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The Internet Financial Connection, May 13, 2000 ------------------------------------------------------------- Presented by Mark Johnson, Editor of the IFC It appears on Silicon Investor siliconinvestor.com -------------------------------------------------------------- To Subscribe to this Newsletter: Send a blank email to <mailto:ifc-subscribe@topica.com> Please tell a friend about this newsletter :) -------------------------------------------------------------- !!! ATTENTION INVESTORS !!! Try Investor's Business Daily FREE for two weeks. Investor's Business Daily -- a proven way to get the best stock, options, and commodities information you need, every business day. Click on the link below ibd.infostreet.com to begin receiving Investor's Business Daily. There is no commitment and you will enjoy two FREE weeks of Investor's Business Daily delivered to you every business day. "One of the best sources of financial information available!" Mark Johnson Editor of the Internet Financial Connection. ibd.infostreet.com -------------------------------------------------------------- This newsletter can be viewed at siliconinvestor.com In This Issue: 1. Top-performing tech fund favors bandwidth, storage and wireless 2. Flamel Technologies 3. ClickAction 4. A.C.L.N. Limited & Interstate National Dealers 5. Interesting Articles on the Internet by Joe Dancy 6. Disclaimer ---------------------------------------------------------- 1. Top-performing tech fund favors bandwidth, storage and wireless siliconinvestor.com Malcolm Fobes of the Berkshire Focus Fund and the Berkshire Technology Fund berkshirefunds.com (1-877-526-0707), provides the following interview with Mark Johnson, Editor of the Internet Financial Connection. Below is the write-up. "Concerns of inflation and higher interest rates may keep the markets choppy for awhile," states Malcolm Fobes, manager of the Berkshire Focus Fund (BFOCX), the Berkshire Technology Fund (BTECX) and sub advisor to the newly launched Wireless Fund (WIREX). He mentions that from a seasonal point of view, the technology sector is entering the slower summer months. "For the long-term investor, the current tech correction is one of the greatest buying opportunities you are going to get... This is a perfect entry point!" Before investing, Fobes takes a step back and looks for the "big trends" in the stock market. "We take a macro approach and look for trends in the marketplace where we see the greatest amount of growth. Clearly, technology is where we think the best growth is going to be for many years to come. Once we identify the trends, we will go in and take a bottom-up approach and look for companies that are going to be the leaders in these trends." Fobes is focusing on three trends within the technology sector: bandwidth, storage and wireless communications. In the bandwidth space, he is focusing on companies that are building out the Internet infrastructure. Cisco (CSCO 60 1/4) is a key holding and a leading networking solutions provider that is directly benefiting from this buildout. Other related favorites include Redback Networks (RBAK 58 1/8) and Juniper Networks (JNPR 148). According to Fobes, the next step is to look for firms that are supplying components and semiconductors to companies like Cisco, Nortel and Lucent. PMC-Sierra (PMCS 147) was a top holding in the Berkshire Focus Fund and the Berkshire Technology Fund in 1999 and continues to be this year. PMC-Sierra is a maker of high-performance semiconductors that format streams of data entering a network. Broadcom (BRCM 148 1/8) is the dominate supplier of semiconductors used in cable set-top boxes. Other top holdings in the semiconductor space include Applied Micro Circuits (AMCC 98 7/8) and Transwitch (TXCC 68 3/8). In the fiber optics realm, a few names Fobes finds attractive are JDS Uniphase (JDSU 86 1/2) and SDL (SDLI 181 3/4). In the storage area, Fobes leans toward EMC (EMC 125 1/2), which has been a major holding in the Berkshire Focus Fund for quite some time. EMC is the premier name in data storage and is poised to ride the storage trend. Network Appliance (NTAP 58) specializes in what is known as Network Attached Storage (NAS). The end result of a NAS system is a fast, simple, reliable and cost-effective file service for data-intensive network environments. Veritas Software (VRTS 89 3/4) manages data storage and guards networks against data loss. Fobes notes that wireless is a new and emerging area. Like most companies he invests in, Fobes prefers to invest in the leaders in wireless as well as companies that are supplying components to the leaders. In the cellular handset market, Ericsson (ERICY 19 3/8) and Nokia (NOK 52 1/8) are a couple of names he finds appealing. Qualcomm (QCOM 99 3/8) is a leading provider of digital wireless communications products, technologies and services based on its Code Division Multiple Access (CDMA) technology. A few companies Fobes is high on and that are supplying components to leading wireless companies include: RF Micro Devices (RFMD 97), TriQuint Semiconductor (TQNT 90 1/2), Conexant Systems (CNXT 40 5/8) and Analog Devices (ADI 59 7/8). Inktomi (INKT 121) and Infospace (INSP 48 3/4) are two companies Fobes points to as becoming large players in wireless. "Surprisingly, most people do not think of these companies as wireless companies," he says. "Inktomi is positioning itself to take advantage of the tremendous growth in wireless. Its technology enables data transfers through wireless devices, the same way that it does through the Internet." Infospace allows people to access data from cellular handsets. "Infospace is positioning itself in the wireless arena going forward." The Berkshire Focus Fund was up an astonishing 104 percent in 1998 and 142 percent in 1999. Fobes states, "For investors who have not gotten into technology, this is a perfect entry point. Historically, corrections in the technology sector were buying opportunities... It's no different this time around. Long-term investors that are patient will be well rewarded." ----------------------------------------------------------------- 2. Flamel Technologies siliconinvestor.com Hossein Ekrami of Sturza's Medical Investment Letter sturzas.com, provides the following stock idea on Flamel Technologies (FLMLY 6). Below is the write-up. Flamel Technologies (based in France) is a drug-delivery company engaged in the development and commercialization of controlled-release therapeutic products based on its proprietary polymer technology. Presently, the company has a number of new products under development. Flamel is working with Novo Nordisk, one of the world's leading insulin makers. The two companies are developing a long-acting human insulin based on Flamel's technology. Hossein Ekrami of Sturza's Medical Research explains that present versions of long-acting human insulin tend to produce wide fluctuations of blood insulin and glucose levels. Flamel's new version is expected to produce a smooth release profile of insulin in the blood, reducing wide variations in blood glucose levels. Ekrami notes that long-acting insulin accounts for over 50 percent of the $2.5 billion worldwide insulin market. Flamel has already developed another product called Genvir. Genvir is a longer-acting derivative of a medication called Acyclovir, used in the treatment of genital herpes. Genvir only has to be administered twice daily. Acyclovir (also called Zovirax) is administered five times a day. Ekrami notes that Flamel should file for European approval of Genvir sometime in the third quarter of this year. He adds that Flamel is in discussions with several pharmaceutical companies to market the new product in Europe. Flamel, in collaboration with Corning, has developed new materials to be sold by Corning to manufacturers of polymer-based photochromic lenses. Photochromic lenses are lenses that change color in the presence of UV light - becoming darker when outdoors and clearer when indoors. "Flamel is a small company but has a number of new developments, as well as many collaborations," states Ekrami. He sees the company becoming profitable in the first quarter of 2001 and with earnings of 48 cents in 2002. He thinks the company's stock could hit $20 within 12 months. ------------------------------------------------------------------ 3. ClickAction siliconinvestor.com Paul Zweng of Palo Alto Investors provides the following stock idea on ClickAction (CLAC 11 1/8). Below is the write-up. The Internet sector of the market has not been a favorite for many investors lately. A stiff correction in technology stocks and a seasonally slow period for the Internet space has caused a sharp pullback in many high-flying Internet names, including: America Online, Yahoo!, DoubleClick and ClickAction. What?..... So, you've never heard of ClickAction? The shares of ClickAction hit a high of $35 1/2 in March before giving up ground and landing in the $10 range. ClickAction is a direct marketer of permission-based email services primarily for the online retail market. Some of ClickAction's clients are well-known names such as: Wards, Dean & Deluca and Legg's. Click here to view the company's client list. "There is a tremendous opportunity for companies to reduce costs by supplementing traditional mail advertising with online email campaigns" says Paul Zweng of Palo Alto Investors. "A traditional catalog sent by bulk mail can cost between 75 cents and $1.50, whereas an email-based promotion can cost as little as 3 cents per email... It's an incredible cost savings. In addition, a catalog usually takes over six weeks before it has an effect. In contrast, the impact of an email campaign is felt in 24 to 72 hours. A client could launch an email campaign on the 20th of December and expect it to increase Christmas sales." Zweng notes that when a person offers his or her email address to a Web site to receive promotions, newsletters or other offerings, the person is commonly prompted to specify his or her individual interests by filling out a short questionaire or profile. This results in much higher click-through rates than typical banner ads (18-80 percent for email ads vs. less than 1 percent for banner ads), and thus explains why email direct-ad campaigns are more effective. "People click on these emails because they have requested the information contained in them", Zweng says, "whereas no one requested the