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The Internet Financial Connection, December 25, 1998 Presented by Mark Johnson, Editor of the IFC techstocks.com It appears exclusively on Silicon Investor techstocks.com -------------------------------------------------------------- To Subscribe to this Newsletter: Send an email to <mailto:ifc-request@mLists.net> with "subscribe" in the message body. Please tell a friend about this newsletter :) -------------------------------------------------------------- Readers: Due to the holidays and timing contraints, the next issue of the IFC will be on January 7, 1999. Happy Holidays from the IFC! Mark Johnson Editor IFC -------------------------------------------------------------- This newsletter can be viewed at techstocks.com In This Issue: 1. John Bollinger's Outlook on Technology Stocks 2. Best Software 3. Sterling Commerce & AMREP Corporation 4. WD-40 Company 5. Digital Cameras To Expand Hard Disk Drive Market 6. Interesting Articles On The Internet by Joe Dancy 7. Highlights on SI: by Tom Taulli 8. Disclaimer ---------------------------------------------------------- 1. techstocks.com John Bollinger of Bollinger Capital Management and equitytrader.com, provides the following interview with Mark Johnson, editor of the IFC. Below is the write up. The technology indexes continue to burn rubber. The NASDAQ Composite, which dropped to a low of 1,350 in October just surpassed 2,150. Likewise, the Morgan Stanley High Technology Index, which dipped below 500 in October, has recently gone over 850. So, does this mean technology stocks have run their course and might start to head down? Not according to John Bollinger of Bollinger Capital Management. "There seems to be quite a bit of strength left in the technology area... We understand that they moved up significantly here but, it does not appear that technology stocks have come too far too fast," he says. John mentions that technology stock indexes recently went through a consolidation pattern. There was a high degree of volatility and prices essentially moved sideways in a very wide pattern. From a technicians point of view, this is called a "Bull Flag." "That pattern has been resolved to the upside... This is quite bullish." John bases his work on a model of the market which he calls a "pyramid." This pyramid puts the market at the apex of the pyramid. Underneath that pyramid is 15 market sectors. Under those 14 sectors are 137 industry groups, and at the base of the pyramid are 3,700 individual stocks. John notes that if the market, sector, group and stock are all in gear, you have an increased probability of success. The 4 groups of the pyramid can be compared to an Olympic rowing scull. If all are rowing together, the scull can move quickly and powerfully to its goal. If one rower stops rowing, the sculls progress is "severely impeded." He calls this "group power." John offers an excellent charting web site at equitytrader.com. That web site will let you analyze and evaluate stocks using John's techniques. To better help you move through their web site, click Help at the bottom left of their web page. That will explain what you need to know and how to use their web site. One technology area that has been strong and looks favorable is the Diversified Technology sector. Within that group; Tektronix (TEK 29 3/4), International Manufacturing Services (IMSX 10), Perkin-Elmer (PKN 96 3/8) and Rockwell International (ROK 47 7/8) look favorable, according to John. His absolute favorite in that group is Tektronix. "Their stock has run from the mid teens to the highs 20's, went sideways for a few days and started to head back up again... This is the very signature of a strong stock," he says. Another sector that looks favorable using John's criteria is the semiconductor sector. One he likes in that area is Texas Instruments (TXN 85 7/8). After a recent strong 5 day run-up in their stock price, the shares of Texas Instruments completed a classic pullback after making a new high. Their stock found support at the level of the prior consolidation for a couple of days and then started moving higher. "That is about as perfect of a pattern as these stocks make!," he says, "We would expect Texas to make new highs here." In the semiconductor area, John likes Semtech (SMTC 33 7/8) and Micrel (MCRL 49). In a very mellow relaxed tone, John says, "These Internet stocks are just wild." The Internet area still looks appealing to him. One stock he likes in that area is CNET (CNWK 54 1/2). Their stock broke out to the upside starting around the beginning of November. It then corrected and found support in the area from where it originally broke out. Within the last 5 trading sessions, their stock started to move up. "CNET looks very attractive to me." Some other technology stocks he is bullish on are Dell (DELL 79 1/2), Compaq (CPQ 443 1/8) and Nokia (NOKa 123 5/8). In the non technology area, a stock John is favorable on is Granite Construction (GVA 32 3/4). "Their stock is completing a consolidating pattern and has great potential for breaking out to the upside... It is just a matter of time before it clears resistance in the $33 or $34 area and breaks out to a new high." As for the overall market, John thinks there may be some short-term volatility. Towards the beginning of the new year, he thinks the overall market will continue to move to the upside. ----------------------------------------------------------------- 2. techstocks.com Steve Kensinger of Wilke/Thompson Capital Management provides the following stock idea on Best Software (BEST 20 