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 : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: ChrisJP who wrote (6414)	6/26/1998 9:58:00 PM
From: Sergio H	Read Replies (2) \| Respond to of 29382

Chris, this is a good time to do a check-up on MTON. Anyone invested in MTON should review the last news release and determine the impact on MTON's game plan. Remember that I said to you in May that MTON would be undercut by competitors as it tries to build its national presence? Message 4399519 If I were a holder of MTON or interested in investing in MTON, I would call IR. I don't remember the gentleman's name, but he was very direct about answering all of my questions when I spoke to him last year. MTON has been allowed a high PE by the market up to now. It is important to evaluate if the Co. is still on course. There are lots of great values in the small caps right now and there's money to be made. Take a look at this: Friday June 26, 12:14 pm Eastern Time U.S. small caps sidelined until big caps stumble By Huw Jones NEW YORK, June 26 (Reuters) - U.S. small caps will remain sidelined, despite their attractive profit outlook and bargain valuations, until big cap earnings begin to stumble, analysts said. ''As you see big cap profit growth start to ratchet down, the small caps will go the other way,'' said Pamela Milunovich, director at Salomon Brothers Asset Management, small cap institutional account. Small caps also face the big ''L'' hurdle before they get to the pot of investor cash -- liquidity. It's easier to get out of big stocks more quickly if Asia or something else takes a turn for the worse, analysts said. ''It's a liquidity issue, and the fact that the earnings outlook is better does not get its due,'' said Chuck Hill, director of research at First Call. Wednesday, the Standard & Poor's 500 index containing the nation's biggest companies, closed at a record high of 1132.88 points, up an impressive 16.74 percent for the year. The Russell 2000 index of smaller stocks, however, closed at 451.31 points, up just 3.26 percent for the year. With the S&P500 doing so well, powerful cash-laden fund managers will continue to benchmark their portfolios against the big cap index, analysts said. The Russell 2000 has underperformed the Standard & Poor's 500-company index for the past year even though earnings growth in the Russell 2000 has outstripped that of the S&P500. ''The right things are in place, it's just a question of seeing the money flow back in this direction,'' said Claudia Mott, director of small cap research at Prudential Securities. Volatility in the stock market, and the tremendous flow of money into large caps from mutual funds and 401(k) pension schemes also hold back small caps, analysts said. ''We wait and we see,'' Mott said. ''But you cannot fight the money flow issue.'' Earnings of the Russell 2000 companies rose 14.3 percent in 1997 over the prior year, while S&P500 profits rose 11 percent over the same period, First Call said. This year and next look set to be just the same. Wall Street analysts expect small cap earnings to rise 20.5 percent this year and 29.3 in 1999, compared with 8.8 and 18.2 for the S&P500 in 1998 and 1999 respectively, First Call said. Price/earnings ratio or multiples also point to a small cap advantage. Calendar 1998 P/E for the Russell 2000 is 21.1, below the S&P500's 23. ''The smaller stocks look even more undervalued when you take the current better earnings outlook into account,'' Hill said. Small cap valuations relative to big caps are at their lowest since 1990 even though historically, small cap multiples trade at a 20 to 25 percent premium, said George Pierides, senior vice president at Fox Asset Management which manages more than $6 billion in assets. Analysts contend that small cap would start to attract more cash if big cap earnings splutter, even though a slowdown in blue chip profits could well dampen overall market sentiment. ''Once larger, very liquid, high-priced names decelerate in terms of earnings growth and their valuations are out of sync with that, reality will set in and investors will seek other alternatives,'' Pierides said. ''We think Asia will still take a hit on big cap companies. I think it's set up for positive small cap rally in the summer,'' Milunovich said. Milunovich has large weightings in some of the retailers, and homebuilding. Pierides said it was a ''small cap myth'' that the sector outperforms the large caps over the long term. Also as smaller companies follow their bigger rivals into overseas markets such as Asia, the domestic safe-haven play touted by small cap enthusiasts was diminishing.