BW/INSIDE WALL STREET: Holiday Bargain-Hunting on the Street
NOVEMBER 13, 2001
By Gene Marcial
It's that time of year when one investor's loser is another's steal. Here are some big names that could become stocking stuffers
With the year's end just around the corner, this is a propitious time to lock in some fire-sale deals. Stock market deals, that is. Some wondrous investing gifts abound that could suit your portfolio.
"Savvy investors are already shopping for holiday bargains in the market," observes George Putnam III, editor of the Turnaround Letter, in Boston. This market newsletter focuses on stocks that it deems are unjustifiably depressed based on their fundamentals -- mainly of the "turnaround" sort -- and are poised to emerge from whatever woes that have hampered them.
Most of these bargains are stocks that investors dump around this time of the year. Two principal reasons why some investors "indiscriminately sell" stocks near yearend:
First, tax-sensitive investors -- individuals and institutions alike -- want to establish tax losses that they can use to offset whatever gains they might have racked up during the year.
Second, some institutional investors dump their losers to get them off their books before they put out their portfolio's annual results. On the Street, this process is called "window dressing."
BEAT THE CRUSH. Although these types of selling usually take place at yearend, the timing in recent years has been pushed up, on the theory that sellers could get better prices and beat the yearend crush. Moreover, some institutions have fiscal years that terminate at the end of October or November.
The irony of all this is that these same stocks that the yearend sellers have jettisoned usually come bouncing back up in price by January. One reason: The selling has abated by then, if not entirely finished. And, invariably, new money flows into the market at the beginning of each year -- thus underscoring even more this so-called January Effect.
Putnam figures that his list of yearend stock bargains also possesses favorable long-term prospects. They're mostly names that aren't exactly throwaways. But they have come under tremendous pressure during the year and are way off their highs. As you might expect, the list includes some of the most beaten-down technology stocks:
Cisco Systems (CSCO ). It supplies most of the Internet's networking gear and is the world's largest provider of high-performance computer networking systems. Currently trading at 16, the stock is down some 56% since Dec. 31, 2000. Its 52-week high was 57.75, and its low is 11.04. But Cisco has been credited with pushing the market up when it recently reported fiscal first-quarter 2002 (ended Oct. 31, 2001) earnings that beat the Street's estimates. The surprise earnings jump cast a favorable light on the entire struggling tech sector and pushed a lot of these stocks higher. So already, Cisco is displaying a rallying mood.
Corning (GLW ). This former major housewares company is now a leading maker of fiber optics and semiconductor components for the telecom and electronics industries. It's currently trading at 7.90, a dismal drop from its high of 113 last year. It hit a low of 6.92 this year. Once a market darling during the Internet bubble, Corning is now left with hardly any bulls to recommend it. This will be a favorite stock for the yearend sellers, according to Putnam.
EMC (EMC ). A leading provider of enterprise data storage systems and software, its sales totaled $8.8 billion in 2000. Shares of EMC, which have tumbled more than 85% this year, are currently trading at 15.82 a share. Its high last year: 104. This is another stock that the bulls have left behind.
Qwest Communications International (Q ). It provides broadband Internet-based data and voice communications for businesses and consumers. Last year, it acquired Baby Bell U S West. The stock, currently trading at 11.80 a share, climbed as high as 50 during the heyday of the tech and telecom last year. Sales hit $16.6 billion last year.
Sun Microsystems (SUNW ). This provider of products and support for building and maintaining computer networks has a 52-week high of 48.12. It has since dropped to 13.15. Revenues in the year ended June 30, 2001, increased to $18.2 billion from $15.7 billion in fiscal 2000. Analyst Andrew Neff of Bear Stearns, which rates the stock a buy, has a 12-month price target of 20 (see BW Cover Story, 11/19/01, "Sun's Defiant Face-Off").
As yearend selling intensifies, the downward pressure on these stocks may provide an even more opportune entry point. That's assuming you agree these stocks are low-risk, holiday bargains.
--------------------------------------------------------------------------------
Marcial is BusinessWeek's Inside Wall Street columnist
Copyright 2000-2001, by The McGraw-Hill Companies Inc. All rights reserved.
businessweek.com
Used with permission of businessweek.com |
