Corel longs are in with some very good players! Sorry for the length, but it's interesting to follow what the pro's do when they are just playing around.
(COMTEX) B: 1999 CRN Mutual Fund -- Loest holds onto top spot as contest reaches midway
point; players place their bets for the third quarter with four new stock picks
Jul. 10, 1999 (Computer Reseller News - CMP via COMTEX) -- EDITOR'S
NOTE: This week, CRN unveils the third-quarter picks for each of the 20
contestants in the CRN Mutual Fund stock-picking contest. The complete
standings are displayed as of market close June 30. The four new
picks-two for three months and two for six months-are listed first, in
that order, followed by the one-year picks. The percent change is for
each existing stock since the pick was made.
New York - The second quarter of 1999 was sweet for the vast majority
of the participants in the CRN Mutual Fund contest.
Of the 20 players, 14 experienced portfolio gains since the end of
the first quarter, while just six suffered declines. The six-month view
looked even better: Since Dec. 31, when the contest began, 16
participants saw their portfolios rise above their starting portfolio
value of $100,000, while just four experienced losses. Even more
impressive was that the contest's top two players nearly doubled their
starting portfolio values.
Among the biggest gainers during the June quarter was channel
executive I've Got Mail!, who enjoyed a $44,954 jump in his portfolio
value on the strength of consumer electronics retailer InterTan Inc.,
which was up a whopping 253 percent since Dec. 31. That catapulted the
channel executive to fifth place from 13th.
Meanwhile, Ram Partners' General Partner Jeff Matthews, thanks to
picks of Tech Data Corp. and Onsale Inc., as a buy and short,
respectively, helped boost his portfolio to $121,565, up from $96,945
on April 7.
The positive trend for the quarter was mirrored in the major indices.
The Dow Jones Industrial Average started the second quarter at 9,786.2
and soared to 11,026.2 on May 11, before dipping a bit to 10,970.8 on
June 30. The technology-laden Nasdaq gained, too, attaining 2,686.1 on
June 30, up from 2,461.4 on March 31.
Each of the Mutual Fund contestants began the yearlong contest with a
$100,000 hypothetical investment in six stocks. Two of the stocks
remain in place for three months, two for six months and two for the
full year. Contestants include investors, analysts, portfolio managers
and channel executives, who pick under code names. The CRN Grab Bag is
comprised of stocks picked at random from a list submitted by CRN
editors.
After a nick-and-tuck battle during much of June with Montgomery
Securities Analyst Al Tobia, IPS Millennium Fund Portfolio Manager
Robert Loest ended the second quarter in the coveted top spot with a
portfolio value of $196,375, a 21 percent gain from the $161,773 he
ended with (in third place) at the end of the first quarter.
Loest's best-performing stocks during the first half were three-month
buys Qlogic Corp. and Broadcom Corp., which gained 97 percent and 134
percent, respectively, since March 31; and six-month buys Sprint PCS
Group and JDS Uniphase Corp., which gained 147 percent and 139 percent,
respectively, since Dec. 31.
For the third quarter, Loest stuck with three of his four expiring
picks, removing Sprint PCS and replacing it with a buy of Network
Solutions Inc.
"Network Solutions has a superior business model and is acting
aggressively to expand its business," Loest said. "Even given really
pessimistic assumptions about government deregulation of domain-name
registrations, their business is not going to evaporate," he said.
Of the other three stocks he chose to re-pick, Qlogic, Uniphase and
Broadcom, Loest added, "I can't see much other than upside potential to
them."
Loest was not the only contestant gung-ho on Broadcom. Ted Bridges,
executive vice president at Bridges Investment Council Inc., also went
long for three months on the Irvine, Calif.-based company, a maker of
integrated circuits that carry voice, data and video over broadband
networks.
Other picks by Bridges this quarter, like Loest's, reflect a heady
outlook on companies offering multimedia and high-speed networking
technologies. Among his other selections are three-month buy Polycom
Inc., a developer of audio, data and videoconferencing products for
multimedia collaboration; and six-month buy Level 3 Communications
Inc., a provider of IP-based local and long-distance networks.
The similarities between Bridges' and Loest's sterling portfolios end
there, however. Bridges has remained stubbornly in 19th place, albeit
with a somewhat improved portfolio value of $80,571, up from $71,863 on
April 7.
Also upbeat on communications and video-related offerings is private
investor Jim Stone, a new contestant who is taking the reins this
quarter from Gerard Hallaren, director of research at Hanifen Imhoff
Inc.
For his three-month buys, Stone nabbed PictureTel Corp. and VTEL
Corp., both suppliers of videoconferencing products. Stone's six-month
longs include World Access Inc., a provider of long-distance, wireline
and wireless products and services; and Glenayre Technologies Inc., a
maker of paging, cellular and digital communications networks.
"Both PictureTel and VTEL will benefit from tremendous growth fueled
by the Internet," said Stone. "The market will soon recognize the
potential of these undervalued stocks," he said.
About Glenayre, he added, "The company is the paging leader that will
expand rapidly with the recovery in the Asian and Brazilian markets."
Stone is betting his picks will drive him out of the basement
position he inherited from Hallaren. But the investor can do little
more than hope for a rebound in Hallaren's one-year picks-a short of
eBay Inc. and a buy of Data General Corp. The eBay short has resulted
in an 88 percent value drop, while the Data General buy has resulted in
a 11 percent decline since Dec. 31.
