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Strategies & Market Trends : Range Bound & Undervalued Quality Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Larry S. who wrote (4947)	3/21/2002 10:07:01 AM
From: BWAC	Respond to of 5499

Pieces exist. A functioning system to handle such capacity as in the WCOM agreement nowhere near exists. Nor does the capacity and infrastructure exist to deliver such a service in quality and quantity to the home. Thus since you can't reach customers, the applications which would require much greater bandwidth amounts are stalled. I'll give you an example of the one consumer service I pay for that requires broadband and what I would like to see it evolve into. TrackPass from Nascar and Realnetworks. An enhanced sporting event type thing. Consists of a lap by lap update of the cars running order. Radio feed of MRN which produces the radio broadcast of the races. And access to in-car driver/pit crew audio. Ability to select the driver of your choice and lock in, or scan the entire field. $30 a year. Now how does it work? It sucks. It runs two minutes behind the TV telecast. Which can be one lap or 5. I'm pulling the stuff down as fast as I can with my Bellshit dsl connection. They claim they are "real time" on their end. What I would pay more for it to evolve into? In car video of the selected driver. View the race from the perspective of your favorite driver type thing. Good thing I'm not holding my breath. Cause there is no way on this green earth such a product can reach me in a useable and quality format under the current state of infrastructure buildout. And it won't be coming anytime soon. Because the RBOC's have zero incentive to compete. All is stalled (applications and buildout) til the RBOC's decide they can't wait any longer. The competion went bankrupt in year 3 of a 10 year buildout phase. Partially due to god knows what investor expectations of near term profitability. And the resulting liqiudity crunch. All of which happened at just prior (1 year or 2 years) to the time that the applications would come to market and use the capaicty built. Lack of investor patience, lack of focus, lack of understanding, panicked masses, and one heaping load of ill-prpepared company executives amazingly with NO backup plan. Bottom line. The capacity may exist. But it doesn't exist in such a manner as to function in the quality and quantity which will be needed for any consumer application to reach critical mass.

To: Larry S. who wrote (4947)	3/21/2002 11:18:58 AM
From: BWAC	Read Replies (1) \| Respond to of 5499

How will USA get more fiber in its telecom diet? Thu Mar 21, 6:09 AM ET Kevin Maney USA TODAY If you think the crashing telecommunications industry is in chaos now, just wait until it all flips around and the world is choking on Web traffic and too many phone calls squeezing through too few fiber-optic lines. Instead of a bandwidth glut, a bandwidth shortage. It will happen sooner than conventional wisdom dictates. When it does, a shortage will push up consumer phone bills, hamper businesses getting swamped by their data communications needs and hurt a technology industry that thrives on the Internet. A shortage also should boost the stocks of some telecom companies and give rise to a new set of upstart telecom companies. Shortages could start appearing late this year. In one worst-case scenario, fiber networks that were intended to have enough capacity for 20 years would get filled up in five. While telecoms form a conga line to bankruptcy courts, forces are aligning to serve up a shortage. Including: * Construction of networks and the ''lighting'' of dormant fiber-optic lines -- which turns them on -- have come to a standstill. * The telecom collapse is crushing innovation and starving new telecom companies of capital. While some new companies are getting modest funding, the pace of innovation has slowed considerably. * Meanwhile, bigger, older telecom companies -- which have more resources to survive the shakeout -- are already starting to buy networks and smaller companies at fire-sale prices. That trend is expected to continue. Companies such as Verizon Communications and SBC Communications, which own older circuit-switched networks as opposed to newer, more efficient networks based on Internet protocol, don't want to be shoved into obsolescence, notes industry consultant David Isenberg, a former AT&T strategist. As the older phone companies again dominate the industry, Isenberg and other analysts say, they'll try to slow the pace of change. But while those factors plunge the industry into a deep freeze, a curious thing is happening. Total demand for communications worldwide keeps rising at 7% to 15% a year. Internet traffic grows at least 80% a year. At some