"Jubak's Picks"--MSN, 6/26/00...
moneycentral.msn.com
>>>June 26, 2000
For me, the process of finding profitable stocks is almost as rewarding as the results. So I first write about the strategies, trends and emotions of Wall Street. Then to separate what actually works from what only seems like a great idea, I find individual stocks that embody the approach. Finally, I track these stocks to see how the ideas are playing out. For a full description, see my Nov. 7, 1997 column.
Here's a list of the stocks I'm currently following, along with a list of recently dropped stocks.
Quotes delayed at least 20 minutes. To track performance in Jubak's Picks fairly, the "Price Then" displayed is the closing price on the date each add/drop was made. Until we have a closing price on the first day of the pick, we display the previous day's close as a placeholder.
Company Symbol... Date Picked.. Price Then.. Price Now... Today's Change... Jubak's Gain/Loss
Transocean Sedco Forex Inc. RIG 6/23/00 $54.500 $51.625 -$1.875 -5.28%
Transocean Sedco Forex (RIG) is the world's largest offshore oil-drilling contractor -- and that gives the stock tremendous potential as the drilling market recovers from its near collapse in 1998 and 1999. Analysts project that the company will earn 82 cents a share in 2000 and $2.16 a share in 2001. The stock is likely to fluctuate with movements in the price of oil, but as long as it stays above $25 a barrel, the earnings picture for Transocean looks solid. I'm adding the stock to Jubak's Picks with a target price of $70 a share for March 2001.
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BroadVision, Inc. BVSN 6/16/00 $49.813 $53.813 -$2.625 8.03%
I'm adding BroadVision (BVSN) back to Jubak's Picks with a December 2000 target of $65 a share. I first recommended BroadVision in my November 5 column, "3 stock picks to go with the mo'," when the stock was near $28 a share. I then sold the position out of Jubak's Picks on March 10 at $86.08 because the stock then appeared too pricey to me. After falling to a mid-April bottom near $27, the stock has rallied, but it's still a good 40% below the March 10 price. And in the last week or so, it has looked poised to break decisively above resistance near $50. As I wrote in " No place to hide in tech stocks," my reasons for liking the stock haven't changed since my initial November buy. One new deal also deserves special mention: BroadVision has partnered with Bank of America (BAC) to form a new company that will build internal corporate Web sites for businesses. Hewlett-Packard (HWP) also is a partner in the deal.
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Atmel Corporation ATML 6/13/00 $43.563 $38.875 -$2.938 -10.76%
I'm adding Atmel (ATML) to Jubak's Picks to get more exposure to the chip sector -- and one of its fastest-growing segments -- at a time when solid revenue and earnings growth are likely to become relatively scarce commodities. As I wrote in "Blue-chip chip stocks," the company's silicon germanium technology means the addition of high-speed, low-cost radio-frequency components to existing products in flash-memory and wireless baseband chips. This makes Atmel one of the few companies in the world able to put together a cheap, silicon-only integrated solution for the emerging Bluetooth wireless-communications standard. As of June 13, my target price is $60 by December.
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ICOS Corporation ICOS 6/9/00 $42.750 $43.375 +$0.500 1.46%
The announcement of a 50/50 joint venture between ICOS Corp. (ICOS) and Texas Biotechnology (TXB) to develop the latter company's novel endothelin-A-receptor antagonists has pushed me off the fence on ICOS. I'm adding this special situation to Jubak's Picks now (see my column, "3 stocks with something special"). In the deal, ICOS acquires another late-stage compound to bolster a pipeline of potential drugs that includes Cialis, the company's potential Viagra killer. As of June 9, I'm setting a target price of $60 a share for March 2001. (Full disclosure: I own shares of ICOS.)
