RadarView
Volume 3 Issue 81 April 26, 1999 DJIA - 10,689.67 Nasdaq -2590.69
April 25, 2:44 PM ET - 'Chernobyl' computer virus expected Monday
(AP)- A virus that can erase a computer's hard-drive and prevent the equipment from restarting is poised to strike on Monday, but experts say off-the-shelf anti-virus software can prevent infection, and several companies are offering free inoculation tools on their Web sites. The virus has been dubbed Chernobyl because its most common version was programmed to activate on the 13th anniversary of the nuclear disaster in Ukraine.
NOTE: In an ongoing effort to minimize risks of viruses, we have upgraded top the most recent NETA DAT files for our anti-Virus software. We ran scans with the new DAT files and no viruses were detected.
OPENING COMMENTARY APRIL 26, 1999
What a week and we are at a loss for what this week holds in store for us. Last Monday was a major Nasdaq reversal that was wiped out by the close of business Wednesday. The collapse in the technology shares preceded a massive amount of good earnings surprises out of the tech sector. All of this came right after the previous Options Expiry Friday. All of a sudden, the top analysts are crawling out from under their word processors and were singing the praises of the semiconductor sector. All of this is old news but the trend is still towards a good recovery in this sector that is substantiated by good fundamentals, good earnings, good bookings, and ramping up in capacity. We couldn't ask for more. The good times are ready to roll. However, there are a few "wild cards" in all of this. The first wildcard is that these types of fundamentals and technical information are not driving the market. The market is being driven by momentum plays (players) and certain manipulations. The Technical Analysts and their mathematical charts, devoid of news releases and an understanding of the companies, are driving the markets as well as the traders that are looking for a quick buck. The retail investor is getting the "thumbs up" for these stocks too late in the buying cycle. For now, the dangers are really in not being a long-term investor to ride out this insanity and wait for the market to return to basics. The second wildcard are the market index levels themselves. Based on the cycles of a market, we have to expect and accept a reversal of sorts (correction), as some of the large cap stocks are over extended. The semiconductor sector recovery is confirmed but we are still dealing with a herd mentality.
Over the past few days, we were a but arrogant in our comments concerning the analysts and their timing of the release of information, opinions, and recommendations. We picked on a few of these analysts and questioned what justifies their salaries. We have been reminded that their primary function is to service their institutional and high profile private client base. We have to expect and accept that there will be delays as they make their advice known to these clients first, allowing them to respond, prior to sharing this information with their retail brokers and the general public. I guess this is where the true value of this newsletter resides. Our uncanny knack for speaking about stocks that perform well immediately or within a few trading sessions is based on the ability to share our information and perspective as real time as possible and not wait until our private clients are informed first. Actually, the readers are the private clients for RadarViewâ and is one of the reasons we would appreciate the information shared here not be distributed to others for a day or two. This is out of respect for the other readers and to allow them the time to react on the information shared. We also realize that the market reaction to a good deal of what we discuss here is getting faster and faster.
The comments, relative to the resurgence of takeover rumors for COMS, are an example of this. We saw the innocuous news blurb and thought it was ripe for a pop, given the day of the week and the perception the market was primed to react favorably. The same held true for some of the Internet stocks that we were in and out of real fast. As a matter of fact, we seemed to be on the outside again waiting to buy back into some of these stocks. Our reaction time to fast breaking news and information is getting to be quite short. This is a double-edged sword since profits can be made faster but it is also a bad indicator that the markets are unstable and there is little loyalty to any given stock. Look how fast RMBS, MU, MIPS and a few others have been deserted recently. RMBS, as can be seen, has a fundamental public relations issue with INTC now supporting other chipsets. However, even with other PC133 SDRAM options, these "other" chipsets do not have the design extensions down the road. These stop gaps are just that, stop gaps, while RMBS designs will support future generations of memory requirements.
We will end today's comments with a reminder that our prime objective is to discuss potential profit generating stocks. All are considered long term investments but many can have their volatility cycles played for profits in shorter time frames. The final comment is in the form of the paraphrased story we came across that describes what we are trying to accomplish. It is also nice to see that there are others, more notable personalities, that are doing the same things as us and are leading their investors to noticeable gains. For the feint heated who cannot pull the trigger on stocks to take advantage of volatility, the following story highlights a technology fund that seems to be doing well. It was started in December and has looked impressive so far.
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CBS MARKET WATCH STORY ON BFOCX
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table was here
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Hopefully a review of individual portfolios occurred this weekend. As you look at Friday's data, we hope you found interesting volume and price information. We believe we have entered into some of these stocks at a lower base price than most investors and even a few funds. This is good since we might not suffer to many losses at the start of any correction. Yes, we are still advocating a cautionary stance, just in case. We also hope the weekend provided enough time from busy schedules to develop a proper exit strategy to protect profits.
