Meghan
Heres another point of view, also I dont recommend to buy or sell any of the following stocks.
Software and Networking Outlook
The "January Effect" In November
Thursday, November 14, 1996
Just as Christmas decorations seem to come earlier each year, so does the so-called 'January effect.'
The January effect is the phenomenon in which small-cap stocks get a boost in January, thanks partly to bargain-hunting by investors following tax-related selling late in the prior year of some downtrodden stocks. The bounce also seems to stem from new-year optimism about the economy and companies' outlook.
For the past 70 years or so, there have been just 14 years in which small-caps have lagged behind larger stocks in January. There haven't been a lot of years where there hasn't been a January effect.
Now, however, that phenomenon has become less of a January event: In recent years it is more likely to occur in the last two weeks of December and early January -- and sometimes even earlier.
The trend started after 1986 tax-law changes that essentially required many mutual funds to lock in their annual gains and losses for tax purposes by October 31. This means some of the depressive effect on small stocks that occurs from tax selling has been accelrated from year end, in turn moving up the bargain hunting that helps create the January effect.
And even individual investors, who generally have until year-end to tidy up their portfolios, have changed their tactics in response to the encroaching January effect. Money managers have moved up their selling so they will not be caught in the downdrafts that used to occur later in the year.
Some investors believe that the period before the January effect can be a good time to find bargains. Historically, the stocks most likely to bounce back in the January effect have included those trading at or near their 52-week lows; those that substantially have underperformed the market for the year; and those that pay slim or no dividends.
Of course, investors need to have faith in the company's fundamentals before buying a stock.
This year the pickings may be plentiful for those looking for stocks that might get a goose from the early January effect, given that small stocks have mostly lagged behind blue chips, making them prime candidates for tax-wary investors needing losses to offset gains on their tax returns.
Technology is a prime sector for bargain hunting. Look for companies whose stocks are being sold because they had a recent disappointing quarter or are out-of-favor due to some kind of short-term facor.
Here's a list of several small-cap software and networking companies that could benefit from the coming January effect:
American Software [Amswa] develops the industry's most comprehensive offering of integrated Supply Chain Management systems. The company announced recently that it is actively evaluating the formation of a separate company for its Supply Chain Planning solutions, its fastest growing business unit. The company is also evaluating the possible sale of a portion of the new company to the public, and the impact that such a public offering would have on overall shareholder value in American Software. Currently trades around $5.
Banyan Systems [Bnyn] makes software products that integrate and manage various PC and UNIX-based platforms into a unified enterprise-wide network. Trades in the $4 range.
Centura Software Corp. [Cntr] (formerly Gupta Corp.) provides application development and deployment software to organizations building large-scale client server applications. In 1996, Centura introduced its next-generation product line for building and deploying large-scale 32-bit-client/server applications. Trades in the $3 range.
MicroTouch Systems is the world's largest manufacturer of touch-screen computers -- PC's with special monitors that respond to touch. Companies are rapidly adopting this technology for self-service kiosks, cash registers, automated teller machine displays, casino video games, and industrial control and business applications.
Proteon, Inc. [Pton] designs, makes, markets and supports local area network (LAN) and internetworking products that allow customers to create enterprisewide computer networks. Proteon's focus in recent periods has been on introducing its next generation of networking products, including Internet access products, remote access routers and Ethernet and Token Ring switching products. Future results should improve as these new products are introduced and begin to generate revenues. Trades just above $2.
Software Publishing [Spco] is a leading vendor of PC presentation graphics software with its Harvard Graphics product line, and sells other software for business professionals. Currently trades at about $1.25.
System Software Associates [Ssax] is a leading provider of cost-effective business information systems to the industrial sector worldwide. The company's product line provides business process re-engineering and integration of operations. Trades in the $12 range.
VMARK Software [Vmark] designs, manufactures, sells, and supports a comprehensive suite of client-server software products and services for the business solutions market. The company has been buying back some of its own stock recently and I agree with management -- VMARK's stock is undervalued at $8.50.
Wall Data [Wall] develops, markets and supports PC-to-host connectivity software products and applications tools for Microsoft Windows and Windows NT, IBM OS/2 and Macintosh operating system users. Trades in the $14 range. |
