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To: Sultan who wrote (14931)	1/23/2000 10:14:00 AM
From: Richard Tsang	Respond to of 118717

SK, I thought the hot sector is "wireless" but JSB got us "wired", something strange happening here <g>. I agree that there is a lot of value in all these cable and wire suppliers. How much money will be going in and coming out of these stocks is a big question mark. Those with good fundamentals will still attract investments looking for value small cap. This is another reading I like, from The Online Investor: theonlineinvestor.com Sector Investing January 21, 2000 - The stock market is made up of many sectors: technology, financials, drugs, consumer non-durables, autos, etc. Investors need to keep this in mind as they look to invest new money or build a portfolio. Right now the hottest sector is technology. If you don't own any tech stocks, you're not happy, especially if your neighbor does. Here's how to improve your chances of owning a hot sector. First, look where the earnings are. Since we're in the middle of the earnings season, there are plenty of announcements to study. Notice that currently all the big tech stocks are beating analysts' expectations (IBM, Intel, Apple Computer, etc.). And just as important, they're very positive about future revenue and earnings growth, giving positive predictions for the rest of the year. None is suggesting a slow down. That bodes well for their stocks for the next few months at least. (Remember the market looks ahead at least six months as it tries to determine how a company will do.) For the moment, tech stocks look like they'll stay hot for at least another quarter. Second, look at interest rates. There's a cloud looming over the market as the Fed is going to meet on February 1 and 2. Everybody expects interest rates to go higher. The question is: By how much? No one knows. There's no question rates are going at least 25 basis points up but will the Fed make it 50? The market is pricing in at least 25 with a heavy leaning toward 50. The Fed may wait until its March meeting to add that extra 25, but by then, if the economy hasn't cooled somewhat, it may boost it 50 basis points. The point is that rates are expected to go up. That puts pressure on certain sectors of the market, in particular, the financial stocks. The banks and savings and loans are the hardest hit because their margins are squeezed as higher short term rates increase the cost of borrowing. While many of banks and S&L's have a majority of floating rate loans, the ability to adjust those loans upward is done on a time delayed basis. That means the current quarters are punished when rates rise without a corresponding rise in interest income. Furthermore, all the outstanding fixed rate loans don't adjust at all, and that means the margins on those loans are tighter. The bottom line: the financial sector is out of favor right now. That might mean it's a great opportunity. If you have the patience to sit through the rate hikes, and the worst is 75 basis points higher than current rates, the stocks may go a little lower from here. But if the rates only go up 50 basis points, this may be the bottom for financials since many of them have been pummeled over the last few months. Third, look for government regulation or de-regulation. The drug industry is being threatened with the former, especially if a Democrat wins the White House. The utility sector has undergone the latter with some winners and some losers. The power of the government can't be underestimated, and when it starts to legislate prices, it leads to uncompetitive pricing and dislocations in the marketplace. The drug sector has been under this cloud before in the Clinton administration and escaped without getting wet. However, there's always an outcry over the cost of drugs and during campaign season, the drug industry is a natural target. Until the election is over, the drug companies will have a hard time moving ahead in a meaningful way, no matter what the earnings are. If you're a momentum investor, you'll look to move in and out of hot sectors. That means you're fully invested in technology at the moment. If you're a contrarian investor, you're always looking for sectors that are out of favor and will patiently wait for the tide to turn. If you're just a regular person, you'll look to have a balance in your portfolio, with some overweighting in the hot sector with an eye on changing when the hot sector starts to cool. For every type of investor, it's always wise to stay with the majority of your investments in the sector leaders as they tend to go down less and lead the rallies on the upside. - Ted Allrich