point, the two trends -- stagnating telecom capacity and zooming demand -- will cross. Demand will keep rising, and capacity growth will be stalled. ''It's not like you can put this stuff in in a minute,'' says James Crowe, CEO of Level 3 Communications. ''If you want it nine to 18 months from now, you need to start today.'' The clashing trend lines will lead to an undersupply of bandwidth. It's not a question of whether this will happen. It's when. Bad news continues The telecom industry probably won't get much happy news in 2002. Telecom is Wall Street's pariah du jour. Investors won't touch it. Those who held telecom stocks bailed after watching Global Crossing file for Chapter 11 bankruptcy and Qwest Communications and WorldCom get queries from the Securities and Exchange Commission (news - web sites). Capital markets and debt financing are basically closed to telecom. Struggling companies will continue to have trouble funding ongoing operations. More will file Chapter 11. Boston consulting company Adventis figures that an additional $70 billion to $100 billion worth of telecom networks will get written off over the next three years. Half of telecom carriers are cutting their 2002 capital budgets, according to Forrester Research. An additional 23% will keep those budgets flat. Meanwhile, the fire sale has begun. Time Warner Telecom, for instance, bought telecom service provider GST Telecommunications for $690 million, or about 50 cents on the dollar. In other cases, the big carriers won't buy struggling little ones -- the big guys will just let the little ones die, leaving the upstarts' fiber networks forever dark and their competition forever removed from the marketplace. For start-ups, venture capital is hard to get. ''There's a lot less money available, and it's in smaller increments,'' says Vinod Khosla, a partner at venture firm Kleiner Perkins Caufield & Byers. In the telecom boom, Khosla was telecom's most visible of the venture capitalists who fund young companies. A select few companies are able to raise money, but, Khosla says, ''Some good companies that should get funded are not getting funded.'' All the woes result in an industry stuck in quicksand. ''Innovation will slow because only the incumbents will make investments,'' says Blaik Kirby of Adventis. With so many companies crippled or gone and so few new ones coming up, competitive pressures inside the industry to build bigger, better, faster networks have vanished. Is the glut for real? A huge, key question for the industry is: How much of a glut is there? Many reports focus on the enormous amount of fiber that's been put in the ground by companies such as Level 3, 360networks and Global Crossing. The building boom created what at first seems like a giant oversupply. Only 2% to 5% of the fibers in the USA are lit, hooked up and carrying traffic. The rest are dark, lying in the ground in anticipation of demand. But it's not that simple. Dark fiber is not the same as capacity. Even though a fiber is in the ground, it's far from being usable. For every $1 spent to put a fiber in the ground, a company has to spend $20 to attach it to all the equipment, configure it and turn it on. One way to think of it is to consider a farmer's crop. Putting in a fiber is like buying seed. That's the relatively easy part. Planting, growing and harvesting are like lighting that fiber. It's the expensive, hard part. Just because a farmer has tons of seed doesn't mean he has a crop. The seed isn't going to meet a surge in demand. ''Is the market really facing an oversupply of network capacity? In a word, no,'' says a report from research firm TeleChoice. The report adds that 63% of busy routes -- those between big cities -- are running at or near capacity. All the while, demand keeps rising. Even in a recession, businesses generally don't cut their spending on communications. It's too vital. Companies will first cut spending on computers or hires. Consumers increasingly eat up bandwidth. In 2000, 4 million homes had cable modems, according to the National Cable Television Association (news - web sites). In 2001, it jumped to 7.2 million. A similar growth rate is expected this year. Broadband over phone lines has passed 4 million U.S. subscribers. Yet cable modems and high-speed digital subscriber lines, or DSL, are together reaching only a fraction of U.S. homes. Most consumer Internet users still dial in on slow lines. Few compelling new applications -- such as online movies -- take advantage of higher bandwidth. Dial-up lines and lack of applications are ''choke points'' -- they could be holding back a potential surge in consumer demand for bandwidth. ''It's not a business of excess capacity,'' says Francis McInerney of research firm North River Ventures. ''It's