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Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: pat mudge who wrote (15248)	12/22/2000 7:53:26 PM
From: Steve Warkentin	Read Replies (1) \| Respond to of 24042

Michael Murphy on JDSU ( stolen from Raging Bull):Fiber is the Story I've told you that a massive fiber buildout is underway and will change the way we live. In fact, fiber optics will be the biggest story in 2001. JDS Uniphase is a fiber optics giant that is set to take advantage of the huge growth in this area. The wisdom in Silicon Valley has been that the stock symbol stands for "Just Don't Sell Us," which was right for many years. But the stock is now down to less than a third of its all-time high. In fact, it set a 12- month low yesterday. What's the deal? It's inventory fears again (nothing to be concerned about long term, for sure) plus some confusion over news about its upcoming merger with SDL, Inc., another leader in fiber optic products. A couple of days ago the companies said the merger would be delayed into January pending Justice Department approval. Corning, a potential objector to the deal, came out and said they will not oppose it. The reason: I am hearing that the Justice Department will ask JDSU to sell certain fiber optic assets as a condition of approval, and Corning is likely to be the buyer. My 30 years of experience tells me that if the rumors are getting this specific, the deal is likely to close-and we're about to own our newest core stock. We just saw this same thing with AOL/Time Warner. Reading this brief delay as terrible news is just plain goofy. Late in the day today the stock cracked from $46 to $37, then recovered to close at $40-15/16, down $2-1/8 for the day to a 12-month low. Alex. Brown & Co. is floating a rumor that JDSU may preannounce a bad quarter due to excessive inventories. Could it happen? Like Sun, it's possible, but not likely-and the current price already more than discounts it. The combination of JDS Uniphase and SDL will be a powerhouse in fiber optic components with, for example, an 85% share of the critical pump laser market (pump lasers carry the light that travels down the fiber). What investor will not want to own this stock? JDSU also has a June 2001 fiscal year, and today's decline brought the stock to 51X my 80-cent estimate. That may sound high, but this company will grow 45% a year for the next three to five years, so on a price/earnings to growth rate ratio, it's the cheapest of all three new recommendations. That's amazing for the dominant core holding in one of the fastest-growing, hottest industries on earth. For calendar 2001, JDSU should earn about 95 cents and for fiscal 2002, about $1.20 (some analysts are up to $1.40, and that's not impossible). With such rapid growth, the forward P/E ratio comes down fast: 43X calendar 2001 and 34X fiscal 2002. I can't believe we're getting this stock so cheaply. Buy JDSU up to $46. Try not to run it there all at once! There should be plenty of stock for sale between $43 and $46. My target price? O.K., hold your breath: $125--but that's a two-year target. My target for year-end 2001 is $88. But remember, we are long- term investors that keep our heads during tough times, buy great companies when their stocks are smashed down, and willingly hold them two years, three years or longer. That's how we make the big profits year after year. Happy Holidays, Michael Murphy