*AV* - I was writing the stuff below while the carnage was taking place. I have decided not to change the post and let the chips fall where they may. I haven't changed my mind on what was presented but I am in a wait and see mode relative to the impending stock purchases mentioned.
Mistakes: Sold FTEL at a great profit but it is running big time now. Oh well, another case of getting out too soon. But I am profitable.
BYDS-got rid of some trading shares at a great profit but the news release today has put an additional 1/2 point to the stock. Finally, Scott and I were talking about RAIN. Big overreaction so I did pick up some trading shares on impulse and will have to adjust some other purchases. So, for your viewing pleasure:
The following is a synopsis on one daily I receive for your reading pleasure. Befor eit is presented, some comments:
I am diversifying my "conservative" portfolio by selling off some of my T, DELL, FMAGX, etal. slightly to in order to move some cash into MOT, QCOM and as yet undetermined GOLD (small position).
I was fortunate enough to get into AAPL at 14 a few days ago and sold out for around a $5 profit. Funny thing is that on Sunday word was out that AAPL would probably have a good earnings release. Well, $3 could have been made (16-19) just from Monday to Tuesday. I followed my own advice for a change, "over 25%, take the money and run". I won't look back. These funds are being channelled into MOT also thereby reducing my "weighting" in the more perceived speculative tech stocks from 1997.
My final results are not completely in for 1997 but it does looks as if I need to shift some stuff out into the more conservative undervalued DOW or Big Board stocks.
SNG and NETC have me on the seat of my pants. Both look like another UUNet in the making. (UUNT to MFST to WCOM) Well NETC will become ICG which looks like a takeover candidate by an RBC or T itself. SNG may get into a bidding war or T may go after SBC again. Too much excitement there.
I am also starting to move some funds to the likes of some utilities for generating dividends such as adding to my DUK position and maintaing the dividend re-investment program I already have with them.
Does this look like I am getting Bearish on the Tech Sector??? Not really. All I am doing is replacing some conservative investment dollars that I had previously shifted into the techs while buying down into weakness. I am also planning for the future by starting to weight a slightly higher percent of net worth to the more stable investments.
On the tech side, I bought FTEL at roughly $4 and sold yesterday for about a 33% profit. This looks as if it was a mistake and I will receive 1 big "I Told you so" from a certain person. In order to recoup my biggest mistake of 1997 (BYDS), I just sold off some averaged down shares (15/16 - 1) for close to 1 - 7/16. I have also taken the $19 SVGI shares off the table at $23 (a few days ago) and rotate the proceeds into LRCX since I am underweighted there. I averaged down into PAIR and ALYD also since they were part of the 1997 November margin call decision. I have a sell order in on the TQNT share that were purchased last week. Nice gain if the sell goes through. I did get back into MOYC in the low 5s again and will wait on more news.
I am watching IOM (Yep), NANX, PLAB, KLAC, IPEC, APM, ATML, CRUS, IDTI, MXIM, NSO, COHU, IFMX, COMS, DIMD, CREAF and am most tempted to seriously consider PLAB, IPEC (adding to positions), MXIM, CREAF (new positions) and playing some longer term COMS options (I haven't looked to see if they trade options.
Finally, I am going back to my principles of investing that I started 1997 with. I got a little reckless with investing in stocks outside of my area of expertise and not taking some profits when presented. 1998 will be dedicated to taking profits when presented and limiting my speculative non-expertise investment to $75,000 at any one point in time. The really speculative gambling "mad money" bucket of "pie in the sky" has been reduced to 3 stocks not to exceed $10,000 (most of these are under $3 anyway). If just haven't figured out where to put ALYD in the scheme of things.
+++++++++++++++++++++++++++++++++++++++++++++++
Wednesday, January 7
"Basically it was a profit-taking mode pretty much all day. They just couldn't get them running here," said alisted Equity Trader at Dean Witter. "In the last 10 days or so, the market had a decent run so people are taking some profits."
The tech sector was under pressure with the semiconductor companies bearing the brunt of the selling.The action was also described as investors taking profits following the sector's recent rebound.
With the focus of the market back on interest ratepolicy, traders said investors are looking ahead toFriday's Dec employment report for any sgns that theFederal Reserve might be able to ease rates.
Some players said it would not be a surprise to see amarket correction since stocks have staged strong performances for the past several years. "I think we've had a great market running for about 5 years and people made an awful lot of money. It doesn't go up forever,"said a Managing Director at Investment Counselors of BryMawr. "Stocks are not cheap any more and a pick up is going to produce a race to lock in profits."
At the time the of the NYNEX (NYX) / Bell Atlantic(BEL) merger RFI was already bullish on Southern NewEngland Telecom (SNG), as a potential takeover target andwe opined that it was a ripe target for Telephone.
Unfortunately, Telephone didn't take advantage of theopportunity but went after SBC Communications (SBC)instead. Now, SBC listened and scooped up SNG. Yes,Telephone missed a great opportunity but it's not overuntil the fat lady sings.
The FCC, et al, have to sign off on the deal. Ergo,those who went long on SNG at those depressed prices lastyear, have received a handsome return on their investment. Lastly, we don't think this is over by a long shot.
The deal still has to be approved, and competing offerscan also be
made. Lastly, the reasons for any potentialcompeting offers are the same as when we first explained why SNG was a ripe takeover target.
