From Opposite Sides, Merrill Analysts Find That Tech Shares Are Still Shaky
By KAREN TALLEY
Dow Jones Newswires
NEW YORK -- Merrill Lynch & Co.'s teaming, in a research report, of its "technical" and "fundamental" stock analysts may not be nearly as controversial as Elton John and Eminem singing a duet at the Grammys, but it still is provocative.
The market researchers -- who traditionally rarely communicate and often work on different floors -- cooperated to look at the technology sector and found that tech stocks will remain distressed into 2002.
"Tech stocks look awful," the group's report said. "The best thing we can say is most tech stocks have collapsed, so downside may be limited at this point."
The teaming of technical and fundamental analysts isn't unprecedented, but it is unusual on Wall Street. At investment firms, the two groups are usually separate because their research can produce different views of the same stocks -- with one recommending "buy" and the other saying "not so fast."
"People look at technical and fundamental analysis as a yin-yang thing of opposing forces," said Steve Milunovich, the Merrill Lynch first vice president who oversaw the effort. "Actually, they can be quite complementary." Technical analysts use mathematical equations, chart movement and historic upward and downward indicators to reach their conclusions. Fundamental analysts rely on measures such as industry trends, competitive positioning, balance sheets and profits and losses.
Looking at technology stocks, the Merrill analysts concluded the group "could trade in a range and take a breather for a couple of years."
They said investors might do best to steer clear of tech's biggest companies. That amounts to sidestepping former turbocharged performers such as Intel Corp., Nortel Networks Corp., Cisco Systems Inc. and Alcatel SA. The researchers prefer such companies as Citrix Systems Inc., Electronic Data Systems Corp. and Lexmark International Inc.
Mr. Milunovich said his firm's two groups of analysts melded so well they might come together for future projects. There was no word on whether the fundamental and technical analysts hugged each other at the end of their collaboration, as Elton and Eminem did.
Write to Karen Talley at karen.talley@dowjones.com |