After turning our attentions to IC semiconductor stocks, it appears that MU and RMBS have not participated in the recent rally, and we may not see them perform. Fortunately, we are no longer in MU and had reduced our position in RMBS. However, both stocks are of high enough profile that we need to look for their bottoms. MIPS, RMBS, and MU are presenting us we another round of opportunities and deserve our attention. We are unsure as to when they will reverse to the upside once again, but we know that they will. Catching a bottom and then setting the shares aside for next year is something to consider. These stocks do present very attractive situations.
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Tables
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*The two tables (above and below) originally on 4/16 were being updated to hopefully illustrate a point. The Internet-IPO stocks are trying to erase 2 days worth of losses from last Friday (4/16) and last Monday. Considering the wide swings these Internet stocks exhibit, we are surprised that these stocks are still down a few dollars. These stocks were supposedly responsible for the Monday steep decline in the semiconductor and other technology stocks. Even though the Internet sector dragged down the semiconductor stocks, last week's fundamentals and strong earnings data proved the semiconductor sector was unjustifiably dragged down with the Internet stocks for no reason other than frantic stupidity or a premeditated manipulation of sorts.
We traveled the road to validate that the IC manufacturing business was recovering last week and that these companies will be leaner and more cost effective. They are installing new technology and they are increasing the utilization of their fabs by ramping up capacity. We are getting strong indications that the fabs are filling up, expansions are being discussed, Book to Bills are improving, and sales of commodities like chemicals, materials, and reticles are improving. Finally, we are seeing the implementation of new technology. This leads us into the next table of IC manufacturing stocks that we believe should start to report good numbers and improved manufacturing output. However, with all this positive praise, many positions were established at lower prices. Therefore, we should protect these profits before they erode too much. We beat the street again to these stocks so it should be easy to protect these profits. We cannot stress enough that we are still in as herd mentality-momentum mode and the market is not looking at the underlying fundamentals of these stocks. Maybe if and when the Internet sector calms down, we might move to a firmer position in the markets. Unfortunately, listening to the media over the weekend suggests the Internet stocks may be in favor this week.
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TABLES
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The semiconductor complementary table to the Internet Table above will also be deleted after today. With the exception of LSCC and XLNX, the comparative semiconductor stocks rebounded from last Monday's losses and should not have been tied into anything problems with the Internet sector. However, Herd mentality does not necessarily make sense, nor can it be predicted sometimes. We may enter into a short period of profit taking that might occur prior to upcoming earnings releases that are driven more by institutional manipulation and momentum players. Let profits run and to keep moving up the LLT values already in place if these stocks continue to advance.
We still think WFR has been overlooked and will be a "Phoenix arising from the ashes. To this list we cannot help but feel that both SFAM and CFMT are close to coming into their own in the market place. It will only take a few orders to dramatically affect the balance sheets of both companies. We also need to be ever vigilant on the rate of the industry ramp up at the semiconductor fabs and be on the lookout for new construction announcements.
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TABLES
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LTX Corp (LTXX) - is the only semiconductor test equipment company to offer a "one test platform, zero compromises'' solution for testing the full spectrum of system-on-a-chip, mixed signal, digital and analog integrated circuits. LTXX has a low PE, high cash value and a relatively low book value.
Claimsnet.com (CLAI) - trading at the original IPO offering, price makes this attractive. It is one of the few IPO Internet stocks that have not been run up to unrealistic levels.
Citrix Systems (CTXS) - Looking for a 12-month price target of $70.
Claimsnet.com (CLAI) - This IPO was offered to investors at $8 a share, opened at $13, and closed at $16.50 for its first day.
PLX Technology (PLX) - priced at $9, develops semiconductor I/O devices for high-performance embedded systems, opened at $11.06, up 22.9%, and closed at $12 a share.
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TABLES
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We said to use last Monday (4/19) as a buying opportunity. On Friday we stated we were in a mode of watching for the next down cycle and the recent gains were consistent with the values of set of cycles. We seem to have gotten some negativity on Friday and need to keep our wits about us today and this week.
