Seeing Red: A View from the Bottom
Kenneth A. Toudouze, CFA
May 22 2000
The Nasdaq 100 [NDX] makes for an interesting case study. Keeping in mind that we remain bullish about the market in general and the Nasdaq in particular, here are some fast facts for your reading pleasure.
90 percent of the companies in the NDX are down 20 percent from their highs.
10 percent of the NDX stocks are off 70 percent from their highs.
32 percent of the NDX are below their prices from one year ago.
On the flip side, 30 percent of the NDX stocks have doubled within the past year.
What?s the net of all this statistical info? The data suggests extreme volatility has been the case over the past year or so. What it also implies is that we are seeing (and measuring) individual stock capitulations on a broad scale, something not seen in a meaningful fashion over the past few years. This generally would indicate a bottoming of the market.
But this data also implies is that we are getting closer to a significant buying opportunity in technology stocks that hasn?t been available for the past few years. Microsoft [MSFT], Worldcom [WCOM], and Biogen [BGEN], household names all, are trading within 3.4 percent of their respective 52-week lows. Despite similar carnage for a number of NDX names, fully 42 percent of the index has doubled in value from their 52-week lows, which would suggest that these fallen companies have settled in at a more realistic valuation.
Note, too, that the NDX Negative Earnings table below includes several communications services companies?Metromedia Fiber [MFNX], Level 3 Communications [LVLT], Nextlink [NXLK], McLeodUSA [MCLD], Global Crossing [GBLX], and Adelphia Communications [ADLAC]?which are undergoing significant capital investments as they build out their networks.
A few lists for your perusal:
NDX Negative Earnings
Rank
Ticker
Company
Price/sales
multiple
1
MFNX
METROMEDIA FIBER NET
150.95
2
LVLT
LEVEL 3 COMMUN
43.31
3
VSTR
VOICESTREAM WIRELESS
31.68
4
NXLK
NEXTLINK COMMUNIC
21.49
5
CNET
CNET NETWORKS
19.95
6
ATHM
EXCITE@HOME
16.30
7
DISH
ECHOSTAR COMMUN
10.82
8
MCLD
MCLEODUSA
9.96
9
AMZN
AMAZON.COM
9.10
10
GBLX
GLOBAL CROSSING
8.50
11
NXTL
NEXTEL COMMUNICATNS
8.40
12
NETA
NETWORK ASSOCIATES
4.35
13
NTLI
NTL
4.34
14
ADLAC
ADELPHIA COMMUN
2.73
15
USAI
USA NETWORKS
1.92
Note: These ranked worse on a price/earnings basis, and we
further delineated the ranking by adding price/sales as a metric.
NDX Biggest Correction from 52 Wk Hi
Rank
Ticker
Company
Change from
52-Wk Hi
1
LGTOE
LEGATO
-86.0%
2
VISX
VISX
-81.6%
3
NOVL
NOVELL
-80.5%
4
PMTC
PARAMETRIC TECH
-75.7%
5
ATHM
EXCITE@HOME
-74.9%
6
CPWR
COMPUWARE
-74.7%
7
QLGC
QLOGIC
-73.3%
8
ADPT
ADAPTEC
-73.0%
9
CNXT
CONEXANT SYSTEMS
-72.1%
10
QTRN
QUINTILES TRANSNAT'L
-70.1%
NDX Closest to 52-Wk Lo
Rank
Ticker
Company
Change from
52-Wk Lo
1
ADLAC
ADELPHIA COMMUN
0.3%
2
ADPT
ADAPTEC
0.7%
3
MSFT
MICROSOFT
1.2%
4
CPWR
COMPUWARE
1.3%
5
WCOM
WORLDCOM
2.4%
6
BGEN
BIOGEN
3.4%
7
NOVL
NOVELL
3.7%
8
CMCSK
COMCAST SPL 'A'
3.8%
9
NTLI
NTL
4.9%
10
SPLS
STAPLES
6.3%
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