8 stocks likely to pop in the telecom squeeze
from Jim Jubak on 11/14/00
He likes CIEN, CORV, VTSS, AMCC, ERICY, NOK, SONS, & TUTS.
moneycentral.msn.com
Portion mentioning TUTS:
Revenue-generating platform builders. That's a mouthful, I know. I'm talking about companies such as Sonus Networks (SONS, news, msgs), which makes gear that translates voice signals into packets that can travel on the Internet, so that an Internet service provider can offer voice telephone service to its customers. Another example would be Tut Systems (TUTS, news, msgs), which just introduced a new platform, the IntelliPOP, that lets a telecom service company provide an array of broadband services from a single platform to all the residents of an apartment building or other high-density location.
These are the kinds of telecommunications equipment companies and stocks that I'd be looking for during the current squeeze on the sector. Some of them are now trading a long way off their 52-week highs. On Nov. 8, after the pounding following Cisco's inventory warning, Applied Micro Circuits was trading 40% below its high. That actually looks good when you compare it to the damage done to Ericsson this year -- that stock is 50% off its 52-week high. And both stocks have performed far better than Lucent Technologies, which is down about 75% from its high.
I wouldn't buy any stock in this sector -- or indeed in this market -- just because it's cheaper than it once was, however. This year, that strategy has just been an invitation to further losses. Multiples, otherwise known as price-to-earnings ratios, have come down hard across the entire technology sector more than once this year, and are quite capable of doing it again.
The investor inclined toward technical analysis would advise waiting on any stock until you see evidence of a sustained upward trend. I think that's sound advice, but tough to act on in a market such as this one that's seen more than one "sustained" rally turn into a precipitous decline. Remember the joy of August and the pain that followed in September?
In this market, I think it's worth putting fundamental analysis and technical analysis to work side by side. I know it's difficult to figure out what any stock is worth right now, but I think it's important to try. In my next column I'm going to see what the fundamentals can tell us about reasonable valuations for Applied Micro Circuits, Ericsson and Lucent Technologies. |
