STOCK STEALS?------ ORB (Fwd PE 4.2); AKLM (Fwd. PE 3.1) and others.
What other stocks should we put on our undervalued "Watch List"? We should update again. The Markets may continue to drop with DOW 6500 and Naz 1000 possible, but there will be temporarily rallies along the way and an eventual turn upward in late 2002 or 2003. So it's time for an updated list of our favorite stocks so when they get fundamentally or technically undersold, we can jump on them when the Reward/Risk is most favorable.
For me this list means that I'm sometimes just watching or doing a partial buy. I often take a 1/3 position and buy more if the stock drops to really low levels (i.e. bought some ORB at $2.80 and then much more at $2.50 on Friday). If the over-reaction just gets too great, I can't help myself, especially if the market is turning up for the day. Here's some of my "takes" (and I've left off many, I know).
FAVE SECTORS GOING FORWARD--- Defense and Gaming for 2002-2003 with financials, pharmas and generics not far behind. My darkhorse is the energy companies for 2003.
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ORB (was just $8) until credit concern came up; but even S&P has positive comments about their improvement and said the company's rating would go back up when the Nov. payment was met. CEO and PR dept say that's not a problem, especially after they beat consensus by 6 cents in the latest quarter (12 cents diluted vs. 6 cents expected). With the huge Boeing and Lockheed contracts, their future prospects seem very bright. This company is certainly in the right sector, maybe the top sector going forward through 2004. Once we get past the immediate financing need, we could see a very nice ramp up.
NVDA at $8-9? (hard to say, do we trust forward earnings?) At some point, this one will likely become a "screaming buy" but I don't like that it broke $10 so easily. Also, if the SOX can't climb abovce 300 soon and hold, it will get uglier. Better semi stocks include ICST, IRF, and FCS. BTW -- The semi-equipment stocks are some of the most expensive techs out there, so I'll pass unless they get really cheap.
ADBE at $16? 17? (PE and PEG in question as well, PE not exactly cheap but this one is cyclical and can come back strong if you're patient. I like it better at $13-15)
ITRI at $14-15? (was just $22 and company beat earnings and offered good guidance; is the inventory concern overblown? PE cheap)
ESST at $8, $10, $11? (PE and PEG certainly low enough and in a growth sector, but Barron's has a negative article this weekend saying stock could go to $5. Why? That's unclear but at some point this will get very overdone. Unless somebody knows something we don't, this is one of the most unjustly manipulated stocks in history.
IVX -- Positive recent article in Barron's (yes, they do like some stocks) and some recent signs that "longs" are coming back to this over-beaten down stock. It's cheap if management can perform up to expectations.
OTHERS TO WATCH
Defense names like RTN, GD, NOC -- How can you lose buying these on dips and some have dipped recently to the tune of 20-40%. Maybe the only sector that one can buy when they dip severely and hold without fear of a huge loss. After all, increased gov. spending is assured.
AKLM, THQI and gaming stocks --- I feel huge gains coming but it may be last Fall until the ramp occurs. These companies are in the so-called "Sweet spot" with hardware platform set and prices reduced and lots of competition between Xbox, Sony, and Nintendo. That means sales of software should be brisk for the holidays. For AKLM, it had been a huge sellof, slow and deliberate. This may be the sleeper stock of the year. We could, if Turok hits its Sept. release and is a big hit, see gains of up to 250-400% by year's end from these levels. But be careful near term, the shorts want to try to break it well below $2. If so, I may just back up the truck.
Drugs and Pharmas ---- KG, ADVP, MYL are stocks worth watching. It's an election year, but there was a recent defeat of the senior prescription drug bill. There is still a risk but these stocks have 20+% growth every year and their PE's and PE/G are way below historic norms.
GE --- despite their questionable accounting, they will be expensing options and they are very diverisified. If this gets near $20-$25 again and their accounting fears subside, I want it.
WM --- low PE; anytime this gets anywhere near $30 it's a steal. They reported over $1.00/share earnings last quarter and continue to benefit from low interest rates. The fear of rising rates is history for at least a year it seems. Also MIMS, ACF and others with low PE's and PEGS worth watching, especially if we get a further Fed rate cut or news that rates won't be going up soon.
ATYT -- keep an eye on this one. They may be eating NVDA's lunch right now with better technology, but we need to see a pickup in consumer sales of computers or at least a new business leasing cycle to get ATYT and NVDA up strongly.
Energy --- MIR was a great winner for me last week, running up a huge 80% off lows in 48 hours. It has since backed off but is down from $8 recently. When the negative publicity of this sector dies down, it is one to certainly watch.
Retailers --- WMT, COST, and HD, in that order. If they get cheap enough, I want them all, especially WMT. There are some names that will do well in any economy.
Other DOW or NYSE names (esp. those paying dividends) ---- CLX, HNZ, PG, etc. whenever they dip badly or other stocks with dividends if the Market tanks. These are safer stocks to own. |
