Beamer - Re: "It's amazing, though, how much things can change in 8 months time. "
No kidding !!
Check out this article from Today's SmartMoney.COM !!
"Three stocks that epitomize the dangers of chasing highfliers are chip-manufacturer Advanced Micro Devices (NYSE:AMD - news), specialty retailer Abercrombie & Fitch (NYSE:ANF - news) and engineering and energy-equipment company Foster Wheeler (NYSE:FWC - news). Back in June, AMD's stock was up 117% for the year, but it's given back all of those gains. The No. 2 semiconductor manufacturer's stock has taken a beating because it's seen as the loser in a fierce price war with Intel (NASDAQ:INTC - news), the No. 1 chip maker. "
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biz.yahoo.com
Friday November 30, 10:43 am Eastern Time
SmartMoney.com - Stock Watch
Where Are They Now?
By Matthew Goldstein
IT'S A SPLIT decision. That's the best way to sum up the performance of the 25 stocks we identified this summer as the hottest of what had been, up until then, an ice-cold year.
Five months after we first shined a spotlight on these 25 highfliers — stocks of profitable companies that had posted triple-digit percentage gains through mid-June — 11 are trading higher, 11 are trading lower and three are essentially unchanged. Investors looking for a definite trend here are advised to look elsewhere for guidance — maybe Tarot cards. But that doesn't mean there aren't some lessons that can be drawn from the decidedly mixed performance of this group of stocks we dubbed the ``Powerhouse 25.''
One thing that's abundantly clear is the danger of chasing an already highflying stock. It's something many investors learned the hard way in the great tech wreck, when they bought more and more shares of technology and Internet stocks at superinflated prices, only to see those stocks come crashing down when the bubble burst.
But it's a lesson that bears repeating — especially now that the Dow Jones Industrial Average has risen more than 20% from its Sept. 21 low, meeting the technical definition of a bull market. Stocks don't go up forever, and valuations do matter. When a stock is priced for perfection, all it takes is one bad earnings report or a sudden turn in an industry's outlook for those gains to quickly unravel. And that's what happened to the 11 of our highfliers that have had the wind sucked out of them. Nine of those stocks are down 20% or more from their mid-June levels. And five are trading 40% lower. Ouch!
Three stocks that epitomize the dangers of chasing highfliers are chip-manufacturer Advanced Micro Devices (NYSE:AMD - news), specialty retailer Abercrombie & Fitch (NYSE:ANF - news) and engineering and energy-equipment company Foster Wheeler (NYSE:FWC - news). Back in June, AMD's stock was up 117% for the year, but it's given back all of those gains. The No. 2 semiconductor manufacturer's stock has taken a beating because it's seen as the loser in a fierce price war with Intel (NASDAQ:INTC - news), the No. 1 chip maker. Abercrombie's stock, down 42% since June, has tumbled because of flat sales, recession concerns and what some critics say is a ho-hum line of fashion offerings. Meanwhile, Foster Wheeler's stock, off 57% since mid-June, has been the victim of falling revenues, declining profits and what the company describes as a ``softness'' in new orders.
Yet it's not been all misery either for our 25 stocks. Among the 11 stocks that are trading higher, four — Pharmaceutical Resources (NYSE:PRX - news), PEC Solutions (NASDAQ:PECS - news), Microsemi (NASDAQ:MSCC - news) and Vector Group (NYSE:VGR - news) — are each up at least 20%. That's pretty impressive considering that even after the overall market's run-up of the past few weeks, the Dow Jones Industrials and the Standard & Poor's 500 are both down 8% from their respective mid-June levels. (That five-month performance of the major stock indexes is something you may want to keep in mind as the Wall Street pompom wavers start proclaiming the return of the bull market — notwithstanding the probable recession and the continuing fallout from the Sept. 11 terror attacks.)
Given all the uncertainties that still surround the economy and the war on terrorism, we're intrigued by the continuing standout performance of these three: Pharmaceutical Resources, PEC Solutions and Microsemi. Each is a midsize company, with a market capitalization right around $1 billion. This year midcap and small-cap stocks have tended to outperform their big-cap brethren, and a lot of market experts are predicting that trend should continue for at least the next several months, especially during the beginning stages of an economic recovery. Of course, the rub is finding the stocks that have what it takes to keep outperforming the overall market. So we thought it was worth taking a closer look at our three still-soaring picks to see what's been driving them to new heights and whether they have even further to climb.
Pharmaceutical Resources: The performance of this Spring Valley, N.Y. generic-drug company's stock brings back fond memories of the likes of Yahoo! (NASDAQ:YHOO - news) and Amazon.com (NASDAQ:AMZN - news). Pharmaceutical Resources' stock is up a stunning 384% for the year. Sales at the company, which markets 58 different kinds of generic products, are being fueled this year by its generic version of the popular antidepressant-drug Prozac. Thanks largely to that drug, third-quarter revenues quadrupled over the year-earlier period, when it took in $99.7 million in revenues in the past quarter.
The handful of analysts who follow the company are generally bullish on the stock. But there are reasons to be wary. For starters, Pharmaceutical Resources probably won't repeat its blockbuster growth next year unless it can bring another hot generic drug to market. The company recently filed with the government to seek approval to market a generic version of a popular antiglaucoma drug. It also faces a patent lawsuit filed in early November by one of its competitors, aaiPharma (NASDAQ:AAII - news), which challenges its rights to market the generic version of Prozac. Pharmaceutical Resources says the suit has no merit, but it's too soon to predict the outcome of this litigation.
PEC Solutions: This little-known Fairfax, Va.-based technology-consulting company gets almost all its revenue from helping federal- and state-government agencies use the Internet and other online technologies. It does work for agencies like the U.S. Drug Enforcement Administration, the Immigration and Naturalization Service and the Internal Revenue Service — and all those government contracts have helped push PEC's stock up 267% this year. In the third quarter, revenues rose 63% over the year-earlier period to $28 million, and PEC posted a quarterly profit of $3.7 million.
Several Wall Street analysts who follow the company are predicting that PEC could get more government work from law-enforcement agencies looking to bolster their criminal databases in fighting terrorism. In fact, about 70% of the company's revenues come from government agencies that specialize in either law enforcement or defense-related work. But investors need to remember that PEC's fortunes rise and fall on the vagaries of government spending, and it's likely to face stiff competition from other consulting firms trying to capitalize on terror jitters. As we've written in a previous story about such firms, the consulting business has tended to be one with an uneven history of profitability.
Microsemi: In a generally bleak year for chip manufacturers, this small Irvine, Calif., company is a rare bright spot. The company's stock is up 160% for the year, largely because it's seen as an important niche player in the semiconductor market. Microsemi makes and design chips and related products for the military and defense-industry manufacturers. Just last month it won a $4.5 million contract to design and manufacture products for a Europe-based defense and aerospace company. Again, Wall Street analysts say Microsemi is well positioned to benefit from the war on terrorism because governments around the world are likely to increase spending on military hardware. That's one reason the stock is up 60% since Sept. 10.
But Microsemi has its detractors. Recently, our sister publication Barron's (which is published by Dow Jones, a part owner of SmartMoney.com) said the stock was looking overpriced. Microsemi trades at a current price/earnings multiple of 64, compared with the industry average of 59. In any event, investors interested in this stock should have a good opportunity to learn more about its long-term prospects when Microsemi announces full-year earnings on Nov. 28.
Will these stocks continue their long, happy runs — or will they join the other fallen members of our powerhouse list? Check back in another five months, when we'll see how they're doing.
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