not overbuilt. It's not built enough. The problem is capacity surrounded by choke points.'' If the choke points get loosened, he says, a wave of consumer demand could make shortages even worse. When will a shortage begin? Level 3's Crowe thinks it will start late this year. Kirby at Adventis pushes that out a few years. Danny Briere, CEO of TeleChoice, says shortages will start soon and could get serious in four to five years. In one scenario, TeleChoice lined up all the factors -- from a hot economy to consumers downloading movies -- that would increase demand for bandwidth. The firm found that within five years the USA could fill up all the lit AND unlit fibers. Telecom companies have generally planned for all that fiber to last 20 years. Higher prices, slower service When a shortage comes, what will happen? High school economics says that prices will rise for everything from companies' virtual private networks to home Internet access and all kinds of phone calls, including wireless calls, which need fiber lines to carry calls from city to city. Networks could get overloaded. That would slow Internet traffic and perhaps cause network glitches that interrupt traffic. Almost half of any network is kept idle as a backup. In a pinch, the idle space can carry excess traffic -- but then that space isn't available if something goes wrong. A shortage will create a vacuum. Frustrated businesses and consumers will be ready to try new companies or technologies to get the bandwidth they desire. Perhaps another generation of network builders, using more advanced technology, will spring up. A technology such as 802.11, or Wi-Fi, might leap to prominence, carrying data wirelessly over short distances at speeds 10 times that of DSL and cable modems. Although start-up funding is tight, it's still available for companies that create ''a significant level of innovation,'' Khosla says. Dev Khare, founder of a start-up that's building telecom applications, in March landed $6 million in funding from Nokia (news - web sites) Ventures and two other investors. ''Two to three years from now, you'll see a set of companies emerge that are significant in terms of innovations,'' Khosla says. McInerney and others predict that a shortage will once again trigger a shakeout, reshuffling winners and losers. The industry will get flipped on its head. ''Investors will get a second big wake-up call in telecom,'' McInerney says. Telecom chaos won't go away anytime soon.

To: Larry S. who wrote (4947)	4/2/2002 9:37:30 AM
From: JakeStraw	Respond to of 5499

BusinessWeek Online Investing Against the Grain biz.yahoo.com Personal Investing: INVESTING Q&A When the market is surging and everyone is buying, that's the time to sell. And conversely, the time to buy is when stocks are bottoming. That's one way Michael K. Farr, president of investment managers Farr, Miller & Washington, sums up his investing strategy. Right now, Farr ventures a prediction that the market will wind up the year 5% to 10% ahead, depending on how well earnings recover. He favors four sectors: consumer, financial, tech, and health care -- particularly the first two. He has one unusual pick as a consumer stock, American Power Conversion, which he describes as a nontech way to play tech. APCC makes power-surge strips and backup supply boxes for servers and computer networks. Noting that interest rates will have to climb above 3% to have a negative effect on Citigroup and Wells Fargo, Farr sees more room on the upside for these stocks in the financial sector. In the defense area, he speaks warmly of United Technologies, the only stock in that group he owns. Farr made these and other market comments in a chat presented Mar. 28 by BusinessWeek Online on America Online, in response to questions from the audience and BW Online's Jack Dierdorff and Karyn McCormack. Edited excerpts from the chat follow. A complete transcript is available from BusinessWeek Online on AOL at keyword: BW Talk. Q: Michael, when you were here a couple of months ago [see BW Online, 12/6/01, ``Emotion, the Enemy of Investing''], you described the market as being ``consistently inconsistent.'' Is that still your view? Where do you see the market going for the rest of the year? A: The key to being a successful adventurer of any kind is understanding your terrain. The market's terrain is always uncertain. Successful investors need to design portfolios that can endure dramatic and unexpected drops, while still benefiting from market increases.... With the disclaimer that no one can predict short-term markets, let me venture out onto the thin branches and guess that the markets will close some 5% to 10% higher by yearend. This is really going to depend on earnings increases that correspond to current positive economic