The Internet & Casino Stock Report
April 28, 1999
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Market Overview:
The Dow moved to record highs while the Nasdaq slipped 49 points. After the
bell America Online announced earnings of 11 cents per share, beating analyst
estimates of 9 cents. The revenue and earnings growth were impressive,
however the street seems somewhat disappointed in AOL's failure to announce a
stock split. In after-hours trading AOL was relatively unchanged at $153
after climbing as high as $166.
The current sector rotation between the cyclical bellwethers and the
technology sector is enough to make anyone seasick. One thing I can tell you
from the floor of the Chicago Board of Trade is that traders are beginning to
add premium to oil, gold, silver, and other commodities. This represents
their current feeling that the economy is somewhat overheated and their
belief that inflation could emerge. There are two ways to look at this. The
optimistic view is that adding value to hard assets narrows the divergence
between techs and core industry, i.e., Goodyear (GT) , Boeing (BA), Deere
(DE) , DuPont (DD). Undervalued stocks gain at the expense of techs. This
improves the advance/decline line and shuts up the those doom and gloom
talking heads. The pessimistic view is that higher prices in basic
commodities begets higher interest rates. Corporations pay more to borrow,
earnings plunge, and the stock market falls. The ideal situation is some sort
of happy medium. It now appears that global economies remain on the mend. Our
view is that the fundamentals of the US economy remain strong, interest rates
remain low, and the trend remains UP.
Stocks to Watch:
E Digital Corporation (EDIG) gained 88% today to close at $1.50, now up over
1300% from our initial recommendation in January. The fact that everyone
seems to believe this stock is heading higher makes me an instant contrarian.
I advise readers to leave this one alone. A spike top and a pullback are
likely. These small stocks can really sting. Be careful out there, greed
kills!
On Friday, April 16th we remarked, "Edify Corp (EDFY): Recent volume surge
for this maker of online software. Stock should remain active and continue to
move higher. 8 5/8 last." After a pullback to $7 the stock continues to move
upward closing at $10 this afternoon on volume of 3.5 million shares.
E.lottery.com (ELOT), we mentioned a short-term bottom at 5 5/8 yesterday.
The stock responded well on excellent participation, up 39% today to 8 9/16.
A challenge of the old highs at $12 is now likely. A word of caution: Do not
purchase this stock into a weak Internet sector. The risks increase
proportionally.
Affinity Technology Group (AFFI), online mortgage software: One of our
favorite picks into the upcoming E-Loan IPO, this stock remains in an
accumulation zone between $2- $2 1/2. A test of the bottom at $2 is likely
before another major price surge. The technical chart pattern is similar to
that of Finet Holdings (FNHC) just 8 weeks ago. Our price target remains
$6-$8 (3-4 weeks). The 3 year high is $24 1/4. This one has room to work on
the upside.
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The information provided above is believed to be accurate. Earnings and
revenues may be estimated for the purposes of evaluation and comparison. This
letter is a general circulation publication. We do not give investment
advice, nor do we at any time manage or direct the funds of any person or
company other than our own. Positions contained in this report are the
publisher's personal trades, and are not intended as trading advice for
readers. This report is issued solely for informational purposes and content
is not to be construed as being an offer to sell or a solicitation to buy any
security. We do strongly recommend that readers contact their personal
investment advisor or broker for advice pertaining to any investment
questions they might have. The publisher is not a registered investment
advisor, but rather a news editor and a stock trader for his own account.
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