*AV*--Okay, so launching a newsletter has its problems<GGG>.
The Radar System Trader
September 2, 1998
The Bridge Over Troubled Waters You Sold Me, Doesn't Look So Hot
Editorial By Raleigh Baughman
Co-editor
Radar System Trader
Beep! Beep! Outta my way! (Hand gesture) Beep! Beep! Hey, What's a matter for you? Can't you see I'm in a hurry?
Investors rushed back into the markets yesterday, but they chose
an alternate route. The "Bridge to Wildass Speculation" was closed
ahead the sign read. And detour they did.
Drugs, oil, airlines, tech, and even the small stocks sector found renewed interest. Conspicuously absent was the rush back to stocks with little or no earnings or those with excessive price earnings ratios. Amazon (AMZN) down 4.53 percent and Broadcast.com (BCST) down 6.93 percent, and many others became quick targets.
Instead capital found its way back to a mix of solid growth companies like Dell +8.38%, LU +10.05%, CSCO +9.92%, all representing the cream of the crop. Also high on the list of gainers were those stocks that seem to do well in uncertain times, like oil and drugs, MOB +5.24% and MRK +5.66%.
In yesterday's edition I referred to the recent shakeout as the "Reality Correction" and how it was long overdue. Hopefully it will serve as a wakeup call that this market needs to get refocused on basic economic fundamentals. Earnings, interest rates, and an expanding economy are what fuel the markets, not speculation with multiples that would take a decade to fulfill.
If that is the case, then this correction was the best thing that could have happened. The markets can not move forward until a stable and secure footing based on fundamentals is employed.
It will be interesting to see which route is chosen once the dust settles. I would expect to see a protracted period of re-evaluation, as a new set of criteria is applied to the valuations of certain sectors. This should bring about extreme volatility by sector, but should not necessarily create huge swings in the market overall. The reason I say that, as some valuations are being shaved off of one grouping of stocks it should just transcend to another. Being heavily weighed in any one sector could be very risky it should happen to be targeted as overvalued.
To me the prudent choice is an easy one, a balanced portfolio of bonds and equities. That also means cash, with a portion that is heavily allocated in the short term to be used for trading or unexpected bargains.
Diversification in sector leaders across a broad spectrum of industries, along with a sprinkling of undervalued small caps should serve you well in the months ahead.
Raleigh
Radar Lock-on Report
By Raleigh Baughman
Not a recommendation, only a consideration in pointing you towards
what I feel is a good place to spend time doing further research.
In going with the above theme, now would be a good time for preparing a shopping list of stocks. Consideration based on solid growth with earnings and a P/E that is in line with being considered reasonable I would like to bring SCTC to your attention as good place to spend some time further research.
This company, the other day just hit the years low and is now hovering at the bottom of its 52 week trading range, while at the same time that it producing record earnings and revenues and landing multiple new contracts and awards. It is also starting to receive the attention of the mainstream investment community as I spotted it last night being discussed on CNBC. SCTC Systems Computer Tech (16 3/8)
52wk range - 13 1/16 to 30 3/8
P/E - 18.19
Mkt Cap 556.2 Million
Last earnings report: biz.yahoo.com
Recent news stories:
biz.yahoo.com
biz.yahoo.com
biz.yahoo.com
EFII Electronics For Imaging (15.00)
52wk range 12 7/8 to 57 7/8
P/E 25.86
Mkt Cap 789.4 Million
Recent buy recommendation from Lehman (target $25) and Piper Jaffray (target $30), has a strong balance sheet, earnings estimate of $1.05, has a high reputation on the street. Several new products recently announced by Canon utilizing EFII controllers.
Today's Radar Screen:
INTV 16.75 off recent news of high earnings expectations.
Sorry but Scan Lists are not available today as Telescan must be experiencing difficulties and did not refresh their databases as of press time.