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Applied Materials, Inc. AMAT 4/4/00 $98.125 $90.094 -$0.656 -8.18%
I thought I'd never get a chance to buy Applied Materials (AMAT) on a substantial dip. This 800-pound gorilla of the chip-making equipment sector just doesn't fall that much once the sector starts cooking. At a recent price of $85, Applied Materials sells for just 29 times the current consensus estimate for the fiscal year that ends in October 2001. As of May 12, I continue to recommend the stock for patient investors willing to sit out the current technology troubles. I am stretching out my target price, however, to $135 by December from the previous $135 by October. (Full disclosure: I own shares of Applied Materials.)
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JDS Uniphase Corporation JDSU 3/21/00 $127.000 $123.594 +$0.156 -2.68%
In the first quarter of 2000, this optical networking gorilla-in-the-making proved it could execute, showing exactly the kind of growth that I was looking for when I added it to Jubak's Picks in my March 21 column ("Half a strategy is worse than none"). And management showed that it could generate this kind of growth while also juggling major additions to manufacturing capacity. Still, in the current market, I know it's going to take time to convince skeptics that the company can continue to deliver. So as of April 28, I'm lowering my target price on JDS Uniphase (JDSU) to $134 by December from the previous $180 by October. (Full disclosure: I own shares of JDS Uniphase.)
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Network Appliance, Inc. NTAP 3/21/00 $92.445 $80.875 +$3.938 -12.52%
On the Internet, you can never have too much storage. Network Appliance's (NTAP) dedicated storage appliances have been winning big when it comes to applications such as electronic commerce and speeding up the basic infrastructure of the Internet itself. As I wrote in "Half a strategy is worse than none," I think the company is about to report a great quarter, and it's time to return this former Jubak's Pick (in the second quarter of 1999) to the portfolio with a December target price of $108. (Full disclosure: I own shares of Network Appliance.)
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Texas Instruments Incorporated TXN 3/17/00 $84.938 $73.438 -$2.313 -13.54%
Only a very nervous market would sell Texas Instruments (TXN) on the April 17 earnings news, but this market did. As I had anticipated when I added the stock to Jubak's Picks ("Just your typical 3-day correction?"), management noted that the growth rate for sales of the company's semiconductors should accelerate as the year goes on. Operating margins should also expand as the company continues to make improvements in its manufacturing efficiencies. I'm keeping my March 17 target price of $101.50 by October. (Full disclosure: I own shares of Texas Instruments.)
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PMC-Sierra, Inc. PMCS 3/17/00 $210.188 $188.000 +$1.188 -10.56%
On April 13, PMC-Sierra (PMCS) reported earnings of 17 cents a share, a penny above the Wall Street consensus estimate for the quarter, and up from 6 cents a share in the same period a year earlier. Sales rose by 106% from the year-earlier quarter and 27% from the immediately previous quarter. That jump in sales also beat analyst estimates of 15% sequential growth. In a bear market, however, nobody pays any attention to good news. The stock fell a total of $29.38 a share on April 13 and 14. The good news, however, is in my opinion likely to make PMC-Sierra one of the stocks that will bounce back most quickly from this sector rout. The fundamental story here continues to show amazing top- and bottom-line growth. I continue to like the stock, but I think this bear market is likely to stretch out until the fall. So I'm cutting my target price on PMC-Sierra to $260 by December from the current $315 by October. (Full disclosure: I own shares of PMC-Sierra.)
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Mercury Interactive Corporation MERQ 3/10/00 $114.875 $90.375 -$4.188 -21.33%
Mercury Interactive (MERQ) didn't get any respect when it reported superlative earnings on April 13. The company earned 11 cents a share, a penny over the Wall Street consensus. That was an 83% increase from the 6 cents a share earned in the first quarter of 1999. Revenue grew by 61% from the year earlier quarter, fueled in part by the faster-than-anticipated adoption of the company's new LoadRunner ActiveTest product. Like PMC-Sierra, Mercury Interactive sold off after the news, falling $8.50 a share on April 13 and 14. I continue to like this stock -- what's not to like about 83% earnings growth? -- but I do think that the bear market in technology stocks will take some getting over. So I'm lowering my target price on Mercury Interactive to $103 a share by December from the current $135 by October. (Full disclosure: I own shares of Mercury Interactive.)
