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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (3013)	4/13/2001 5:49:11 PM
From: Gofer	Respond to of 74559

Some tech investors need to join a 12-step program globeandmail.com By MATHEW INGRAM Globe and Mail Update Like an alcoholic after another all-night bender, there were plenty of tech investors who sat with their head in their hands a month or so ago, looking at benchmark Nasdaq stocks 80 to 90 per cent off their highs. They swore that they would never, ever do that again — never again would they be so foolish as to binge on such questionable investments. So why do so many tech investors seem to be falling off the wagon so quickly? Maybe more direct action was required. Maybe, after the meltdown of the Nasdaq was well under way, technology investors should have been forced to sign something before they were allowed to buy more stocks — the kind of document that Robert Downey Jr. has to sign when he gets released every six months or so from some treatment program or other. How about something like: "I agree never to buy something with no earnings and a price-to-sales ratio of more than 10"; "I will never justify such multiples by projecting where earnings and revenue might be three years from now, when a company has only existed for two years"; "I promise I won't believe a company when they stick to their forecasts, even though everyone else in the sector has slashed theirs by over 50 per cent." Investors could agree to stay away from discount brokerage Web sites for at least two days after reading about a company's quarterly results, and to agree never to look at analysts' ratings without a neutral third party being present. Furthermore, they could promise not to think about what they paid for some of those big losers, or to hope that they will ever get back there, or to use the word "bottom" in reference to the Nasdaq — and to write an essay about how not to fall for a "short-covering" rally. Binge drinkers get suckered into returning to their old ways even though they know that they will only cause pain and misery, and it looks as though some tech investors have the same approach when it comes to stocks like Yahoo, Amazon, Juniper Networks and Research In Motion. They have been beaten up so badly by an unrelenting stream of bad news and earnings warnings that having a company merely meet its already-reduced estimates is reason for joy. A lack of bad news is greeted as though it was good news. Juniper and Research In Motion, two stocks that continue to trade at eye-popping multiples despite the economic downturn and signs of a slump in their respective markets, soared higher and pulled the rest of the Nasdaq with them Thursday. Juniper released results that met analysts' expectations, but it also cut its forecasts for the year — and the stock climbed more than 17 per cent, even though it is already 100 times trailing earnings and more than 50 times estimates for the current year. Research In Motion actually outperformed estimates for both earnings and revenue, although its earnings came largely from investment gains (that is, selling shares in other companies). Revenue soared thanks to sales of its handhelds to customers such as America Online, but most of the analysts who upgraded the stock failed to mention that the growth in RIM's subscriber base — which makes up the bulk of its recurring revenue — fell about 20 per cent below targets. The stock climbed more than 28 per cent and is now trading for more than 50 times even the recently upgraded earnings forecasts for 2001. The list goes on: Dell and Yahoo pushed the market up by more than 5 per cent last week when they said that things are going to be almost exactly as bad as expected. Dell climbed more than 14 per cent last Thursday, even though all the company said was that it was sticking by its forecasts. The stock is now trading at more than 35 times earnings estimates, despite the fact that its profit margins are still falling. Yahoo climbed almost 25 per cent after it was upgraded to a "buy" by a Lehman Brothers analyst, even though questions remain about its business and it needs a CEO. Motorola pulled an even better trick this week: it reported a quarterly loss for the first time in 15 years, said its cellphone handset business is in serious trouble and it will have to lay off thousands of employees — and the stock has climbed to the point where it is now 16 per cent higher than it was just before the company released its results. Revenue in a couple of its major markets fell by over 25 per cent over last year, and yet the stock is now trading at 92 times projected earnings. Just because some analysts argue that the Nasdaq is getting close to a bottom, and some economists think the U.S. will see a pickup in activity toward the end of the year doesn't mean it's time to start partying again.