3/4). Below is the write up. Best Software is a maker of accounting and HR (Human Resource) software to small and middle size companies with over 40,000 customers. Like most stocks in the current stock market environment, Bests' stock has been volatile. Their shares slipped from a 52 week high of $28 in November to $18 recently and has started to move back up. "Best has been a successful company and has a good reputation for their software," says Steve Kensinger of Wilke/Thompson Capital Management. "They are piggy-backing on the success of Microsofts Windows & NT and are compliant with those platforms. As the NT installed base grows, which it should dramatically over the next several years, so should Best's sales of its application software." He notes, Microsoft NT based servers are allowing small and mid-size businesses access to computing power that was only previously available to larger corporations. Best has a line of new software packages coming out that will allow more functionality. "This new software will allow them to move upstream into larger businesses," says Steve. About one half of Bests' revenues come from software license fees. The other half of revenues come from maintenance fees for contracts and are typically renewed. So, there is a recurring revenue stream that is consistent. According to analyst estimates, Best is expected to earn close to $0.90 in 1999 versus projected final earnings of $0.69 this year. Steve thinks they can grow in the 25% range during the next 3 to 5 years, with their stock hitting the mid 30's within the next 12 months. There is a thread that discusses BEST on SI. Subject 18349 ------------------------------------------------------------------ 3. techstocks.com Bob Mann of First Georgetown Securities cicorp.com provides the following stock idea on Sterling Commerce (SE 40) and AMREP Corporation (AXR 6 1/2). Below is the write up. "Tis the season to be Jolly." That's what many of the shareholders of highflying Internet are singing. Electronic retail (e-tail) over the Internet this holiday season, as everyone already knows, is expected very strong. Amazon.com, the book, CD and movie retailer was trading around $125 per share in early November. Their shares hit $329 per share recently! The Internet will revolutionize retail in many different ways but, many investors question their sky-high valuations. One company that is benefiting from electronic commerce (EC) over the Internet is Sterling Commerce. They are a leading provider of EC software products. "They do not make the software used to buy grandma a sweater over the Internet," says Bob Mann of First Georgetown Securities. Sterling enables companies to securely engage in business-to-business electronic transactions. Click here to read a profile on the company. Bob notes that Sterling has had excellent earnings growth. They posted $350 million in revenues for fiscal year ending in September of 1997, $490 in 1998 and should have revenues in the range of $650 to $700 million in 1999. He is comfortable with analysts earnings estimates of $1.60 in 1999. "I think Sterling could easily trade at 35 times 1999 earnings or $56 within the next year," he says. Another stock Bob likes is AMREP Corporation. Their company is essentially two different businesses. One is a magazine wholesale distributor, the other builds homes, developments and sells land. When the market sold-off from July to September, so did AMREP. Their shares fell from $9 1/2 to $6. On top of that, they just reported earnings in their most recent quarter of $0.05 versus earnings of $0.34 last year. One reason why earnings were not so rosy was because they fell on decreasing land sales. "In some quarters they sell land and in some quarters they don't," says Bob. He figures AMREP has a book value of over $10 per share and should earn between $1 and $1.20 for fiscal year ending July of 1999. Click here to view their earnings history. "You don't find very many companies that make money like that and trade at this much of a discount to book value," he says. He thinks their stock can hit close to $10 within the next 6 to 12 months. There is a thread that discusses SE on SI. Subject 18152 --------------------------------------------------------------------- 4. techstocks.com Michhael J. Funke of the MJF/Ruta Financial Newsletter <mailto:mjf@discovernet.net> provides the following stock idea on WD-40 Company (WDFC 29). Below is his write up. WD-40 Company's products are used in four out of five U.S. households, and the odds are that you have a con of their petroleum-based product on your work shelf or in your garage right now. The Company's products, which now include WD-40, 3-IN-ONE Oil, (a drip oil lubricant), and T.A.L 5 (an extra-strength synthetic lubricant developed for industrial applications) are sold through retail outlets and industrial distributors in over 150 countries After more than four decades of being identified with a single petroleum-based product (WD-40), this Company has dramatically shifted its corporate identity and strategy. With the acquisition of the 3-IN-ONE Oil brand in December, 1995, and with the introduction of its new T.A.L 5 brand in early 1997, WDFC has become a Company no identified with three strong products. The Company's goal is to dominate the entire category of lubrication products by combining the smaller niche markets targeted by 3-IN-ONE Oil and T.A.L 5 with the broad-based market held by the WD-40 brand. The Company developed its newest product, T.A.L 5, which stands for Triple Additive Lubricant/5 functions, as an extra strength synthetic