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Cable and Wireless plc CWP 3/7/00 $74.500 $51.625 -$1.250 -30.70%
As I wrote in "Catch profits by following telecom dollars," I'm buying Cable & Wireless (CWP) as a way to play the continued consolidation of the global telecommunications industry. With outposts throughout Asia, the United States and Europe, Cable and Wireless is the exact piece that many telecommunications companies with global ambitions are missing. As of April 7, thanks to the March sell-off in technology, I'm lowering my target price to $90 for December 2000 from the previous $105.(Full disclosure: I own shares of Cable and Wireless.)
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LSI Logic Corporation LSI 1/21/00 $41.000 $64.250 -$1.500 56.71%
When I added LSI Logic (LSI) to Jubak's Picks on Jan. 21, I wrote that I expected the company's big growth would come from its chips for Sony's Playstation, for DVD, and for TV set-top boxes ("Time for a little discipline"). Well, when the company reported earnings April 25, communications chips turned out to be the huge growth story. Management reported that revenues in this segment will grow by 60% this year and by yearend will represent 50% of total company revenue. Since it will take time for this value to come out in the current market, however, as of April 28 I'm setting a very conservative target price of $82 a share for December to replace the previous $94 by June. (Full disclosure: I own shares of LSI Logic.)
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Puma Technology, Inc. PUMA 12/14/99 $41.813 $28.125 -$2.500 -32.74%
As I reported in my Dec. 14 column, "5 stocks to 'disrupt' a lagging portfolio," Puma Technology (PUMA) is trying to build a complete portfolio of software to link wireless devices to the Internet, and to computers and computer networks. The stock has been hammered in the recent technology correction, but the company's May 25 earnings report contained lots of good news. The company reported a loss of just 6 cents a share, a whopping 5 cents a share better than Wall Street expected. And deal momentum is up too. With two new product launches this summer, the company should have no trouble keeping the momentum going either. It will take the stock a while to come back, though, so as of May 30 I'm setting a new price target of $43.00 a share for May 2001, down from my previous target of $65 by June. (Full disclosure: I own shares of Puma Technology.)
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Citrix Systems, Inc. CTXS 11/30/99 $47.438 $19.500 +$0.813 -58.89%
As I wrote in "Splat! Citrix and Qualcomm are down, but are they out?," Citrix Systems (CTXS) management seems to have lost the capacity to accurately project sales in the midst of a transition in how it sells its product and a move to sell directly to large corporations. This may be a short-term problem, but it seems wise to take a show-me attitude toward the stock, especially since quarterly comparisons in the third and fourth quarter will be very difficult this year thanks to great sales in 1999. I'm setting a short-term target of $26 for September -- based on my belief in a probable bounce for the entire technology sector in the period after the June Federal Reserve meeting -- and assuming the company actually hits its new targets when it reports in July. After that, I'll re-evaluate my recommendation for this stock -- originally made in my column, "Stocks that'll hop to ?apps on tap'." (Full disclosure: I continue to own shares of Citrix Systems.)
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RF Micro Devices, Inc. RFMD 11/30/99 $67.938 $92.188 -$0.250 35.69%
As I wrote in "Fast and wireless -- Nirvana on the Net," RF Micro Devices (RFMD) is probably the best stock to buy to invest in the explosion of wireless communications, including wireless broadband -- assuming you already own Nokia and Wind River Systems. RF Micro Devices hit my $140 target price intraday on June 6, but given the strength of this story, I'm not inclined to sell here. Instead, as of June 13, I'm raising my target price to $155 by October 2000.(Full disclosure: I own shares of RF Micro Devices.)
