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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Elwood P. Dowd who wrote (36054)	11/9/1998 4:32:00 PM
From: Jimbo Cobb	Read Replies (1) \| Respond to of 97611

INTC kicks more butt than CPQ !!!!!!!!!!!!!!!!!!! YES !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! jajajajajajajajajajajajaja Jimbo.

To: Elwood P. Dowd who wrote (36054)	11/9/1998 5:02:00 PM
From: Yargnad	Read Replies (1) \| Respond to of 97611

ELWOOD(Money Magazine): COMPAQ IS STILL DOWN; Unlike IBM and Dell, Compaq hasn't snapped back from the summer slump. Thousand of companies shares are cheap as a result of this summers blistering correction. Among the most attractive are technology issues, particularly computermakers such as Compaq. A lot of analysts are still taking a wait-and-see attitude toward tech stocks, but the most recent evidence shows they they're being too negative on the group. Tech leaders such as CA, IBM an MSFT all reported better earnings in mid October than the analysts had expected. Do did Texas Instrument. This is an investing situation where you have to be willing to get out in front of the analyst, even if it means relying on a top down argument. The case is a convincing one, though. Historically, the year before a presidential election year tends to have the biggest stock market gains(since WW II, increases for the S&P 500 in pre-election years have averaged more than l5%). The chief reason: The Federal Reserve generally tries to provide an easy monetary climate in the l8 months or so leading up to a presidential election. This time around, the Fed's accommodating stance started early because of economic turmoil overseas and large losses by banks an investors in the U.S. In addition, tax selling has been intense this year-and once that selling ends, many depressed stocks will rebound. The so-called January effect began in October and will likely continue into the new year. Computermakers should be among the rebounders, since they were hard hit earlier this year, with declines of 30% or more in many cases. A couple of other trends may give computer stocks a lift as well. Signs suggest that the worst of the Asian crisis may be over. Stock markets in Hong Kong, S. Korea, and Thailand have rallied more than 30% from their lows. Also, Congress passed legislation this year favorable to tech firms, including more visas for skilled foreign workers and stricter limits on certain lawsuits. Which companies stand out? Dell's growth is breathtaking at 50%-plus this year. But the stock is richly priced at more than 50 times earnings. And Dell's growth rate could slow next year as CPQ's new sub-$l,000 machines nip into market share. IBM doesn't look like a great value either. The stock fell less than the Dow this summer and is already back to an all-time high. HP is still down almost 30% from its l998 high and looks fairly cheap. But the company seems to be stagnating, partly because of an uninspiring product mix and partly because it has resisted cutting prices as fast as the other firms have. Compaq boasts the best mix of price and prospects. It is rapidly improving its position in the industry, but its stock still sells nearly 25% below its high earlier this year. Bear Stearns projects that earnings for technology hardware companies will increase at an l8.7% annual rate over the next 5 years. But computermakers' profits slumped this year because they produced too many machines and ended up having to slash prices to shed all that excess inventory. CPQ for instance had l0 to l2 weeks worth of machines on hand at the start of the year but has managed to work that down to just 3. CPQ's earnings, reported as 7 cents a share for the most recent quarter, are obscured by substantial costs stemming from the company's June takeover of Digital. The acquistion should be a contributor to earnings by early next year, however. And the deal brings promising opportunities in upper-end computer markets. For instance, CPQ acquired DEC's 64 bit Alpha chip, the fastest processor of its time. CPQ has incorporated that chip into Unix-language servers that could possibly double the speed of previous generation machines. CPQ stock, which fell 40% to a low of $23 in early October, has since recovered to $29. And if the computer business improves as much as I expect, CPQ could easily Gain another 45% to the low $40's.