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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (39549)	5/14/2003 9:29:22 AM
From: Techplayer	Read Replies (1) \| Respond to of 57110

Networking equipment stocks ready to breakout -------------------------------------------------------------------------------- 00:10 ET FAIRFAX, Va. ( "Wealthcast") -- We've cashed in on the Net and are doubling down on networking. After three brutal years, now's the time to take a hard look at the hard hit stocks that focus on communications equipment. A nice basket of stocks worth considering in this space is Cisco Systems, Lucent, Juniper Networks and Foundry Networks. I'm currently long on all of these stocks, with the exception of Foundry. We took nice profits sold all of our positions in the trio of Internet stocks recommended in this "column" two months ago, Yahoo, E-Bay and Amazon. Admittedly, our market neutral approach on "March 5th" going short on Procter and Gamble was not as successful as we would have liked but our long position in Allergan was successful. The market neutral position actually worked, however, because both stocks rose with the long position besting the short position by about 2 percent. I no longer hold positions in either stock. As for our basket of networking stocks, our new recommend list, the trend relative to each stock is rising. After a long protracted decline, Cisco, Lucent, Juniper and Foundry have stopped their descent and, after building decent bases, are enjoying the result of a breakout. The result of a successful breakout off of a base is an advance. That means higher prices. Cisco Cisco Systems (CSCO) is the gorilla of the group. Cisco is the leader and could be the foundation of the basket. The stock has built a solid base off of the bottom achieved last October when it fell to a price just over $8 a share. Today a little over 7 months later CSCO trades around $16 a share. That is a gain of 100 percent in a period of 7 months. What happened is not a dream. What happened is reflected on the tape. The tape tells the tale. The tape never lies. This stock has just negotiated a stubborn price point that it has failed to cross all year and that is $15.50. The fact that the stock has been able to cross that level confirms the persistence of the advance. Today CSCO should be bought aggressively if it is able to close above $16. If the market corrects and CSCO pulls back to the $14 to $15 zone then pick at it at that time at those prices. The stock is free to move until a minor level of resistance occurs between $17 and $18.The next level of major over head supply causing selling pressure will happen as the stock crosses $21 a share. If that happy event should occur then tighten your stop loss. Any purchase of CSCO at this time ought to have a stop protection at $12.79. Juniper Juniper Networks (JNPR) has performed better then its larger competitor thus far this year. The stock may be down 95 percent from its peak, but the past is the past. Juniper is already up roughly 75 percent this year. The stock is slightly extended right now after making a gallant move this year, but, a toe in the water is appropriate. What would serve you better is a gift on a pullback at around $10 a share. The $10 a share level is a great price to take a position in JNPR. If it drops to that level over the near term consider the move a gift. You can pick up the stock from current levels down to $10. After its major decline, a true disaster, the stock is now clearly on the up swing. That is the ideal time to get involved in any stock. The chart tells the tale clearly. CSCO is merely up about 21 percent this year so JNPR is extended. The question of course is how long do you keep it. The answer is as long as it is trading in a healthy manner. There's nothing wrong with taking profits along the way. Positions in JNPR should be protected with a trading stop at 8.99 and an investing stop at 7.99. The upside reward given the possibility of the gear makers actually getting into gear is enormous. Foundry Foundry Networks (FDRY) , too, is on a roll. This stock has rocketed 68 percent thus far this year. Measured in terms of overall market performance and what you have is a clear winner. Like JNPR this stock is down about 95 percent from its bubble days. This stock is also slightly extended right now, so you would be better served picking it up on a pullback in the 10 to 11 zone. I currently do not hold a single share in FDRY but will strongly consider adding fresh money to it on a market pullback. The same stop losses attached to JNPR is appropriate for FDRY. Lucent Lucent (LU) at $2 a share could be quite a steal. I will never forget the tumult among clients in January of 2000 when I sold their precious shares of Lucent at $50. The stock in the bubble days was a solid foundation for any portfolio oriented toward growth. The return certainly wasn't as spectacular as many participants in the bubble, but it was so widely held, that a dash of stability enabled owners a good night sleep. Well Lucent did not split over thelast three years and I recently bought it back at $2 a share. I waited till it crossed $2 on a closing basis before pouncing. Lucent has survived and will rebuild its business and the result of that reality will be the reward of a higher stock price. I do not delude myself into believing that Lucent will retrace its steps and subsequently climb to its former glory of $50 a share. Perhaps an unwanted reverse split will enable that to occur. I will be very happy with a cost basis of 2 to 3 and a sell between 5 and 7. If you do the math the potential return is quite astonishing. The amazing thing about it is that it's still widely held. You can protect yourself with a stop at 1.39. Jack Rothstein is an SEC-registered investment advisor and is the editor of the "Wealthcast" investment letter. He also hosts two radio shows on investing for listeners in the Washington D.C. area. For a profile summary of Wealthcast, "click here". Content found in The Guru's Corner is subject to the terms and conditions found in the "Disclaimer" and does not represent a recommendation of investment advice. Investors should seek the advice of a qualified investment professional prior to making any investment decisions.