Hot on the heels of Loest is two-time champion Tobia, who has been
trading places with Loest and had held the No. 1 position for most of
this year. Tobia aims to catapult again to the top with six-month buys
Natural Micro Systems Inc., a vendor of voice and fax boards, and S3
Inc., a maker of 3-D graphics chips.
Tobia's three-month longs include Visual Networks Inc., a provider of
service-level management systems for multiplexed networks, and
graphics/automation software developer Corel Corp. Underpinning his
pick of Toronto-based Corel is investors' increasing bullishness on
Linux, an operating system on which Corel is building many of its
products, said Tobia.
"We expect investor awareness [of Linux] to increase with the Red Hat
[Software Inc.] IPO," said Tobia, adding that investors will "respond
accordingly" to Corel.
Joining Tobia in playing the Linux and IPO cards is Hambrecht & Quist
Senior Analyst Christopher Galvin. Now in 12th place with $110,037,
Galvin aims to replicate the performance of colleague and 1998 champion
Todd Bakar. For his new three-month buys, Galvin also selected Corel,
plus Westboro, Mass.-based Applix Inc., which in June created a
division that will source and brand Linux-based products.
As for his six-month buys, Galvin flagged CareerBuilder Inc., a Web
site offering job search and placement services, and San Diego-based
Newgen Results Corp., a vendor of database management, direct marketing
and related services for auto dealerships and auto manufacturers.
CareerBuilder is one of many Internet plays on which contestants went
long. And channel executives were among their most fervent backers.
Among their picks were PC Service Source, an online provider of
service logistics outsourcing selected by I've Got Mail!; Internet
search engines Yahoo Inc. and Inktomi Corp., flagged by Raging Elk and
Black Knight; and America Online Inc., a three-month pick of
Competitor.
The experts also joined the Internet bandwagon. Among them were David
Takata, vice president of research at Gruntal & Co., who selected
online auctioneer eBay as a six-month pick; A.G. Edwards & Son's Vice
President of Investment Brad McWilliams, who is carrying Yahoo from the
second quarter for three months; and Bob Turner, chairman and chief
investment officer of Turner Investment Partners Inc., who is retaining
AOL for another six months.
"The second half of the year will be strong for a lot of Internet
stocks," said Turner. "And AOL will be the main beneficiary," he said.
Other contestants disagreed with that buoyant view, however,
believing corrections in sky-high valuations of Internet shares are
long overdue. Indeed, most of the short picks this quarter, as in prior
quarters, were tagged to online companies.
Within the short category, Roundhill Securities Vice President Lou
Bacher flagged eBay and online publisher VerticalNet Inc. as three- and
six-month picks, respectively; Monash Information Services President
Curt Monash selected ISP MindSpring Enterprises Inc. for six-months;
Gruntal & Co.'s Takata picked online auctioneer Priceline.com Inc. for
six months; and Michael Murphy, editor of California Technology Stock
Letter, picked online software vendor Beyond.com Corp. as a short,
along with Internet auctioneer Onsale.
"Each of these companies shows large, accelerating losses with no
profits in sight." said Murphy of Beyond.com and Onsale, adding, "After
a rally into July, I expect a very sharp correction in the Internet
stocks during a summer slump, with the worst of the devastation
occurring [in] customer-facing companies with unprofitable business
models."
Channel stocks were among third-quarter favorites, selected by both
channel executives and analysts.
I've Got Mail! nabbed MicroAge Inc. for three months, calling the
stock "oversold." Competitor picked CompuCom Systems Inc. for three
months, and Martin Wolf Associates President Martin Wolf bought
Manchester Equipment Co. Inc. and Allstar Systems Inc., calling the
stocks "too cheap to pass up."
And Michael Whitney, a director at The Advest Group, picked Inacom
Corp. and Merisel Inc. as three- and six-month buys, respectively.
"[Inacom's] shares should start to rebound as investors look beyond
uncertainty in the second half of 1999," Whitney said.
As for Merisel, he added, "the company has proven it can survive in a
difficult environment. Compaq authorization should help revenue in
[the] second half."
Ram Partners' Matthews shorted for six months Miami-based CHS
Electronics Inc., as he did during the second quarter. CHS, has "a
major liquidity issue and poor business prospects,"said Matthews.
Matthews, who sits in seventh place, also sold short three-month pick
and E-commerce consultancy Sapient Corp., and went long on six- and
three-month picks Newbridge Networks Corp. and National Semiconductor
Corp., respectively.
--
What The Experts Are Saying
'Don't be fooled by [Micron Technology's] location in Boise, Idaho.
Micron is positioned to survive and thrive in the DRAM mosh pit. I
predict their stock will soon rock-n-roll.'
- Raging Elk
'Nokia makes excellent monitors and, with their wireless technology,
they will benefit greatly from the convergence of voice and data.'
- Black Knight
'[3Com] . . . is well off of [its] potential acquisition target value
of the high 40s. . . . AOL should have a nice run.'
- Competitor
'Sapient's Internet and ERP consulting business is strong. But the
competition is heating up and the stock is overpriced.'
- Jeff Matthews
'Data General is gaining increasing respect as the poor man's EMC,
which could lead to a closing of the enormous valuation disparity. . .
. Mindspring sells an increasingly obsolete commodity.'
- Curt Monash
-0-
By: Warren S. Hersch
Copyright 1999 CMP Media Inc.
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