Jack, you might want to read this excerpt from Dow Jones regarding the telecommunications industry and where they key analysts are focusing their attention, it kind of says it all:
Analysts 1997 Survey: Telecommunications Carriers
Dow Jones News Service ~ June 19, 1997 ~ 12:13 am EST
By Leslie Cauley
Staff Reporter of The Wall Street Journal
The telephone carriers industry has been producing some stock-picking
opportunities since federal telecom legislation was enacted in early 1996. The new
laws encourage local, long-distance and cable carriers to go after one another's
customers.
In this new environment, all three of the industry's top stock pickers in 1996 favor
small, nimble companies that can grow fast by picking up slivers of market share
from the giants such as AT&T and the regional Bell operating companies.
No. 1 in the sector was Stephanie Georges Comfort of Morgan Stanley, with a
51% return. Her biggest winner was MFS Communications. Five of her six picks
rose, the only exception being AT&T.<p>
Ms. Comfort, who is making her All-Star debut, says that she has become "much
more focused" on new entrants in the business. After being shut out for years, new
entrants finally have a shot at "a little bit of market share" in the $100
billion-and-growing U.S. telecommunications market, she says.
She is bullish on a number of smaller players, including MFS, ICG and Intermedia.
She is less optimistic about the Bells, currently rating them all "neutral." Last year,
she even slapped a rare "sell" rating on two of them -- Ameritech and Pacific
Telesis, which has since been absorbed by SBC Communications.
However, unlike many of her peers, Ms. Comfort has a strong buy on AT&T. She
believes the market has overreacted to the company's fits and starts. "We think
there's a turnaround story there at some point over the next six months," she
declares.
The No. 2 stock-picker, Jack Grubman of Salomon Brothers, is a three-time
All-Star. He notched a 48% return, as gains in MFS, ICG and Worldcom
propelled his performance. Seven of his nine recommendations rose.
Mr. Grubman, a former AT&T executive, studiously avoids most of the big-name
players, such as the Bells and AT&T, which, as clients know from his
sometimes-stinging memos, badly underperformed the market over the past year.
He does consider MCI Communications and Sprint to be "good stocks," however.
One of Mr. Grubman's favorites is WorldCom, a company he describes as being
"the intersection of everything we like." WorldCom owns local and long-distance
facilities as well as "the largest Internet platform in the world," Mr. Grubman says.
"No carrier in the world has the set of facilities that WorldCom does."
Others might fret about WorldCom's puny market share -- less than 1% globally,
and only about 4% in the U.S. -- but Mr. Grubman sees it as an advantage.
"WorldCom has no market share to lose," he says, "only market share to gain,
which it has been and will be for some time."
Stuart Conrad of Deutsche Morgan Grenfell, new to the All-Star roster, placed
third with a return of 41%. His batting average was lower -- seven stocks, four
winners -- but his gains in Tel-Save Holdings, MFS, ICG and MCI were hefty
enough to outweigh the losses.
Mr. Conrad says his focus these days is almost exclusively on new entrants and
smaller carriers. Among his favorites are Teleport and Brooks Fiber, which offer an
array of phone services over their own networks in competition with the Bells.
Though he is a former MCI executive, Mr. Conrad believes the big, established
players, such as AT&T and MCI, are in for a rough ride. However, he does have
an "accumulate" rating on AT&T, believing that "most bad news is on the table" and
is already factored into its AT&T's sagging stock price. |