spray lubricant for heavy-duty applications. The product resists breakdown due to corrosion, friction, temperature, load and motion. It can be applied to rubber, metal or plastic and will provide long-lasting strength and durability. The Company intends to target this product at specialized users in the trades and general manufacturing industries. While WD-40's revenues and earnings growth has been impacted somewhat by the Asian economic crisis over the past 18 months, the Company pays an outstanding 4.3% dividend and is well-positioned for future long-term growth well into the next century. The shares of WD-40 Company are recommended for purchase for long-term growth/income oriented accounts. ----------------------------------------------------------------- 5. techstocks.com Joe Dancy, co-editor of the IFC and editor of the The Lone Star Growth Investor members.aol.com provides the following commentary. Subscriptions to his newsletter are FREE. "Digital Cameras To Expand Hard Disk Drive Market" The title describes it all. To conserve bandwidth, please use the link below to access the article. techstocks.com ----------------------------------------------------------------- 6. techstocks.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 AND ELECTRONIC COMMERCE Bandwith shaping up as the big topic in 1999. A PricewaterhouseCoopers tech forecast released early this month predicts demand for interactive services will severely challenge the ability of the Net's infrastructure to function properly. Some say demand for bandwidth will increase tenfold every single year through the next decade. bergen.com Internet stocks are rebounding even higher, turning high-tech millionaires into billionaires - and beyond. nypostonline.com Analysts who cover Amazon.com, one of the top names in the emerging world of e-commerce, fell into sharp disagreement last week about where the online book- and music-seller is headed. One analyst things the company is worth $400; another $50. nypostonline.com Internet commerce is finally starting to yield results -- online purchases are at levels that exceed estimates. washingtonpost.com SEMICONDUCTOR & ELECTRONICS The industry has advanced rapidly in the five decades since Berkeley's researchers manipulated 800 bits in a square inch. Today's most-advanced hard disk drives can cram more than 5 billion bits of data -- five gigabits -- into that same square inch. www8.mercurycenter.com Orders for advanced IC production systems are helping to prop up the troubled semiconductor-equipment industry. SEMI's book-to-bill index rose to 0.84 from a revised 0.75 figure for October. A ratio of 0.84 indicates $84 in new orders are being received for $100 worth of products shipped. techweb.com The efforts of PC makers to reduce inventory and streamline production and distribution operations is starting to pay off, according to a report issued by San Jose-based research firm Deloitte Consulting. techweb.com INVESTING What will 1999 bring in the stock market? One predictor of stock market performance that, while crude, has been uncannily accurate since at least 1832 - and predicts significant gains in 1999. washingtonpost.com With some 50 million American households now with money in the market. So why bomb Iraq? Bomb the stock market. Don't think the president would jeopardize the nation's financial well being just to save his job? Nobody thought he'd attack Iraq either. nypostonline.com Boring but safe. That's the investment theme Wall Street strategists recommend for investors looking to buy stocks in the face of President Clinton's impeachment. nypostonline.com High-flying technology stocks are due to come in for a landing next year, according to top Wall Street strategists. It's not just the Internet stocks, where valuations are ridiculously out of whack, but even profit-producing tech companies that are likely to witness a loss in market capitalization in 1999. nypostonline.com Stock market chugs along in own world dallasnews.com The five largest announced acquisitions of 1998 would, upon completion, rank as the top five in history. Investors should expect this merger barrage to continue, prompted by confidence in the stock market and factors unique to each industry, predicts Gary Finger, director of mergers and acquisitions with Houlihan, Lokey, Howard & Zukin. chicagotribune.com ECONOMIC Japan's government slashed its forecast Sunday for economic performance this year, predicting a contraction of 2.2 percent as the country battles its worst postwar recession. iht.com Inflation remains tame--for now chicagotribune.com Forecasters expect growth to slow in '99 bergen.com ----------------------------------------------------------------------- 7. The Taulli Report, Voices of SI: by Tom Taulli For a weekly e-mail newsletter of The Taulli Report, e-mail <mailto:tom@taulli.com> Few fans of AT&T, iMall deal stocksite.com Yahoo! deal boosts Onsale stocksite.com Rave reviews for CMGI stocksite.com Millionaire.com a rich idea stocksite.com Amazon price target causes stir stocksite.com InfoSpace IPO: A return to sanity? stocksite.com ---------------------------------------------------------------------- 8. techstocks.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 anytime before or after being presented in this newsletter. 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: Send an email to <mailto:ifc-request@mLists.net> with "subscribe" in the message body. Please tell a friend about this newsletter :) Shop the best prices on the Web! webmarket.com | ||||||||||||
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