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TABLES
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There really is little to do right now in the market except to watch and wait for new opportunities pop up from left field or to develop within this limited universe. We did a good deal of reading over the weekend and have to concede one strategy. There is no getting around it; Internet stocks should make up a small representative portion of our portfolios. However, we must not chase those stocks that have little underlying fundamentals and are over priced. It might be too late for the AOLs, EBAYs, and YHOOs but it might not be too late for NETG, AMTD, CYCH, VRSN or some of the other Internet stocks we follow. The real money that will be made from the Internet will come from business to business e-commerce and not from personal use of the Internet. When this occurs, which is still a ways off, we might finally see some earnings. However, that will not be for awhile so it makes little sense to look that far into the future. As long as these stocks are in rotation and are being run up with the herd mentality, we might as well wait for a few entries and not go too overboard. In this same light, telecom and networking stocks, which are more stable, need to be embraced more in our portfolios since they are also the wave of the future. In other words, we might want to consider a rotation of our own that includes these sectors.
The pendulum of values seems to have swung to the negative side recently which might indicate there may be some profit taking occurring with some of these stocks after some decent earnings were released in the sector.
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TABLES
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NEWS YOU CAN USE AND BROADER MARKET COMMENTS
April 25, 2:36 PM ET - Demand for Internet IPOs still intact
(Reuters) - Although Internet stocks suffered a setback early last week, their quick recovery has left the demand for Internet initial public offerings intact, analysts and syndicate managers said.
April 23, 4:00 PM PT - 3Com stock jumps on renewed rumors
(CNET News.com) - 3Com's shares shot up 16 percent today amid rekindled rumors that the struggling networking firm might sell all or part of its business. Rumors that Ericsson, Siemens, or other firms may be interested in buying 3Com ignited heavy trading Friday. 3Com's shares opened at $22.31, shot up 21% to $27 before closing at $25.50.
April 23, 4:00 PM PT - VeriSign Shares Skid on Valuation Concerns
(Bloomberg News) - VeriSign shares fell nearly 16 percent amid concern that the company's stock has risen too high given its prospects for future earnings growth. VeriSign reported a smaller-than-expected first-quarter loss as revenue more than doubled. Some analysts and investors expressed concern that the company's shares, which have tripled in the last year, are too high given its earnings prospects.
April 23, 4:41 PM ET - Chip, hardware shares in mixed mode Xilinx, Gateway shares shunned after rating downgrades
(CBS.MW) -- Hardware and chip stocks were mixed Friday, with semiconductor shares taking the brunt of negative sentiment after a rating cut in shares of specialty chip maker Xilinx. Xilinx dropped $4.75 (9%) to $48.38, a day after the company released its fourth-quarter earnings, Prudential Securities downgraded Xilinx shares from "strong buy" to "accumulate," while Morgan Stanley maintained its "strong buy" rating. Lattice Semiconductor shares tumbled for the second straight day. Lattice (LSCC) dropped $4.44 (10%) to $40.88) after skepticism arose the company when the company said it entered a $500 million agreement with Advanced Micro (AMD). IBM stock advanced, driven in by investor enthusiasm over the company's earnings surprise. Shares of Gateway fell after a downgrade from "strong buy" to "buy" by U.S. Bancorp Piper Jaffray. Prudential Securities reiterated its "strong buy" rating on the shares. Gateway earned 62 cents a share vs. the median estimate of analysts surveyed by First Call, which was 60 cents a share. Silicon Graphics (SGI) said its net loss in the third-quarter was narrower than the First Call estimate of a loss of 30 cents.
April 23, 3:14 PM ET - Intel Inches Away From
Shares of memory-chip designer Rambus (RMBS:Nasdaq) plummeted to their lowest point since Oct. 8 today after Intel (INTC:Nasdaq) said on Thursday that it would support alternative chipsets. Intel stated it would come out with chipsets this year for non-Rambus synchronous DRAMs. This is a major blow for Rambus, since Intel was one of the strongest and earliest backers of its designs. Memory-chip makers have balked at adopting Rambus' designs. One reason was the costly royalties they would have to pay to the company. As memory-chip makers began looking for alternatives to Rambus, Intel had issued statements supporting the company's designs. Many institutional and individual Rambus investors held on, waiting to see if Intel would drop its support of the company. Credit Suisse First Boston analyst Charles Glavin said the memory-chip industry is expecting a new Intel chipset (currently called 810E) in the next quarter that will support PC-133 DRAMs, a stopgap alternative to the Rambus design, for Intel's entire line of chips, from the low-cost Celeron to the high-priced Xeon. Micron (MU:NYSE) CEO Steve Appleton went out of his way on his company's March conference call to cast doubts on whether Rambus chipsets would be out this year at all.