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Nortel Networks Corporation NT 11/23/99 $39.656 $68.125 +$2.250 71.79%
On April 25, Nortel Networks (NT) reported that soaring demand for optical networking and Internet equipment had sent quarterly earnings to 23 cents a share, well above the 18-cents-a-share Wall Street consensus. Earnings grew by 64% from the year-earlier quarter. Revenue grew by 48%. This is exactly what I was hoping for when I added the stock to Jubak's Picks last November ("Stocks moving at the speed of light"). And things look even better in the quarters ahead, management reported. As of April 28, I'm stretching out and raising my target price for the stock to $76.50 by December 2000 from the previous $72.50 by June.
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Global Crossing Ltd. GBLX 11/19/99 $45.438 $27.063 -$1.313 -40.44%
As I wrote in "Stocks that'll hop to 'apps on tap'," Global Crossing (GBLX) is a good play on the creative destruction that now surrounds the field known as distributed applications software -- or "apps on tap." For a current price about $20 a share below the stock's 52-week high, investors also get exposure to the company's two telecommunications partnerships in China -- one with Hutchinson Whampoa, and the other with Softbank and Microsoft. As of April 7, I'm lowering my target price on Global Crossing to $49 a share by June from the previous $60. The damage done in the March technology sell-off will take time to fix. (Full disclosure: I own shares of Global Crossing.)
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E*TRADE Group, Inc. EGRP 11/9/99 $32.313 $16.375 -$0.688 -49.32%
Worries about higher interest rates and falling trading volumes have knocked the stuffing out of E*Trade (EGRP), a stock I recommended in my column "5 stocks ready to join the party.," But E*Trade should come out of this downturn in better shape than most of its competitors since the company now gets only half its revenue from brokerage transactions, thanks to its drive to become a financial supermarket offering banking and brokerage services. I'd expect that the stock will stay dead money through the summer as it labors under the weight of an active Federal Reserve and continued low trading volumes. But the fall should see the Fed on the sidelines and a pickup in trading volumes. As of May 30, I am setting a new target price of $30 a share for December 2000, down from my previous target of $53 by September. (Full disclosure: I own shares of E*Trade.)
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America Online, Inc. AOL 11/5/99 $72.750 $52.313 -$1.188 -28.09%
In the long run I think the combination of America Online (AOL) and Time Warner (TWX) will result in the media company to beat. In the short run, however -- that is, over the first half of 2000 -- the deal is likely to keep shares of AOL from rising much beyond $70. As I wrote in "What's AOL worth now?" on January 18, investors who want to own a go-go Internet stock will be selling and it will take a while for traditional growth investors to get comfortable with the new company. But I think the strategy behind this deal is ultimately a good one. As of Jan. 21, I'm upping my target price for America Online to $88 a share for February 2001 from the previous $85. (Full disclosure: I own shares of America Online.)
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Global Marine Inc. GLM 9/17/99 $18.688 $29.375 -$0.125 57.19%
Global Marine (GLM) released decent, if not great, news in its April 14 earnings report. Earnings before charges came in at 9 cents a share, 3 cents above the Wall Street consensus. That wasn't as great as it sounds, however. That 9 cents was down steeply from the 21 cents a share the company earned in the same quarter of 1999, and earnings were just about flat with the last quarter of 1999. I think it's safe to say that the price of Global Marine, up almost 150% since the end of 1998, is still way ahead of the actual recovery in earnings at the oil drilling and service company. I'm stretching out my target price of $31 a share to November from the current September. (Full disclosure: I own shares of Global Marine.)
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Wind River Systems, Inc. WIND 5/21/99 $20.313 $39.188 +$1.250 92.92%
I added Wind River Systems (WIND) to Jubak's Picks with a target price of $30 a share for May 2000. As I wrote in "Who wins when life goes digital," the company will be a major beneficiary of the rapid growth in the market for specialized appliances that can communicate over the Internet. The stock took a beating after an earlier earnings warning, but has rebounded strongly in the rest of calendar 1999. The March sell-off in the technology sector once again took a bite out of the stock even as fundamentals were improving. As of April 7, I'm setting a new target price for Wind River of $78 a share by October to replace the previous June target of $70. (Full disclosure: I own shares of Wind River Systems.)
