... February to August 2001 target prices, and my forecast for the balance of 2001 ...
This past February 2, I estimated six month target prices for August 1, 2001 for 13 companies, that, at that time, I had some interest in buying, possibly now.
Here are the results ...
Analog Devices ... target was 33.50 or minus 39% from February 2 ... actual price yesterday was 50.00 ... I missed that by a bunch - Analog did much better than I estimated.
Cisco Systems ... target was 17.50 or minus 50% from February 2 ... actual price yesterday was 20.30 ... good estimate.
EMC ... target was 32.50 or minus 55% from February 2 ... actual price yesterday was 20.90 ... EMC did much worse than I thought.
General Electric ... target was 27.50 or minus 40% from February 2 ... actual price yesterday was 42.80 ... bad miss on my part, GE held up pretty well.
GlobeSpan ... target was 17.50 or minus 50% from February 2 ... actual price yesterday was 15.21 ... good estimate.
Network Appliances ... target was 17.50 or minus 63% from February 2 ... actual price yesterday was 12.48 ... worse than my estimate.
Nortel Networks ... target was 17.50 or minus 51% from February 2 ... actual price yesterday was 8.19 ... wow, what a tumble.
PMC Sierra ... target was 37.50 or minus 45% from February 2 ... actual price yesterday was 33.34 ... good estimate.
Sycamore Networks ... target was 17.50 or minus 40% from February 2 ... actual price yesterday was 7.48 ... yuch.
Sun Microsystems ... target was 17.50 or minus 40% from February 2 ... actual price yesterday was 17.35 ... good estimate.
Teradyne ... target was 17.50 or minus 55% from February 2 ... actual price yesterday was 35.10 ... Teradyne held up very well, bad miss on my part.
Veritas ... target was 45 or minus 48% from February 2 ... actual price yesterday was 43.23 ... good estimate.
What is going to happen for the balance of 2001?
(1) Equities will continue to rally into early or mid September ... maybe up quite a bit overall from now to then or plus 20 to 25% from August 1.
(2) Then watch out ... by mid-November, we will be down 25 to 35% from where we are today ... the NYSE Composite and the S&P 500 will get hit the worst ... technology stocks will not be hit quite as bad.
U.S. investors will realize during the Q3FY2001 earnings reporting period that economic recovery will not only not happen in Q4, but that we may not start to really turn the corner until the beginning of Q3FY2002 (which starts next July 1).
Earnings estimates for FY2002 are much too high if we do not see light at the end of the tunnel before Thanksgiving. P/Es are also too high historically, and are due to return closer to the average. Volatility in equities has been low in the last few months. I look for it to accelerate in September and October on the downside.
I expect layoffs to continue and perhaps accelerate in the fall. Americans will realize that the economy will not get better for some time. Consumer spending will take a hit as well as consumer confidence. The housing market will slump, perhaps seriously. The U.S. dollar will lose value against the Euro, the British Pound and the Yen. If our currency loses value quickly, look for major outflows of capital. At this point, I am planning on buying December and March S&P puts as an equity hedge (to be bought in September).
My plan ... 35% in equities, 45% in AAA bonds, treasuries and cash, 20% in futures contracts and index options.
Will I be correct in forecasting all this? Probably not. However, do I think that equities will have gained 20% or more on January 1 from where they are now? No, I do not, but we will see in five months.
Disclaimer: The above is my personal opinion. I recommend that you do not base your investment decisions solely on any one person's views or analysis (including mine). Do your own research and take personal responsibility for your investment decisions.
Ken Wilson |