April 23, 10:49 AM ET - BancBoston Robertson Stephens Upgrades LRCX and MCHP to a Strong Buy Rating - PRNewswire - BancBoston Robertson Stephens managing director and senior semiconductor equipment analyst Sue Billat today upgraded LAM Research (Nasdaq: LRCX) to a Strong Buy rating from a Buy. "We are raising our rating on LAM Research from a Buy to a Strong Buy as bookings surged and we are raising our fiscal 1999 earnings per share estimate to ($1.55) from ($1.93) and our fiscal 2000 earnings estimate to $1.80 from $0.90,'' according to Ms. Billat. Billat also said, "Building on order momentum that began in the December quarter, we believe that LAM has achieved a remarkable comeback feat and has fully turned the corner. We believe the company is well positioned to take full advantage of the industry upturn currently underway. In addition, we expect LAM to further increase its gross margins through a combination of operating leverage, streamlined manufacturing and effective materials cost management. Accordingly, we have raised our estimates and are raising our rating on the stock to Strong Buy from Buy.'' Sorry Sue, even though you are correct, you are a day late and quite a few dollars behind the eight ball. Off by close to a week.<GGG> BancBoston Robertson Stephens managing director and senior semiconductor devices analyst Daniel T. Niles today upgraded Microchip Technology (Nasdaq: MCHP) to a Strong Buy rating from a Buy. "We are raising our rating on Microchip Technology to a Strong Buy from Buy, after the company reported above-expected earnings,'' said Niles. The company beat earnings per share expectations, with increasing book-to-bill ratio, backlog, visibility and revenue growth. Our six-month price target is $50.'' Good Call Dan!
April 23, 10:35 AM ET - RESEARCH ALERTS
(Reuters) - Prudential Securities analyst Hans Mosesmann lowered his rating on Xilinx Inc. to accumulate from strong buy. He raised Atmel Corp. (ATML) price target to $26 a share from $22 and raised Anadigics Inc. (ANAD) to $28 from $21.
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TABLES
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ARCHIVAL INFORMATION :
BUY ZOME TABLE: consolidated the list and combining certain purchases to reflect the month and the weighted average price for each stock. See Issue 3-14 for past listings and Issues 3-43 and 3-58 for recent listings. All of March's exits are in Vol 3-63 and only the best are listed below.
STOCK UNIVERSE: See Vol 3-42 for last rotation. DSP-ESFT-KOPN were to be dropped from the list above and AEIS rotated back in See Vol 3-57 for last rotation. QCOM-SMTL-IDTI are to be dropped and replaced with DSP-FORE-NETA rotated in
IPO AND INTERNET FOCUS: see Vol 3-43 for previous LLT exits
TIMELY TOPICS: Recaps: see RadarViewâ Volume 3 Issue 18, 34, 42, 50, 56, 61, 64, 71, and 76
LOCKED ON TARGET: see RadarViewâ Vol 3-14 for last update.
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RadarViewâ is a financial publication that is geared towards the NYSE and NASDAQ equity markets as they relate to telecommunications, technology and semiconductor sector investments. Stocks presented might have trading range guidelines established from time to time, entrance and exit strategies, along with taking advantage of volatility in certain stocks as they come in or out of favor on news. Most of the stocks highlighted will fall in to the $5 to $80 price range with enough daily trading volumes to minimize the market manipulation that can occur with under $5 stocks.
Radar System Traders, LLC. was formed to provide a common sense approach to investing in some of the hottest sectors of the equity markets and to guide the individual investor toward worthwhile investment candidates. Information will be presented in the form of news releases, rumors, Internet discussions, and educational commentaries. Most of the companies discussed come from personal experiences of a Manufacturing Lithography Process Engineer with 20+ years of hands on experience.
DISCLAIMER: Radar System Traders, LLC. is a informational service for investors and does not make recommendations to buy or sell securities, nor an offer to buy or sell securities. This memorandum is for informative purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy, any security. The author of RadarView* is not a brokerage, investor relations or public relations firm, and is not acting in any way to influence the purchase of any security. While the information provided is obtained from sources deemed reliable, it is not guaranteed as to its accuracy or completeness and it should not be relied upon as such. It is possible at this or some subsequent date, the members of Radar System Traders, LLC., may own, buy or sell securities presented in this newsletter. Under friendly advice from legal counsel, The RadarView* Newsletter, its Publisher, owners and investors, hereby warn everyone to completely disregard all the information presented here and treat it with the lowest level of confidence. Treat this information as if it were being provided by an unbalanced, neurotic, Prozac ingesting mental patient. By warning you of this, we cannot be held liable for any losses or damages, monetary or otherwise, that result from the contents of The RadarView* Newsletter. Radar System Traders, LLC recommends that anyone investing in securities should do so with caution and consult with a licensed broker or certified financial advisor before doing so prior to taking the word of the author of this newsletter. Past performance of this newsletter and its authors may not be indicative of future performance. Most securities presented in this newsletter should be considered speculative with a high degree of volatility and risk. |
