Drop in Computer Shares May Offer Opportunity Says 'money runners'.
Pat:
Good news for a change.
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Drop in Computer Shares May Offer Opportunity (Repeat) (Repeats story to add dropped word ''high'' in 3rd paragraph.)
New York, March 1 (Bloomberg) -- The February decline in computer stocks that sent Dell Computer Corp. down 25 percent may be the best buying opportunity investors have had for some time, according to some of Wall Street's top analysts and money managers.
A report of unexpectedly weak revenue growth from Dell two weeks ago triggered concern that the personal computer industry's remarkable run of growth may be falling off. Compaq Computer Corp. hastened the drop on Friday, saying sales slowed in January.
The growth concerns spread to market stars such as Intel, the No. 1 computer-chipmaker, because Compaq is one of its biggest customers. The Morgan Stanley High Tech Index, which includes companies from Cisco Systems Inc. to Microsoft Corp., is down almost 10 percent from its closing high of 1034.26 on Jan. 29.
Fund managers are optimistic about the prospects of computer- related shares. ''I don't think you can abandon these stocks,'' said Terry McLaughlin, a portfolio manager at Ashland Management Inc. in New York, which oversees $1.7 billion in assets including Dell Computer shares.
Technology companies are growing faster than most others, and after a couple quarters of growth, even the most expensive stocks can look like reasonable purchases, he said. ''Before you know it, people will be buying again.'' 'I'd Be a Buyer'
Compaq has lost a third of its value since its record close of 49 1.4 on Jan. 26. It fell 1 27/32 to 33 17/32 today, its lowest price in almost four months.
Intel has dropped 17 percent since a high of 140 15/16 on Jan. 29. It fell 2 7/8 to 117 1/16 today, its lowest level since mid December. ''I'd be a buyer on this dip,'' said Paul Meeks, manager of the Merrill Lynch Global Technology Fund which oversees $720 million in assets. ''Intel is a good buy here.''
Computer-related issues across the board plunged in the last month, including semiconductor equipment makers such as Applied Materials Inc., down 17 percent from its Feb. 19 high. Applied Materials rose 1 7/16 to 57 1/16 today. ''We believe the sell-off in semiconductor capital equipment stocks has been overdone, and at current levels, a short-term opportunity exists to purchase quality equipment stocks at attractive prices,'' said Jay Deahna, an analyst with Morgan Stanley Dean Witter & Co., in a research report.
Deahna recommends companies such as Applied Materials, ASM Lithography Holding NV, KLA-Tencor Corp. and Novellus Systems Inc. ''As long as PC unit growth is 13 percent of higher, we expect an expansionary trend in semiconductor industry growth,'' said Deahna.
Merrill Lynch analyst Mark Fitzgerald agreed. ''The sell-off is a good buying opportunity and we recommend investors use the price weakness to build positions,'' he said in a report to clients.
His picks include storage device and display maker Veeco Instruments Inc. and Lam Research Corp.
Pentium III
Some analysts and investors said Intel's early discussion and preview of its Pentium III chips may have caused some PC makers and end users to put off purchases until late last week, when the products officially went on sale. Intel had been previewing the processors and discussing the enhanced multimedia effects the chips offer. ''Once you get through this modest product transition to PIII, there will be stronger growth,'' said portfolio manager Graham Tanaka of Tanaka Capital, which owns Intel and Dell. ''I think it's a buying opportunity.''
Not everybody is convinced that troubles in the computer industry are past.
Richard Gardner, an analyst with Salomon Smith Barney, lowered his first-quarter earnings estimate for Compaq to 30 cents a share from 34 cents because the No. 1 maker of personal computers was exposed to $250 million in assets in Brazil when the real was devalued in January.
The 40 percent drop in the real will increase expenses by $100 million, Gardner said.
Money Flow
Even so, money flow analysis supports expectations that computer-related shares will move higher in coming weeks.
Institutional investors poured money into Compaq in recent days even as the shares fell. The same is true for Hewlett- Packard Co., which has slumped 20 percent since its record close of 81 15/16 on Feb. 1.
Positive money flow shows investors bought more shares when the stocks rose than they sold when the shares declined, and may indicate the stock has room to rise in coming days. Money flowed into the shares today too, even as Compaq slid 2 3/16 to 33 3/16 and Hewlett-Packard fell 1/2 to 65 15/16.
Compaq closed with a 14-day average relative strength index reading of 28.31 percent. The RSI, which measures the speed of price moves, is considered ''overbought'' above 70 percent and ''oversold'' when the indicator falls below 30 percent.
Intel's RSI reading was 38.21 percent. While that's above the oversold benchmark used by
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