news.... I think investors over the past few years, and after Enron, are waiting to see the evidence before they put the buy orders in. Q: Speaking of earnings, what do you see for the first-quarter earnings season? Do you expect any sectors to really shine or disappoint? A: I think that we should look for fewer disappointments than usual, because earnings estimates were slashed through the end of last year and post-September 11. I think that you could see some surprise positives from the tech sector as a result of late-quarter orders, and despite the turbulence and weakness in GE (NYSE:GE-news), they will make their numbers. Q: In the near term, would you favor small and intermediate stocks? A: I think that the small and intermediate [mid-cap] stocks have a greater potential return over the next 12 months, but investors need to be prepared for greater volatility. Large-cap stocks are always more comfortable because they can withstand significant declines that certain small caps cannot. Q: What sectors do you feel are worth a look? A: I like four sectors...consumer, financial, tech, and health care. Of those four sectors, I think the consumer and the financials are still the most comfortable places to be right now. Tech will bear out over time. I think it represents good long-term value, but is a very volatile place for the next 12 to 18 months. We still need to see the orders come through in tech, and I still think we're recovering from the Nasdaq 5100 hangover. Q: What stocks specifically do you see as the best investments now? What have you been buying? A: In the consumer sector. I like American Power Conversion (NasdaqNM:APCC-news), and I like Honeywell International (NYSE:HON-news). United Parcel Service (NYSE:UPS-news), Target (NYSE:TGT-news), Staples (OTC BB:STLS.OB-news), PepsiCo (NYSE:PEP-news), and Wendy's (NYSE:WEN-news) are also good. In the financials, I like Wells Fargo (NYSE:WFC-news) and Citigroup (NYSE:C-news). I think that rates will have to go up something above 3% to negatively affect these two companies, meaning there's more room on the upside there. Q: What are your thoughts on Tyco (NYSE:TYC-news)? A: Tyco remains mysterious, and the story remains complicated. Tyco wanted to be another great consolidated, amalgamated company like GE, but as management became frustrated with static and falling valuations, they changed course and suggested that a breakup would bring better value. This change in management philosophy and direction, combined with a murky balance sheet and suggestions of Enron, brought the stock's price low. This was complicated by some questionable fees that were paid to a director for the sourcing of the CIT Group acquisition. I think that while Tyco shares may have potential, they have proven to be not my kind of stock, given the change in management direction, and the lack of transparency with regard to their balance sheet. I would avoid Tyco shares. Q: Is MMM [3M] more likely to attain that GE-like status than Tyco? A: No, I don't think so. I think 3M as a multifaceted manufacturer is a reasonably well-run company, but it's commodity- and human-capital-intense, and I think will have a rather slow and steady growth rate and will not achieve the price-earnings multiple premium that has been afforded to GE. I think the question is, will GE maintain this p-e multiple, or will it begin to trade more like a traditional diversified manufacturer and finance company? Q: Some big-name techs: What are your thoughts on Oracle (NasdaqNM:ORCL-news), Cisco (NasdaqNM:CSCO-news), and Intel (NasdaqNM:INTC-news) for this year and three years out? A: Well, I think if you were to own all three for the next three years, you would probably keep pace with the market -- and may even stay ahead of the broad market. Oracle is my least favorite of the three. I think that the trading pattern continues in a negative vein and will take longer to recover. Cisco, of the networking stocks, I think has potential, probably within a one- to three-year horizon, but I'm concerned about the number of stock options outstanding as employee incentives. They have created a huge number of phantom shares that, when realized, will dilute earnings and present significant challenges to the company. Intel is subjected to two negative forces. The first is the slowdown in all sorts of tech sales, and particularly hardware sales. And second, semiconductors have become much more of a commodity business, and competition is increasing. For the long term, I think Intel is a very well-run company and is the most conservative investment of the three. It may take some time before any of these three is a ``comfortable'' investment. Q: How do you feel about defense? Any buys there now? A: I think that there are buys in the defense