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Nokia Corporation NOK 2/2/99 $16.484 $52.438 -$0.813 218.11%
Nokia (NOK) on April 28 reported earnings, total revenue and wireless phone revenue all well above what Wall Street was expecting. And Nokia's management raised its target for 2000 sales growth to 40% from the previous 30%-40% range. I believe the stock still has room to run. The company has been increasing market share in the high end of the market and is likely to get a bigger boost than its rivals from the trend toward wireless Internet that I laid out in my Nov. 30, 1999 article, "Fast and wireless -- Nirvana on the net." I'm raising my target price as of May 2 to $72 by October from the previous $65 by June. (Full disclosure: I own shares of Nokia.)
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WorldCom, Inc. WCOM 8/14/98 $33.458 $37.938 +$0.188 13.39%
WorldCom (WCOM) is the first telecommunications company to put it all together. As I wrote in "A buy in this market?," since the purchase of MCI closed in the third quarter of 1998, the combined company is able to offer domestic and international voice services, data networking, Internet access and management. The company also seems to have earned new respect from institutional investors, who snapped up WorldCom's record $6 billion bond offering at a very modest interest rate. The plan to acquire Sprint (FON) continues to hang over the stock like a black cloud and MCI WorldCom will have trouble moving up until investors know how big a pound of flesh regulators will want before approving the deal. As of April 7, I'm stretching out my $70 target price from June to December. (Full disclosure: I own shares of MCI WorldCom.)
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Schlumberger Limited SLB 7/09/98 $67.375 $73.813 -$0.688 9.55%
I added Schlumberger (SLB) to Jubak's Picks in July 1998 ("Take a walk on the dark side") with a price target of $85 in a year. It hasn't managed to hit my revised $74 target price, but I like the stock's recent performance. Schlumberger's relative strength has moved up from 71 for the last 12 months to 72 for the last six months to 76 for the most recent three-month period. So I think this one deserves more time. As of March 3, I'm raising my target on the stock to $84 by September from the previous $75.
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Cisco Systems, Inc. CSCO 9/12/97 $8.028 $61.750 -$0.875 669.18%
I first recommended Cisco Systems (CSCO) in September, 1997 "Catching The Cisco Express," calculating that at a split-adjusted price of $8.03 or less, buying it and holding for a year would be essentially risk-free. At a recent price of less than $60 a share, I think Cisco Systems is a buy for investors patient enough to wait for a recovery in the technology sector. As of May 12, I'm raising my target price -- but stretching out the time period -- to $83 by December from the previous $81 by June. (Full disclosure: I own shares of Cisco Systems.)
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RECENTLY DROPPED
Company Symbol... Date Dropped... Price Then... Price Now... % Change Since Dropped
Commerce One, Inc. CMRC 6/16/00 $50.750 $41.750 -17.73%
Commerce One (CMRC) has enjoyed quite a pop since May 30, when I set a new buying limit of $47 a share and a new target price of $80 a share for May 2001 ("Bargain hunters, don't jump the gun!") It was $37 at the time. But I think it's now struggling to pierce heavy resistance in the $55-to-$60 range. So I'm going to use the nearly 50% improvement in price since May 30 to exit the stock. I'm down approximately 50% in Commerce One since I added it to Jubak's Picks at $109.25 on Jan. 4, 2000. (Full disclosure: I'll be selling my personal position in Commerce One three days after this item is posted.)
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SDL, Inc. SDLI 6/2/00 $260.375 $278.250 6.87%
Thanks to a boost from Lucent Technologies' purchase of Chromatis Networks, a private fiber-optic equipment maker, for $4.5 billion in stock, SDL went convincingly through my $220 October target price on May 31. I think this marks the high end of the current trading range for the stock, and so I'm going to take my profit here. The stock is up about 296% since I added it to Jubak's Picks on Nov. 5, 1999 ("3 stock picks to go with the mo'") at a split-adjusted $63.125 a share. (I will be selling my personal position in the stock the usual three days after this column is posted.)