**
Radar Trader Newsletter
High Tech Commentary--Scan List
September 2, 1998
OPENING COMMENTARY FOR September 2, 1998 -- Andrew Vance
The Major markets made a comeback of sorts today, with some nice rebounds of sorts in the "oversold" group. This is directed towards INTC, MSFT, DELL along with the Darlings of the DOW. Yesterday I said that any list generated might be a good tool for some day traders but I did not think it would be of great help to the positional traders. Well, the astute day trader had a field day yesterday. I am not one of their number but was able to hit a few semiconductor stocks for a ride yesterday and chickened out late in the morning. A very oversold situation brought some quick profits that were taken. I still think the market is shaky. To be blunt, a number of sources seem to think this was a bottom feeding market that attracted some money for some quick profits.
Some stocks that I follow but have not made the list did a good bounce today. Yesterday I said that anyone who was interested in putting their cash to work should place it with their favorite company and to hell with the experts. I cautioned you to wait until you were sure the market has turned to the positive direction. I took a chance myself today but closed all the positions at the end of the day. I just do not trust the overnight markets that much and who knows what the Asian markets have up their sleeves. Interestingly enough, Debeers was
up about 10% yesterday. I stated that it seemed the short sellers were the only ones making money which probably was incorrect. They made their money yesterday when they started to cover their shorts. My
apologies for that error since it was paper profits until they actually covered. There are those that believe that some of yesterday's rally was covering of shorts.
My thoughts are that today might show some strength again depending on how the overseas markets did last night. I would be pleasantly surprised to see a repeat performance of yesterday, but you never know. I think we still have a few days left for the completion of the margin call process from the last few days. Do not be surprised if we see a bit of weakness as the last ditch efforts to resolve these issues causes some turmoil. The indiscriminate selling of stock to cover margin calls will still be in effect.
Those that are in cash still have opportunities down the road to leverage themselves as we said yesterday. Do not be fooled or be in a rush to jump aboard any runaway trains. Just a friendly reminder that you should not to rush to invest and not force any trades. Patience and abstinence has been a virtue these past few weeks. These last statements bear repeating so I apologize if you think you heard that from me yesterday, because you did.
TIMELY TOPICS
REXI(13-11/16, -1/4)-- in a sea of red ink everywhere, these guys had an up day Monday and gave half of its gain back today as many other stocks took part in the mini rally. Nothing like running contrary to the crowd. Volume has come down to the 1 million share level which is
about 2X average daily trading volume.
PWJ(35-3/4, +7/8)-I will not re-iterate my diatribe of the past few days but the stock made a 2.5% comeback today after losing more than 11% on Monday. For those following the saga, the boiler room guys have not called back yet. However, a new guy can get me into an IPO, Galacticomm, supposedly an internet related stock. Call me fickle but I will pass on it. One look at the SEC filings and I was scared off. Too scary a tale to tell today since I do not want anyone to get goose bumps.
I took the time to do a little whining about the market mentality yesterday and held a few stocks up for scrutiny. To be fair and honest, I need to let the chips fall where they may and report on these same stocks today. So let's see how the group did.
Group 1 the NYSE and DOW Darlings
JNJ(72-3/8, +3 3/8 up 4.9%) KO(68-1/4, +3 1/8 up 4.8%)
AXP(82, +4 up 5.1%) GE(82-11/16, +2 11/16 up 3.4%)
IBM(117-15/16,+5 5/16 up 4.7%) MCD(60, +3 5/8 up 6.4%)
MRK(122 -1/2, +6 9/16 up 5.7%) T(53-5/8, +3 « up 7%)
WMT(61-3/4, +2 _)
The DOW was up 288.36 to 7827.43 up 3.82% relative to this list above. WOW, I beat the DOW on this. I guess people still want their band aids, Coke, Big Macs, drugs, PCs, telephone services and discount shopping centers after all.
The key is whether I beat the NASDAQ which was up 75.84 at 1575.09, up 5.06%).
Group 2 The Highly Valued Stocks
DELL(108-3/8, +8 3/8 up 8.4% YHOO(72-1/4, +3 ¬)
AOL(85, +3 1/16 up 3.7%) BRCM(59-13/16, +8 9/16 up 16.7%)
GCTY(21-3/8, +3 5/16 up 18.3%) XCIT(24, +2 ¬ up 10.3%)
CRB(17-9/16, +5/8 up 3.7%) AAPL(34-1/8, +2 15/16 up 9.4%
INTC(76, +4 13/16 up 6.8%) MSFT(101-1/4, +5 5/16 up 5.5%
WCII(19-13/16, +1 9/16 up 8.6% XIRC(18-1/2, +2 7/8 up 18.4%)
Not a bad group of stocks either since they beat the indices also. However, you will notice that the internet stocks shot up relative the rest of the members of this group. Yesterday I stated "the valuations in the Internet market may become a bit more realistic. Well, the drops might actually be justified here since many of these stocks were vastly overpriced". Well, they shot up again just to show you how fickle investors can be. They dropped like a rock but everyone seems content on jumping back into these overvalued "gems". CBS news watch had a very interesting piece today which is linked below for your viewing pleasure.