banner ads". ClickAction's technology is very user friendly, enabling its clients' marketing groups to design, send and manage their own email ad campaigns. The company's new release allows its clients to measure, store and data mine the results in real time. "Their demo to potential clients is very impressive", says Zweng, who has sat through a number of them. ClickAction then receives a fee for each email that is sent out. Zweng adds that ClickAction's revenues are fairly visible and the company is seeing strong support for its service. The companies that use ClickAction's email-based service continues to increase, as do the number of emails being sent by each business. "We checked into over 20 of ClickAction's clients. We discovered that ClickAction's customers really like their product. They especially love the demonstrable return on investment." ClickAction sports impressive partners including BEA Systems and Broadvision. Zweng expects ClickAction to post break-even results in the third quarter of this year and to earn 6 cents in the fourth quarter, assuming no acquisitions. "Gregory Slayton, ClickAction's CEO, is very focused on shareholder value and wants to see ClickAction move into the black this year. Given how far he has moved this company forward since taking over in late 1997, I think he can do it", he says. Zweng thinks the stock could well double or triple from present levels within the next 12 months. ---------------------------------------------------------------- 4. A.C.L.N. Limited & Interstate National Dealers siliconinvestor.com Scott Hood of First Wilshire Securities fwresearch.com, provides the following stock ideas. Below is the write-up. A.C.L.N. Limited (ACLNF 27 1/4) is a marine logistics company that specializes in the international shipping of automobiles. Most of the company's business is conducted transporting second-hand vehicles from Europe to the African market. Scott Hood of First Wilshire Securities is bullish on the shares of A.C.L.N. Limited. He states that the demand for affordable cars in Africa far exceeds supply. "A.C.L.N. is directly benefiting from the insatiable demand for affordable automobiles." Presently, no cars are being manufactured in the African countries they service. A.C.L.N. handles the majority of the used cars transported into Africa from their European ports. Another reason why Hood is high on A.C.L.N. is because Hyundai, a world leader in water freight shipping, agreed to outsource all Europe-to-Africa automobile shipping to A.C.L.N. In 1999, A.C.L.N. shipped automobiles from one European port. The cars would then be received by about 10 African sea ports. In order to keep up with demand, A.C.L.N. has increased the number of European sea ports transporting cars to Africa from one in 1999 to the five largest this year. In many developing markets, such as South America and the Caribbean, there is a high demand for affordable cars. Government restrictions have put a damper on the number of autos entering many of these countries. Scott notes that these restrictions are slowly being lifted. "I wouldn't be surprised to see A.C.L.N. shipping cars to an entirely new continent sometime in 2001," he says. A.C.L.N. has "accumulated a hoard of cash." It increased cash from $5 million in 1994 to $78 million 1999. Hood figures that A.C.L.N. will have well over $100 million in cash by the end of this year. The total market capitalization of A.C.L.N.'s stock is currently $225 million. A.C.L.N. has compounded earnings growth over 40 percent in the last four years and earned $2.62 in 1999. Scott thinks the company will earn $3.50 to $4 this year. He believes that A.C.L.N. will be able grow earnings at an annual rate of over 30 percent during the next five years. Scott interestingly points out that the PE (price-to-earnings) multiples of other ocean freight shipping companies such as Expeditors, Air Express and Circle International carry an average PE multiple of 24 times this year's earnings. "If A.C.L.N. traded at the same PE multiples those companies trade for, its stock would be trading at $70 per share." Another company Hood favors is Interstate National Dealers (ISTN 5), a company featured in the 'Forbes 200 Fastest Growing Companies'. The company's main business is selling warranties for new and used automobiles. Hood mentions that the company has $3 per share in free cash and $10 per share in total cash while the stock trades around $5 per share. The company has added $2 per share in cash each year for the last several years. About five months ago, a group solicited an offer to buy ISTN for $9 per share. ISTN politely rejected the offer and started a share buyback program of 500,000 shares. "ISTN believes their stock is worth a lot more than what was offered... They have a low PE, no debt, tons of cash, and the company is buying back its own stock." Hood figures ISTN will earn 60 cents this year and that its stock should be trading much higher than what the market is assigning it. "With the high levels of cash and no debt, ACLNF and ISTN are beneficiaries of higher interest rates." ------------------------------------------------------------------ 5. Interesting Articles on the Internet siliconinvestor.com