HOME IS WHERE THE MEDIA IS
The FCC predicts that cable modem subscribers could total about 9 million by year end, and DSL-based subscribers could reach roughly 10 million in the U.S. Broadband is where all of technology is pointing. It is the interconnect for hardware, software, and what they enable. Look for 2002 to be the year cable companies make a bigger push into broadband and telecom giants fight back with even more affordable DSL. Based on that, we think one of the beneficiaries could be next-generation cable set-top box maker Scientific Atlanta (SFA). For DSL, look at Redback (RBAK). More on each below.
But hardware, software and gee-whiz gadgets don't drive adoption. Customers do. We are strangely in a world where the PC is becoming just one more computing sphere in an expanding galaxy. Network-enabled cell phone-PDAs, digital video recorders (TiVo, Ultimate TV), and video game consoles are just a few of the early warnings of a computing shift to multiple devices. A new entrant for 2002 will be Home Media Networks. Let's invent a new acronym, HMNs.
Privately-held startup Moxi (a company began by the founder of WebTV) is but one of the entrants in the race to control the home media nerve center (good luck to them). The HMN race, as in many races that involve hardware and entertainment, ultimately belongs to the consumer electronic giants: size 24 shoe or above required for entry. Sony, Samsung, Philips, and Panasonic are the media reges that will own this space. Moxi will probably be acquired by Microsoft (as was WebTV). HMNs are very early, but keep an eye out as this evolution of information and computing continues on Main Street and Wall Street. We certainly will.
Consider the following anecdotal evidence of this ongoing change. As a group, in the past 52 weeks our universe of more than 100 stocks is up 73% from its lows. These diverse stocks (technology, telecom, software, and communication) are down 57% from 52-week highs. Translation: despite a healthy run in this entire basket of leading companies, we think room to run exists across many sectors. Our Security Stock group is up 150% from lows and Travel Security even more at 200%. As technology expands it produces an even tighter center to keep the parts moving in sync.
This report highlights the stocks in each sector and their percentage change from high and low over the past year to help identify buying and selling opportunities for you as an investor.
One of the few constants in the market and technology is change. As such, we daily add new stocks to our universe of coverage, expanding with the edge of technology.
New year, new opportunities for reward and risk.
Before we talk about what the year is, here's what it's not: It's not the Internet, it's not wireless, it's not e-commerce, it's not infrastructure, it's not fiber optics.
2002 is the year of the network as platform, where seamless integration of information and commerce flow will be necessary demands.
2002 focuses on practical solutions, technologies that make businesses run better, cut costs, and improve earnings. Everything else is hype. Don't believe it.
In the first few trading weeks of 2002 we got a taste of the market and it was both sweet and sour. To combat volatility our investment philosophy is "think like a long-term investor, but act like a short-term trader." That means buy the best companies, but sell them if they disappoint. How? A simple trading tool -- the stop-loss order -- is a powerful weapon to protect you from loss.
Our new guidelines for 2002 are 10% stop-loss on NASDAQ QQQ, 15% stop-loss on large-cap technology companies (above $100 billion market cap), and 20% stop-loss on everything else. Remember to ratchet up stop-loss from latest closing high daily to lock in any gains.
2002 could be a year of recovery for parts of the economy. As the economy shifts from manufacturing-intensive to technology-intensive, old-line corporations such as Ford lay off tens of thousands, and tech companies also will continue to lay off. But the key is technology taking over many aspects of supply chain and labor. Automation. Robotics. Procurement systems. This is all heavy lifting and the companies most likely to benefit are gorilla technology solution providers: Microsoft (MSFT), Intel (INTC), IBM (IBM), Oracle (ORCL), Cisco (CSCO), Texas Instruments (TXN). We also recommend Nortel (NT) and Lucent (LU) in this group. More on these below.
A lot of mutual fund holders pay for minimal fund management and also fail to match the market. Index funds are better but also have expenses. One of the most flexible ways we suggest to invest in technology are NASDAQ QQQ series trust shares, which we've been talking about for several months now. 2002 could be redubbed Y2Q in our analysis, if the fuel of the economy kicks in. We think by third quarter both tax cuts and rate cuts could ignite the economy. Technology leads the economy, rising with that tide.
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