cbs.marketwatch.com
Group 3 The ever so fickle Semiconductor Sector
This area is where my core competencies are located. I saw shares of stocks drop to prices I never thought possible but the pop they took today was very impressive. For those of us that did a little bottom fishing and bailed out late morning, afraid (I admit it) that we would see this evaporate in some late day plunge like Monday. I present a small grouping of these gems only to whet your appetites for when the real rally occurs and this sector get back on its feet. The percentages are very enticing.
ASMLF(20-15/16, +3 5/16 up 18.8%) CIEN(33-5/8, +5 « up 19.6%)
KLAC(25-3/8, +4 1/8 up 19.4%) VECO(26, +3 3/8 up 14.9%)
MCHP(23-1/8, +4 13/16 up 26.3%) PLAB(14 -1/2, +2 « up 20.8%)
RMBS(49-7/8, +2 1/8 up 4.5%) TER(18-1/2, + 1 1/8 up 6.5%)
UNPH(43-1/2, +3 9/16 up 8.95) CYMI(12-1/4, +2 up 19.5%)
NVLS(28-1/4, +1 5/8 up 6.1%) AMAT(26-1/8, 1 9/16 up 6.4%)
Some of these stocks were played today successfully and were excellent money makers for those with ready cash. Those who were extremely careful and recognized a totally obnoxious oversold condition in some of these stocks were able to nibble away for a few points. This was just a small portion of the overall sector that did well. Stocks that were out of favor and not looked at today, CFMT(7-1/4, +1 1/8 up 18.37%) and ALYD(8, +1 1/16 up 15.3%) are selling for close to 33% of their realistic street value. Once the recovery occurs in the tech sector, CFMT, an enabling technology supplier may see the high 20s to low 30s which is still below previously reached highs. ALYD may come into its own when the entire YR2000 matter finally comes to rest. Two solid contracts with State government agencies should bode well for them down the home stretch.
DY (29-7/8, +2 ¬ up 8.1%)--This is a core holding of mine that was ripped to shreds on Monday (27-5/8,-2 5/8) and I asked people to hunt down a story that I linked. Well, the answer to the mystery was that after reporting good revenues and good earnings in a very pathetic market, they were dumped on. Sorry, but that did not make any sense to me at all. With a recent 52 week high of ~$37 and some honest retracement, there was no reason for this thing to have been beaten up the way it was. Apparently cooler heads prevailed yesterday and they gave back a majority of what they took on Monday. Problem was that it was not such a great place for me to invest relative to the other gems listed above. However, 8% is better than a kick in the rear end by a donkey.
CIEN(33-5/8, +5 « up 19.6%) was the "saved the best for last" comment yesterday. My comments were directed at the Monday action of CIEN(28-1/8,-7 3/16) where the day traders were picking this puppy apart most of the day successfully and then WHAM BAMM, it was gone. I said "The fortunate ones that were short at the time are out celebrating while the long holders licked a few minor wounds. When CIEN opened up 1 -1/4 higher, I would hope that the short sellers covered their shorts. I was not one of the short sellers. Well, "the best for last" stock did not disappoint yesterday, making back a good portion of Monday's drop. CIEN will be trading in sync (hopefully) with TLAB which was up only 10% today (TLAB, 46-1/2, +4 ¬) with the
fixed share ratio for the merger previously announced. To date, I have not seen anyone back off on the ~$45 value for CIEN. Only time will tell whether there is a set of legs worth $10 more dollars for this stock. BTW- If CIEN is supposed to track closely to the movement in TLAB, something is amiss just from the percentage rises each one had today. At roughly 0.8 exchange, CIEN is a $37.25 stock trading at $33.625 a share. I guess I need to double check the exchange ratio again to be sure.
