.
In fact, recent precipitous wealth erosion in the equity markets coupled with past Fed rate hikes will go a long way toward cooling the economy. I expect continued economic growth and tame inflation.
While panic seemed to overtake the markets on Friday, underlying fundamentals of companies are sound and improving. The profit picture is robust and volatility, while disheartening, is part of the new market environment that we are in.
What?s more, I am encouraged by the strong profit reports out last week from chipmaker Advanced Micro Devices (NYSE: AMD - Quotes, News, Boards), computer manufacturer Gateway (NYSE: GTW - Quotes, News, Boards) and workstation pioneer Sun Microsystems (NASDAQ: SUNW - Quotes, News, Boards). I expect continued robust earnings from other tech bellwethers in the weeks ahead.
Why am I encouraged by results from companies that some argue were priced to perfection? Because over the past few days many pundits have expressed skepticism over the ability of companies like Sun to hit estimates and others questioned whether there would be a resumption in PC demand following the Y2K lockdown.
I have always argued that markets are rational and they weed out the excess. While this holds true today, the process of weeding out the excess has resulted in too much deflation in the prices of many solid, well-financed companies. It is those companies that investors should focus on.
Why do I think the markets will come back? Because, as even Alan Greenspan concedes, we are in extraordinary times. I believe that inflation will remain in check. Competitive pressures will result in the inability of companies to pass costs onto consumers and productivity improvements are impressive and will continue.
We have seen panic selling and I believe that investors have repatriated money form the markets to pay taxes this past week. I believe that there is a lot of money on the sidelines waiting to pour into the market; institutional investors are just waiting for the dust to settle down.
When the dust settles, and I believe that it will soon, money will pour back into the markets. I predict that investors will look back on this time in six months as a historic buying opportunity.
<< Previous Page SATURDAY GROUP: Don?t Panic!
Page: 1, 2
SATURDAY GROUP: Don?t Panic!
Page: 1, 2
individualinvestor.com
So where are the opportunities? Stay with the quality companies with solid financial positions and improving business prospects. As always, I have a few names for everyone.
In the Internet space, stick with the leader Yahoo (NASDAQ: YHOO - Quotes, News, Boards). It has a dominant position with solid finances. It will continue to thrive.
I also like incubator company CMGI (NASDAQ: CMGI - Quotes, News, Boards). I am encouraged by the ability of online grocer Peapod (NASDAQ: PPOD - Quotes, News, Boards) to raise capital in the current market environment. Investors will continue to fund Internet companies with franchises.
Among low multiple turnaround stocks, I especially like Motorola. Motorola (NYSE: MOT - Quotes, News, Boards) was sold off way too far on its earnings release. It has made great strides turning itself around.
While investors were disappointed with its guidance, results are being impacted primarily because demand is strong and component shortages are adversely impacting Motorola's ability to meet demand. The stock is too cheap at around 25 times next year's earnings.
Little surprise, I also like Novell (NASDAQ: NOVL - Quotes, News, Boards). Its business will continue to improve and its valuation is way too cheap with the stock at current levels.
I also like Dell Computer (NASDAQ: DELL - Quotes, News, Boards). Dell will successfully penetrate the high growth server market and will benefit from growing PC sales. The company is a leader and its stock has held up well in the market sell off.
In the chip space, Applied Materials (NASDAQ: AMAT - Quotes, News, Boards) will have stellar numbers this quarter, and the outlook for the remainder of the year is also bright. It is a winner and it will bounce strongly.
In the networking space, I have been positive on Lucent (NYSE: LU - Quotes, News, Boards) since its pre-announcement last quarter. If Lucent hits estimates this quarter, and I think that it will, shares will move sharply higher. Its growth prospects are sound and its valuation is very low in comparison to other networking stocks.
In the biotech arena, I continue to like genomics leader Human Genome Sciences (NASDAQ: HGSI - Quotes, News, Boards). The company has successfully raised an enormous amount of capital, is in human clinical trials with products, and has the potential to be the next major pharmaceutical company.
The above mentioned are just a few names. Investors should stick to the market leaders. While calling a bottom is difficult at best, it is better to be early than late. Those companies with leadership market positions and sound resources will come roaring back.
I am not worried. Neither should you be worried.
How are you feeling? What is going through your mind? Are you scared, tired, worried, confident, confused? Think now?s a time to bottom-fish? What are your favorite stocks? Tell us on our Bull Sessions board.
<< Previous Page: 1, 2 Next >>
Like this Article?
TODAY
DAILY ANALYSIS
Five IPO Un-Lockups to Watch This Week
MCI WorldCom?s Sprint to the Internet
Paper Stocks: Where All Things Conspire to Inspire
Don?t Be Fooled by Cost of Broadband Buildout
Bank on Strong Earnings from Banks and Brokers
Earnings Watch ? 4/17
Focus on Long Term in Tech Earnings
Old Economy Stocks Should Post Solid Numbers
Pharmaceuticals Earnings Will Show Sector?s Strength
Radar Screen on Insider Trading
After Hours Action: The Bottom Fishers Are Out
Now Showing at Video Stores: ?Net Strategies
Chip Stocks Rake in the Earnings
6 Dot Coms Too Cheap to Ignore
8 Tech Stocks That Could Rock the Market
DID YOU MISS A DAY?
Last 7 Days Archived
--------------------------------------------------------------------------------
|
