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Technology Stocks : WAVX Anyone? -- Ignore unavailable to you. Want to Upgrade?

To: SDR-SI who wrote (7730)	7/3/1999 10:22:00 PM
From: Jesse Livermore	Respond to of 11417

Show: TRADING PLACES> <Date: March 9, 1999> <Time: 10:00:00> <Tran: 030912cb.L04> <Type: INTERVIEW> <Head: Stock Market Analysis, CNNfn> <Sect: Business> <Byline: Lauren Thierry> <Guest: Jim Melcher> <High: > <Spec: Business; Stocks> <Time: 11:35:00> THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. LAUREN THIERRY, CNNfn ANCHOR, TRADING PLACES: Well, we're kind of wondering if there are any long-term investors out there. My next guest says, maybe not. At least not as many as there used to be. Here to talk about the <11:35:10> market mentality and where stocks are heading, Jim Melcher, founder and president of Balestra Capital. Jim, always good to see you. JIM MELCHER, BALESTRA CAPITAL: Good to be here. THIERRY: Let's talk a little bit. There you see the Dow, it's up 66 now. And the markets <11:35:20> are actually behaving right now, but we're still not seeing the breadth that you would like to see. MELCHER: No. It's still concentrated and in relatively few stocks that are moving <11:35:30> the indices, but the broad market is still not doing that well. THIERRY: In fact, you have 25 percent in cash here. Are you keeping 25 percent cash to the sidelines to do buying if <11:35:40> the opportunity presents itself or are you just keeping the cash? MELCHER: With the market at these valuations, I think it's wise to have some cash aside. If we saw the market pull <11:35:50> back for what we thought was not a good reason, we'd convert that cash to stocks that we thought were cheaper, but it's very hard to find cheap <11:36:00> stocks unless you go down to the micro cap area and be interested in that. THIERRY: We have another guest coming on who might dispute that. I know you're being somewhat <11:36:10> sarcastic saying there are no long-term investors out there. Let's talk about the patterns that we're seeing. We're still seeing those guys snap up more and more of the blue <11:36:20> chips here. Is that a cause for concern for you? MELCHER: Well, you know, as the money continues to flow into the market. it flows into a relatively small group of stocks and <11:36:30> of course, the Internet stocks. And it drives them higher and higher and higher. So the disparity between the haves and the have nots, this market is greater than we've ever seen in <11:36:40> the history of the stock market. Which means there are fantastic bargains among the smaller stocks. If you're a true long-term investor, you go into the small stocks now. I know stocks selling <11:36:50> in single digit multiples with high double digit growth. Nobody cares. Some day they'll care again. In the meantime you have the opposite with the big stocks. They're growing, you know, 5, 8 percent or 10 percent except for <11:37:00> a few of the tech stocks and they're selling at incredible multiples, 30 times, 40 times or 50 times. History says this doesn't last. This disparity corrects sooner or later. So if there are long-term investors, the small <11:37:10> stocks have been lifting off the bottom already. Everybody's in for performance. Nobody's interested in risk anymore will. They don't want to hear about risk. It's how much you can make in the next <11:37:20> week or two? THIERRY: What is the biggest draw back of this? It's a short-term outlook here then? MELCHER: Well, the short-term outlook, I have to admit looks pretty good right now. When markets break through to new <11:37:30> highs like this, they tend to keep running for a bet, but you'll be running into a period when it flows into mutual funds, retirement funds start to slow <11:37:40> down a little bit and earnings reports coming through this year probably will not be very good. Foreign competition for the multinationals is getting tougher and tougher so <11:37:50> earnings will be hit. I think the market's going to be tested over. THIERRY: The market's going to be tested. In the meantime let's look at some of the stocks that perhaps a <11:38:00> lot of folks are overlooking at this point. Starting, first of all with Wave Systems. You like Wave System, why? MELCHER: I want to emphasize it's a speculative small stock, but Wave Systems has a technology that could make <11:38:10> it a very dominant player in the Internet. A lot of people just aren't aware of it yet. And it enables e-commerce on a level that's really not available right <11:38:20> now. THIERRY: Right. MELCHER: Some of the big computer companies and information technology companies are catching on to it and signing contracts with the company. THIERRY: A matter of time. MELCHER: I think it's a matter of <11:38:30> time. Nothing's for sure with a small stock, of course, but the numbers can be so good with this company knows what I do with the technology, I've been compelled to own the <11:38:40> stocks for several years and only in the last few months has it started to move. But it could be such a major player that I'd be kicking myself <11:38:50> if I didn't own some of it. THIERRY: You're also dipping your big toe into some REITs out there. MELCHER: Yes. But we own in our portfolios maybe two or three REITs at the moment. THIERRY: you're keeping <11:39:00> that to a minimum. MELCHER: Until we see signs that there's interest in the stocks again. I got out of the REIT stocks about a year and a half, two years ago when <11:39:10> they were overvalued. At this point they're undervalued. So they represent good values. THIERRY: They go up and down as do other ones. Jim Melcher of Balestra Capital. Appreciate you coming. MELCHER: Thank you. END