RADAR TRADER RST SCAN LIST COMMENTARY FOR SEPT. 1, 1998
No discussion will take place in this section today since there were still issues with generating the Scan List at the time of my publishing my portion of this newsletter. That occasionally happens and we apologize for not being able to provide that commentary. It is to be hoped that you will receive the Scan List early in the morning.
AND NOW A WORD FROM THE RADAR ROOM:
I found some interesting tidbits that might take you mind off some of the recent financial paper loss or margin setbacks you may have incurred over the past few days.
The world's richest individual, Microsoft's Bill Gates, saw his net worth drop $9 billion to $55 billion as of Monday night according to estimates by Forbes magazine.
Warren Buffett, Chairman of the Holding Group Berkshire Hathaway Inc., was down close to $4 billion as the shares in his company retreated on Thursday, Friday and Monday. He is now worth over $33 billion, as his shares rose $900 to $61,400 yesterday.
Jeff Bezos, founder of Amazon.com, had his personal wealth fall 36 percent to $1.6 billion from $2.5 billion on
Thursday, Friday and Monday, according to Forbes. His problems are not over since AMZN dropped more yesterday, closing down $3.80 to just under $80. Combined for the 3 last trading days, AMZN, which traded
as high as $147 recently, has dropped close to $40.
FURTHER UPDATE of Friday's 3 companies:
MRVC(5 15/16, +11/32)not much of a comeback from Monday or Friday.
UTEK(18, +11/16)4% recover yesterday which should be considered lackluster given the numbers present in the first part of the newsletter today for the semiconductor sector.
Xoom files for $46 million IPOStill no word as to whether they are going to change their minds, given the market environment.
Andrew Vance
I was requested to do a little Monday Quarterbacking and print the list you should have seen in yesterday's newsletter. None of the stocks on the list should come as a surprise. It was interesting to see how they did relative to the mini-comeback yesterday. The list is presented for archiving purposes only. I will list any press releases that occurred on Monday and Tuesday.
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Prosearch 5.0* Top Stock Report 09/01/98
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VRSN VERISIGN INC COM--.INT Price = 28.4 (30, +1 5'8)
Red Herring reports Francis Gaskins of Gaskins' IPO Review still
positive on VRSN.
redherring.com
VeriSign formed Certplus, a joint venture with three French
companies to provide secure digital certificate-based e-commerce
applications for the French market. Certplus has targeted fourth
quarter to begin offering service.
MPRS MICROPROSE INC COM--.DSO Price = 5.7 (5-11/16, 0)
Hasbro, Inc. Announces Expiration of Hart-Scott-Rodino Waiting
Period Regarding Pending Acquisition of MicroProse, Inc.
biz.yahoo.com
Hasbro says acquisition waiting period over
biz.yahoo.com
STBI S T B SYSTEMS INC COM .DCS Price = 7.4 (7-3/16, -3/16)
STB Ships World Fastest Multimedia Accelerator in Velocity 4400
biz.yahoo.com
GNTX GENTEX CORP COM--.ELE Price = 11.6 (13, +1 7/16))
REXI RESOURCE AMERICA INC COM--.OCP Price = 13.9 (13-11/16, -1/4)
THDO 3DO CO COM--.DSO Price = 3.7 (3-15/32, -7/32)
SMTC SEMTECH CORP COM--.ESE Price = 16.0 (16-1/4, +1/4)
WIND WIND RIVER SYSTEMS INC COM .DSO Price = 37.5 (40, +2 «)
ADPT ADAPTEC INC COM .DCS Price = 11.5 (11-1/2, 0))
CEXP CORPORATE EXPRESS INC COM .RMC Price = 9.6 (10-1/8, +1/2)
TXCC TRANSWITCH CORP COM .ESE Price = 15.8 (16-7/8, +1 1/8)
DBRSY DE BEERS CONSOL MINES LTD A D Price = 11.5 (12-9/16, +1 1/16)
CYBR CYBERMEDIA INC COM DSO Price = 8.8 (8-11/16, -1/8)
GALTF GALILEO TECH LTD COM .ESE Price = 9.9 (10, +1/8) |
