For the WCOM longs who are in dire need for good news:
news.morningstar.com
Stocks That Fund Managers Are Buying
by Kunal Kapoor | 06-22-01 | 05:00 PM | E-mail Article to a Friend
With telecom stocks in the dumps, which ones are attractive? This week we spoke to some value managers who are trying to sort through the telecom wreckage. While these managers are wary of many stocks in the sector, there are several that might appeal to bargain hunters.
PrimeCap Team Likes Worldcom and Sprint
The managers of Vanguard's Capital Opportunity VHCOX and Primecap VPMCX funds like to buy growth on the cheap, and they think they've found it with long-distance providers WorldCom WCOM and Sprint FON. Howard Schow, Theo Kolokotrones, and Joel Fried argue that over the past few years, upstart telecoms have raised a ton of money, which has allowed them to add to industry capacity, forcing down prices. With investors no longer willing to fund these money-losing telecoms, many will go out of business, giving long-term survivors such as Sprint and WorldCom better pricing power.
Moreover, the managers note that Sprint has more than 8 million local-telephone customers. In sales of local-telephone operations, each local subscriber typically has been worth several thousand dollars. Thus, Sprint's local customers alone more than justify the firm's current $16 billion market cap. Indeed, that implies that the market has placed a negative value on Sprint's long-distance operation, and management thinks that is unjustified.
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