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Technology Stocks : AT&T -- Ignore unavailable to you. Want to Upgrade?

To: AHM who wrote (1578)	7/9/1998 5:12:00 PM
From: m thompson	Read Replies (1) \| Respond to of 4298

One bright outlook for soaring stocks Buy stocks like AT&T, Telebras and Intel By Frank Cappiello, CBS MarketWatch Last Update: 03:19 PM July 09, 1998 NEW YORK (CBS.MW) -- More than halfway through 1998, the U.S. stock market continues its "bull run" that began back in early 1991. Let's amend that: it's a "bull run" if you were invested in the big blue chips such as General Electric (GE), which now sports a market capitalization greater than $300 billion. It's a bear market if you were in small capitalization stocks ($RUT). This is one of the curiosities regarding this bull market: small cap stocks and a number of stock sectors have been in ongoing bear markets for many months. Much of the reason for this state of affairs has been the flight to quality, ÿ sparked by the fears of the ongoing effect of the Asian crisis. In an increasingly volatile market, investors have sold off their smaller stocks and sought refuge in the big blue chips seeking quality and liquidity. In some sectors, the bloodletting was substantial: technology (with most semiconductor stocks; at one point, down 40 percent to 50 percent. The tobacco, oils, as well as the commodity stocks such as the coppers are also down substantially. This is bad news for investors who are still in those groups but good news for new investors seeing depressed bargains for long term appreciation. That, in a nutshell, is the vitality of this wondrous stock market: to correct itself constantly in terms of stock sectors and capitalization. It is this factor more than any other that keeps us bullish. But what does an investor do now: hold on, buy more or sell? With the stock market seeking to go beyond 9,200 on the DOW, and with a new high on the S&P 500 and the New York Composite, isn't the market too high and ripe for a "real" correction? Answer: we had a correction in May and part of June. A sort of "stealth" correction; not quite the normal 10 percent expected in an ongoing bull market but it will do for the time being. In the meantime, it is unlikely stocks are going to go down again right away. So, the trend is toward higher prices rather than lower prices for the time being. As one market guru observed some years ago: the market, near term, is a voting machine, reflecting the popular wisdom of the moment. That wisdom states that low inflation and low interest rates are the key and you can forgive the current corporate earnings slowdown as a temporary event. Probably true. Low interest rates can hold up an overly rich market for some time. Longer term though, the stock market is a weighing machine and earnings growth is what counts. So the search is for those stocks whose earnings are improving (or about to improve) since this would be a surprise for Wall Street and surprises make for nice market moves. Another principle is that enumerated by Sir John Templeton: the principle of maximum pessimism: go where the outlook is the most miserable . . . that's where you'll find the cheapest stocks combined with the best possibilities for a higher price. So, combining earnings surprises with sectors that Wall Street hates, the following stocks are worth considering: AT&T (T) It's a stock everyone loves to hate....but remember it is in the Dow and carries a good yield. Applied Materials (AMAT) A technology stock much affected by the Southeast Asia slowdown. Intel (INTC) Best of the chip makers, still cheap despite being down about 20 percent from its high. Telebras (TBR) The telecom company in Brazil. Profit growth for Brazilian stocks expected to be 19 percent or more in 1998 and better in 1999, and the P/E ratio on Brazilian stocks is 10-11 times 1998 earnings. Telebras is a good proxy for this "interesting" overseas market.