Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Lee Lichterman III who wrote (41844)	2/1/2001 3:09:59 AM
From: HammerHead	Read Replies (1) \| Respond to of 42787

By Yuka Hayashi Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--David Dreman, a veteran fund manager of Kemper-Dreman High Return Equity Fund, thinks the Nasdaq Composite Index will dive below last year's lows after the current upturn runs its short course. "What we are seeing is a major rally in a bear market," said Dreman, whose $3.7 billion fund invests in large-cap value stocks. The Nasdaq has regained nearly 15% of its value so far this year amid hopes that the Federal Reserve's interest rates cuts will prop up the sagging economy. The index hit its 2000 low of 2288.16 in late December, then drifted further down to 2251.71 in the first week of this year before starting on its current upward trek. The Nasdaq finished Wednesday at 2772.73. Speaking at a media briefing here Wednesday, Dreman said he expects the rally to last "two or three months, maybe even four months." But it then should begin losing steam once people start paying closer attention to companies' earnings. Expectations for technology earnings are much too high because of optimistic views promoted by analysts, the fund manager said. Many technology stocks are still priced much higher than what can be justified by their earnings power, Dreman said. Furthermore, he said he thinks it will take a year, or even two, until the Fed's rate cuts start having real impact on the economy. "It can very easily turn the stock market around, but it's very temporary," Dreman said. The Fed announced a half-percentage-point cut in its key rates Wednesday. Sees Two-Tiered Market Dreman, the founder and chairman of Dreman Value Management, has a subadvisory agreement with Zurich Scudder Investments Inc. Kemper-Dreman High Return Equity Fund is up 2.54% so far this year, after soaring 41% last year, according to Morningstar Inc. The fund ranked in the top 1% of its category last year, in a complete reversal of fortune from 1999, when it was at the very bottom with a 13% loss. While Dreman said he's "selling into any tech rallies" these days, he isn't averse to buying technology stocks. He had virtually no tech stocks in his portfolio at the beginning of last year, but started buying a little in December. His targets have been companies that had gone down by 70% to 80% over the past year, such as Nortel Networks Corp. (NT), Lucent Technologies Inc. (LU) and Hewlett-Packard Co. (HWP) Hewlett-Packard, a company that has appeared several times in Dreman's portfolio during his more than 30 years as a fund manger, now offers a "nice, reasonable price" at 17 to 18 times its earnings. The stock closed Wednesday at $36.85, down 2.5%. The 52-week high of $69 was set in June, while the low of $29.13 came in December. Dreman said he would venture to buy some New Economy names if their prices come down to what he considers right levels. EMC Corp. (EMC) and Cisco Systems Inc. (CSCO) are among such companies. "Cisco, at 30 times earnings (after adjusting for stock options), would be a terrific stock," the fund manager said. Cisco's trailing price-to-earnings ratio is near 100. Dreman said he believes the market has entered a two-tiered structure, where overpriced technology stocks will face further correction and value stocks will come under the spotlight with a strong recovery. The picture is similar to what happened after a prolonged bear market in the early 1970s and a tech rout in 1983. "Value managers can come out of the woods again," Dreman said. He said he is excited about financial companies such as Freddie Mac (FRE) and retailers such as Best Buy Co. (BBY) and Gap Inc. (GPS) His fund invests heavily in tobacco companies such as Philip Morris Cos. (MO) and puts a quarter of its total assets in oil and oil service companies. -By Yuka Hayashi, Dow Jones Newswires, 201-938-2129; yuka.hayashi@dowjones.com (END) DOW JONES NEWS 01-31-01 07:17 PM