sector. The only stock in that group that I own [and may add to] is United Technologies (NYSE:UTX-news). I think at 15 times earnings, and with a projected earnings growth rate of 14% over the next five years, these shares will benefit from increased tech spending and represent reasonable value at these levels. The stock, after its recent runup, is not cheap. Q: Any thoughts about media stocks? Especially radio? A: I don't follow the radio stocks, though I am curious to look at them now. In the broad media sector, I think that AOL (NYSE:AOL-news) represents value. In spite of recent trouble, I think the Time Warner portion of the company is worth $18 to $19 a share, and the deep discount on the online-subscriber portion makes the stock look very attractive in the long term. Near-term, I think it will continue to be volatile. Q: How do you feel about the grocery industry for 2002? A: It feels like a defensive and comfortable place to be. The grocery industry has such small margins that it's hard to judge the effect of difficult economic times, and also to judge how they will fare when their cost of capital increases. That said, I think that Albertson's (NYSE:ABS-news) and Safeway (NYSE:SWY-news) are two of the stronger names in the industry. I would look to those names first. Safeway appears the less expensive of the two. Q: Into troubled telecom -- what about WCOM [WorldCom]? A: Good question. What about WorldCom? I'm not sure WorldCom knows. The spin-off of the two tracking stocks clouded an already cloudy situation. MCI is unprofitable and will act as a drain on the combined companies. The WorldCom portion particularly, with regard to the Internet backbone, feels like it should represent value over time, though on the heels of an SEC inquiry, it seems that it could be a long time before investors are rewarded in this name. Q: Cable stocks such as Cablevision (NYSE:CVC-news) and CHTR [Charter Communications] -- prospects? A: I don't follow either of those names specifically. I like the cable industry as far as potential for growth. In terms of vertical integration, the cable companies can provide several products, and combine these products to market directly to the consumer, meaning that if you have a set-top box that has your PIN and credit card in it, cable companies can allow for interactive TV, shopping, and access in ways that serve the consumer, and build profiles that they can take advantage of in a proprietary way. Q: Early on you cited APCC as a favorite in, if I recall correctly, the consumer area, but isn't that a tech stock? A: Good question! It looks like a tech stock, because American Power Conversion makes the power-surge strips into which we all plug our computers. They also make the battery backup supply boxes for servers and computer networks. So APCC, while closely related to the tech industry, is still a manufacturing stock, but I think a very good nontech way to play tech. They are the industry leader, the chart pattern is very positive, they are almost $3 billion in market cap. Earnings growth over the next five years is expected to be 13% to 14%, and the stock is selling at 16 times next year's estimates. This is a well-managed company whose shares are selling at what I would consider compelling prices. Q: Michael, I bought Kmart (NYSE:KM-news) at $1. Is it time to sell? Do you think it will survive? A: It's a hard question for me, because I would not have bought it at $1, and therefore I would not have made the 60% on my money that you have made. Having made 60% on a retailer that's in the bankruptcy courts, I would say take that profit, count your lucky stars, and if it goes higher, don't look back. You made good money on a bad and difficult situation. Q: Can you leave us with a few of the best names to look at in the current market, Michael? And your wisdom on strategy? A: I think that all investors need to be focused on the long term. Those focused on the short term fall under the category of speculator. Investing needs to be done dispassionately, and emotion is the foe of the long-term investor. High-quality companies that are well managed, with good earnings, if held over time, will be profitable and will mitigate risk. I like American Power Conversion as a defensive name. I like Pepsi, Wendy's, Pfizer (NYSE:PFE-news) , EMC (NYSE:EMC-news), AOL, SBC Communications (NYSE:SBC-news), Wells Fargo, and Citigroup. My rule for intuition is: ``If it feels bad, do it.'' When the market surges through irrational levels, and everyone feels good, you should sell. When it's bottoming, and everyone feels bad, you should buy. Be dispassionate, bet on quality, and think long-term, and you'll be rewarded. Don't expect the road to be without bumps -- just look for the pot of gold at the end of the road.