Goldman Analysts Say Tech Stocks Good Bet for 2001:
10/3/00 1:11:00 PM
Source: Bloomberg News
URL: cnetinvestor.com
New York, Oct. 3 (Bloomberg) -- Technology stocks will be a good investment in 2001 because the economy's expansion will slow and concern about rising interest rates will diminish, Goldman Sachs analysts Abby Joseph Cohen and others said.
Recent declines in technology stocks are overdone, Goldman Sachs analysts Rick Sherlund and Laura Conigliaro wrote in a note to clients. They favor companies in such businesses as data and storage networking and electronic-business software, including Cisco Systems Inc., Juniper Networks Inc., EMC Corp. and Network Appliance Inc., Conigliaro said.
The Nasdaq Composite Index, which is weighted with technology- related companies, had fallen about 12 percent this year through yesterday. The Federal Open Market Committee, the policy-making arm of the Federal Reserve, has increased U.S. interest rates six times since June 1999. The committee today decided to leave the overnight bank lending rate at 6.5 percent.
''If there is one key message to portfolio managers, it is that we are still bullish,'' Sherlund and Conigliaro wrote. ''While we are not calling the bottom at this point, we would guess that investor perception will be more positive by November and December.''
Sherlund said most technology-related spending will go to companies that lead in their respective industries.
Shares of Cisco gained 50 cents to 56. Juniper fell 4.69 to 201.44. EMC fell 5.31 to 93.94. Network Appliance fell 1.86 to 120.31.
Decelerating Growth
U.S. economic growth is decelerating to an annual rate of 3 percent to 4 percent from 8.5 percent last winter, Cohen wrote in a note to clients. She predicted the S&P 500 Index could rise about 9.5 percent to 1575, by the end of 2000, an estimate she has given before. She predicted the index would reach 1650 by mid- 2001.
''Equity markets perform best not when growth is at its most rambunctious but, rather, when investors have confidence in the durability of growth,'' Cohen wrote.
Many mutual funds' fiscal years end in October. Fund managers typically sell unsuccessful holdings in September and October to prepare for taxes and to balance portfolios with successful investments, Cohen wrote.
Stocks could rally in November as individuals invest year-end bonuses and fund managers make new investments for the coming year, she wrote.
Earnings warnings, such as recent announcements by Xerox Corp., Apple Computer Inc. and Intel Corp., have historically occurred during the final three or four weeks of a quarter, Cohen wrote. As a result, the number of profit warnings for the quarter could slow going forward.
''There is seasonality in profit revisions,'' Cohen wrote. ''We're now likely at the worst point.'' |