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Vitesse Semiconductor Corporation VTSS 5/2/00 $62.625 $79.750 27.35%
I'm continuing to raise cash in Jubak's Picks by selling into the current technology rally, since I think I'll need it to pick up a bargain or two during the summer months. So I'm selling Vitesse Semiconductor (VTSS) with a 54% gain since I added it to Jubak's Picks on Oct. 29, 1999 at $45.875. If you don't need to raise cash, don't care about summer volatility or don't believe the summer will be particularly risky for technology stocks, you should seriously consider holding Vitesse for the long term. (Full disclosure: As per the rules of Jubak's Journal, I will be selling my shares of Vitesse three days after the column is posted.)
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National Semiconductor Corporation NSM 4/28/00 $60.500 $68.750 13.64%
I'm going to take my own advice and use the decent recovery in the technology sector to build up a little cash in Jubak's Picks. Nothing wrong with the story at National Semiconductor (NSM) at this point, but I do want to lighten up on technology for the summer. So I'm selling National Semiconductor out of Jubak's Picks for a 50% gain since I bought the stock at $41.25 on Dec. 12. Investors who have a longer time horizon than the 12 to 18 months I use in this portfolio should strongly consider holding onto the stock. It should be a solid long-term performer. (Full disclosure: As per the rules of Jubak's Journal, I'll be selling the National Semiconductor shares I hold in my personal account three days after the column is published.)
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Halliburton Company HAL 4/4/00 $40.000 $46.875 17.19%
Halliburton's (HAL) international business continues to recover, but more slowly than estimated. That's important, since about 70% of the company's revenue comes from overseas. I think Halliburton's earnings are still headed up into 2001, but I'm worried about short-term downgrades and estimate cuts by analysts. I'm selling with an 11% gain since I recommended the stock on March 23, 1999, at $37.50 a share.
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BroadVision, Inc. BVSN 3/10/00 $86.083 $53.813 -37.49%
After watching BroadVision (BVSN) climb 220% since I added it to Jubak's Picks at $26.94 just about four months ago ("3 stock picks to go with the mo,") I think much of the company's near-term future is in the stock price. And with volatility likely to increase in the technology sector as we head toward summer, I just don't find the risk/reward ratio that appealing. I'll be selling my personal position, as per our rules, three days after the column is posted.
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Metromedia Fiber Network, Inc. MFNX 3/7/00 $40.688 $38.000 -6.61%
Metromedia Fiber (MFNX) went through my $80 target price on March 2. While it remains in my Future 50 portfolio for investors with a longer time frame, I'm dropping it from Jubak's Picks (with its 12-18 month focus) with a 140% gain since I recommended it on June 25, 1999 at $34.63. As I wrote in "Catch profits by following telecom dollars," I'll be selling Metromedia Fiber from my personal account three days after the column is posted.
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Sun Microsystems, Inc. SUNW 2/29/00 $95.250 $90.438 -5.05%
The fundamentals haven't changed for Sun Microsystems (SUNW) -- the company should continue to benefit from the growth of the Internet. But I think it's important to recognize that part of the fuel that's taken the stock on a 38% run since I added it to Jubak's Picks on Jan. 7 at $68 a share ("Internet stocks for widows and orphans,") has been sentiment. As I wrote in "Will your winners race on or run out of gas?," I think that is about to change. So I'm going to take my 38% profit on Sun Microsystems here. (Full disclosure: As per the rules of Jubak's Journal, I'll be selling the Sun shares I hold in my personal account three days after the column is published.)
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Dell Computer Corporation DELL 2/25/00 $41.250 $48.469 17.50%
I think Dell Computer (DELL) is the class of the PC industry, but for the next four to six months the stock is sailing into too much of a headwind. Add the fact that I want to clear some room in Jubak's Picks for any juicy buys created by the volatility I expect in the next five months, and Dell becomes a sell. The stock is down a little more than 1% since I recommended it at $40.625 in my Nov. 2, 1999, column, "10 stocks to buy on the dip,"
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