Joe Dancy, co-editor of the IFC and editor of The Lone Star Growth Investor members.aol.com provides the following links to Interesting Articles On The Internet. These articles were from a daily worldwide search of over 150 newspapers and magazines. Subscriptions to his newsletter are FREE. members.aol.com INTERNET, TECHNOLOGY, AND ELECTRONIC COMMERCE Nearly four in 10 U.S. home buyers used the Internet last year to shop for a house--an 18-fold increase in four years, according to a survey released Tuesday by the National Association of Realtors. washingtonpost.com The dot-com world is not an automatic licence to print money, says billionaire Bob Young, Canadian-born co-founder and CEO of Red Hat Inc. "The press misses this all the time," he said in a telephone interview last week. "They look at the huge amount of money that the winners make and treat it as a tech gold rush. But not all the miners looking for gold will win. Only a few wilL." canoe.com Everything's not coming up roses these days for the online flower business. Stock prices have fallen precipitously, financing for Internet retailers has dried up, and competition is growing -- everybody and their e-brother, it seems, is going on the Web to hawk flowers and gifts. bergen.com Employees of the best-known consulting firms are leaving for Internet start-ups, forcing the button-down advisers to re-evaluate incentives. chicagotribune.com Sales of personal computers in Japan jumped more than 30 percent to a record 9.94 million last business year, reflecting Japan's growing appetite to surf the Net, industry data showed on Tuesday. techweb.com Venture capitalists began the year believing that the Internet remains the World Wide Windfall -- a perception that industry leaders say probably will not change soon. bergen.com Cooling interest in Internet stocks is unlikely to stem the flow of investment bankers seeking a new job in Net startups. technology.scmp.com Recent surveys show that the Internet has increased more in popularity among those older than 45 than any other age group. Many believe it's partially because grandchildren are taking the time to introduce their elders to the new technology. detnews.com INTERESTING AUDIO PROGRAMS HomeCom Communications announced that revenues increased 161% last year and CEO Harvey Sax and CFO Jim Ellsworth are interviewed about the company, their products, and the outlook. audioinvestor.pyxos.com MARKETS AND INVESTING As baby boomers age and accumulate wealth, they'll increasingly need asset-management services. detnews.com Despite boom times, some are choosing to spend less and really take charge of their lives. globe.com Globe-trotting financier George Soros warned yesterday that the recent erosion in US share values suggests that the United States is already in the grip of a bear market. globe.com With just one word -- buy, sell or hold -- a Wall Street analyst can change a company's fortune/ detnews.com ECONOMICS A common complaint of opponents of globalization is that it leads to a ''race to the bottom.'' By this they mean that governments, especially in developing countries, compete for foreign investment by lowering labor and environmental standards so that multinational corporations will be attracted to the country with the least onerous requirements. The competition, in this view, puts downward pressure on global standards. iht.com As the euro tumbled below 90 cents this week, Europeans seemed hurt, bewildered, even anxious. So much so that Willem F. Duisenberg, head of the European Central Bank, today issued an extraordinary message to citizens assuring them that the condition of their newborn currency was not as dire as it looked. washingtonpost.com ----------------------------------------------------------------------- 6. siliconinvestor.com DISCLAIMER: All information contained on this page are from the authors cited. The information is believed to be reliable but there is no guarantee to its accuracy. Stock ideas presented by mutual fund managers, money managers, newsletter writers and SI participants may be bought or sold by them or the company they represent anytime before or after being presented in this newsletter. Writers and editors of the IFC publication may own positions in the securities mentioned above. Positions may be liquidated at any time. Anyone purchasing the stock ideas above should consult a financial advisor before doing so. The stock ideas mentioned above are not solicitations to buy or sell but to provide people with information from many sources. I (Mark Johnson editor of the IFC) am not paid any fees by the above writers nor by the companies represented. The stock ideas may represent a starting point for investors. People are encouraged to do their own homework before buying any stock. Neither Silicon Investor or the Internet Financial Connection will be responsible for any loss occurring from the purchase or sale of the above securities or any securities. ========================================================================= To Subscribe to this Newsletter: Send a blank email to <mailto:ifc-subscribe@topica.com> Please tell a friend about this newsletter :) | ||||||||||||
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