Motorola (MOT) 58 3/4 down 3/4. It's tough to find an investor who is excited about MOT. Profits have not demonstrated the consistency that Wall Street desires at this time. Exposure to a variety of high-technology markets scares investors.
MOT's large overseas exposure is not exactly a plusgiven Wall Street's current xenophobia. Little wonder that the stock has fallen 35 points from its 52-week high ofjust over 90. Yet, for all its problems, MOT has a lot to offer.
MOT is a force in a variety of communications markets. MOT's Iridium satellite-based communications system, while a big bet, could provide a huge payoff down the road.
Still, MOT is managing MOT for huge returns over the next few decades, not necessarily the next few quarters. Given MOT's long-term approach, investors in these shares must think likewise.
One reason Wall Street has shied away from these shares may be the big technology bets MOT historically makes. Previous bets on cellular and paging paid off handsomely. The latest technology bet is MOT's Iridium satellite project.
Iridium is a global communications network that has huge upside
potential. It's also risky, as rapidly changing telecommunications
technology could make the system less competitive over time. The next 12 - 24 months should provide a clearer picture of the potential of this business.
Investors with long-term perspectives have the luxury of being able to buy quality stocks and wait for a rebound. MOT is offering a classic case of a quality long-term holding selling at an attractive price. To be sure, the stock could decline further if the overall market drops.
Still, trying to pick a bottom is a loser's game in most stocks,
especially technology issues that can turn quickly. Better to take
positions now and increase buying on further declines.
* * * * * * *
Apple Computer (AAPL) 18 15/16 up 3 1/16. Hold ratedAAPL shocked Wall Street by announcing that its F1Q results would see a profit of $45M on revenues of $1.575B. While this top-line is still showing a year to year and sequential decline, the bottom line indicates AAPL's costcutting efforts are paying off. We suspect that this quarter will probably be AAPL's strongest this fiscal year.
Historically, 1Q earnings which include Christmas, havebeen the peak period for AAPL. We also note that revenues are continuing to show a declining trend, despite new products as well as new software introductions from Microsoft.
While we now believe that AAPL is on the road to earnings recovery, we continue to question just how long this will last. We will likely be increasing our EPS projections for AAPL after reviewing the earnings that will be reported on Jan 14; our estimate now stands at $0.15 for FY98.
We maintain our hold rating at the present time. This stock has already advanced by 50% since the end of calendar 97 and while an earnings turn-around is certainly in place, we wonder if AAPL is not reaching a full valuation.
* * * * * * *
The Gold complex has sold down.
The gold and XAU have bounced off of a near-term cycle low due in early Dec, have run upward flashing daily buy signals with the weekly studies turning friendly, have bumped their heads on their 40-day moving averages and have retested downward with the gold scoring marginally lower low, which was bullishly not confirmed by the technical studies. This is part of the
basing process.
The first hint that the retest is done would be a close above $286.00 by the Feb gold with a close above 73 by the XAU. A close above $300.00 by the gold, 77 by the XAU, would confirm the start of the uptrend.
Battle plan: Complete your accumulation now. If you're not long, get long.
* * * * * * *
[Oberweis Report]
Our outlook for 98 is for a much stronger year forsmall-cap rapidly growing companies. The Asian problem will be blamed by most companies reporting disappointing earnings, whether or not it is really the cause. The Dowand S&P are not likely to have another 20%+ year. In fact,a down year for the Dow is overdue.
The current tight labor market is likely to lead to amodest increase in the rate of inflation. This will help cause long-term interest rates to begin to head back upfrom the current 5.9% to the 6.5% to 7% area by year's end. The exact timing of a market's change in preference is always difficult to pinpoint.
Perhaps never before has such an extreme relative undervaluation been so clear as exists today between small-cap rapidly growing companies, including technology stocks, and the S&P 500 stocks. We believe investors should avoid the S&P 500 stocks in favor of small-cap rapid growth stocks to the degree that their investment objectives and risk tolerance will allow.
* * * * * * *
* * * * * * *
[Principles of the Stock Market]
After 15 years of a bull market, where each economic or financial
setback, the panic of 87, Iraq's invasion of Kuwait, Mexico's peso
devaluation, Fed Chairman Greenspan's slowing of the economy, even America's downsizing, turned out to only be tiny bumps in the superhighway to a globale conomy, we are now faced with another obstacle.
Today's possible bump in the road is larger than all the others were. Today's widespread Asian collapse affects one third of the global economy. Financial markets are now sitting in judgment deciding if capitalism is strong enough to smoothly glide over this bump in the road.
It's certainly not just a little bump in the road for Asia, which is now mired deep in a devastating Papa Bear market, but the charts show that Europe and America's weakness can still possibly resolve themselves as just market corrections.
But as investors, analysts and market advisors wait and watch for some definitive evidence, the market continues to show gradual deterioration, with more and more stocks rolling over.
*****************
[Fundline]
State of the Market: I started the last issue with the flat-out
statement that we would likely see a bear market some time next year, based primarily on the recurring 4-year market cycles, plus the odds that a double-digit return for 4 consecutive years was highly unlikely.
As of this writing I don't see the factors that would normally be seen prior to a bear market. The daily as well as the weekly adv/dec lines of the NYSE continue to plot a satisfactory trajectory. Furthermore, short-term indicators, I monitor, are telling yet another story. They are implying that the correction since the Aug highs has ended and a new rally is probable.
++++++++++++++++++++++++
Andrew |
