 |
 | |
 |  |
| We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level. |
The Internet Financial Connection, April 9, 1999 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 :) -------------------------------------------------------------- This newsletter can be viewed at techstocks.com In This Issue: 1. What Does the Future of Technology Hold? An Exclusive Interview with Dennis McKechnie of The Pimco Innovation Fund 2. QLogic & American Eagle Outfitters 3. D&K Healthcare 4. Airborne Freight 5. SI/IFC Reader Highlight: Global Crossing 6. Interesting Articles on The Internet by Joe Dancy 7. Disclaimer ---------------------------------------------------------- 1. techstocks.com Dennis McKechnie of the Pimco Innovation Fund pimcofunds.com, provides the following interview with Mark Johnson, Editor of the Internet Financial Connection. Below is the write up. Now that the Dow Jones Industrial average has surpassed the 10,000 hurdle, the Pimco Innovation Fund just broke a similar numerical milestone and that was the $1 billion in assets hurdle. The Innovation Fund's assets have swelled from $300 million last fall, to around $1 billion currently. One reason why their funds assets have swelled so dramatically was because their fund returned an astronomical 79% last year. In the funds first four years of existence, the Innovation Fund gained 278% versus 147% for their comparable peer group. Dennis McKechnie, manager of the Innovation Fund takes a unique approach when investing. Most of all, he focuses on the fundamental drivers of company. Dennis likes the fundamentals of a company to be strong, along with surprising expectations or "drivers" to the upside. He also likes to identify trends upstream. For example, when AT&T announced a digital one rate plan. This pro said, "My gosh, this is going to drive an enormous amount of handset upgrades!" He quickly figured out that Nokia was best leveraged towards those handsets and would directly benefit from the "one rate plan". He accumulated a sizable position and profited immensely from that call. The Innovation Fund is a broad technology fund and mainly composed in high tech leaders. The fund is fairly concentrated, contains between 35 and 40 names and also invests in up to one third of their holdings in non technology innovators (companies that do not produce technology products but try to "out innovate" their competition). Some of the holdings in his fund that are considered, "non tech innovators" are; Medtronic (MDT 70 7/8), Amgen (AMGN 79 1/8) and Time Warner (TWX 76) Dennis' recent top ten holdings are listed below: 1. America Online (AOL 160 1/2). Dennis used his technology genius to make AOL the top holding in his fund during the last 9 months. Some of the elements he thinks will keep AOL going are strong subscriber growth (currently about 16 million paying subscribers), ad revenues have been good and they are continuously signing deals, e-commerce (e-tail) has been doing well, which should get stronger and they should directly benefit in the growth of broadband or high speed Internet connections. "We are always watching upstream to see if there will be fundamental drivers that will move those 4 factors above expectations, so far they have been exceeding expectations," says, Dennis. "AOL has a fantastic model and it is gaining momentum!" 2. Cisco (CSCO 117 5/8). Dennis notes that their sales have become increasingly important to the telecom industry. "This is important because the telecom network is moving rapidly towards transmitting packet based switches, rather than circuit based ones. Their activity in the telecom space is moving rapidly and is the strongest part of their business right now. That is the key as to why they have been successful at what they do and I look for that to continue." 3. Microsoft (MSFT 94 1/2). Even though Microsoft continues to go up in light of the antitrust lawsuit, Dennis does not see any real reason to break up the company at this point. Microsoft is directly benefiting from sub $1,000 PC's and the growth in their popular NT software, which is gaining market share. 4. Amgen (AMGN 79 1/8) has many factors working for them. One, they have decide to use their enormous hoard of cash to invest in other companies and recently have entered into a joint marketing pact with a private firm called Abarelix. That company has a product in late stage approval for prostate cancer. Second, last December Amgen won an arbitration hearing against Johnson & Johnson. The ruling will allow Amgen to market their newest drug, NESP worldwide. NESP is a new formulation of Epogen. J&J has exclusive rights to Epogen and were upset by the ruling because NESP will cut into their drug sales. Meanwhile, Amgen's opportunity is expanded dramatically. 5. Ascend (ASND 98 1/2). Even though Ascend will soon merge with Lucent Technology, Dennis likes the combination and intends to hold the new shares of Lucent when they officially merge. As noted above, the telecom market is moving towards packet based switches. Lucent has developed loyal customers that know and trust them. The Ascend acquisition will help enable Lucent's clients in the transformation from switched based products to the emerging packet technology. "Ascend's products will be well received." 6. Dell (DELL 45). As everyone knows, their stock was recently wacked down on concerns of slowing revenues. Dennis mentions that the PC industry is typically slow during the first few months of the year. He believes that PC sales have shown signs of strength and will begin pick in the coming months. "I love Dell's business model... They are the most efficient producer of computers and they get stronger everyday." 7. Intel (INTC 131 1/8). Advanced Micro Devices has taken market share away from Intel. Dennis likes the way Intel is migrating their Celeron processor to meet this challenge. He thinks Intel's Xeon processor will drive growth. "It is a more expensive chip used in high end servers and workstations. These chips are 2 to 3 times more expensive than the average Intel chip and these high end processors could use up to 8 of those chips." 8. Micron Technology (MU 47 1/8). Dennis added their stock to his portfolio last October, just before their shares took off. The down cycle for DRAM chips started in 95', and Micron stock holders have been feeling the pain. "We are getting closer to a cyclical recovery in the DRAM market and there should be an upturn shortly." 9. MCI WorldCom (WCOM 87 3/4) is a telecom service company. What they have done well is capitalized on the rapid growth of transmitting high speed data. Dennis notes, their acquisition of MCI was fabulous and their cost cutting is ahead of expectations. They have a fantastic management team who knows what they are doing and where the industry is heading. 10. Time Warner (TWX 76) is a media and cable company. He is very excited about the cable side of the businesses. "We like the cable business in general because we see it as a fantastic pipe into the home. It is a wonderful way to get faster data, digital television and eventually telephone into a large number of households. It's not that cable is the best creation, the important thing is that the cable is there. The cost to install new fiber into households would not be economical. They already supply the cable going into the homes and that will be leveraged in the future." Dennis notes that people refer to the Internet as a "bubble" or "mania." He feels that the Internet is still in the early stages of development and will continue to dramatically improve the way people do things. Amazon (AMZN 179) is one Internet company his fund recently (last few months) bought in the low $100 range. He likes the way their business model is evolving into more than just books. Other areas include; CD's, movies, drugs and a recent announcement to move into the online auction market. Inktomi (INKT 104 5/8) is another favorite Internet holding in the fund. They provide search and cacheing capabilities for Internet content and access providers. The cacheing side of the business, for example, will store a particular (usually popular and frequently accessed) web site in a local server. The reason for this is that the data can then be delivered more quickly to the user that requests it, increases bandwidth and saves in transmission costs. Yahoo! (YHOO 206 3/4) is another core Internet holding. The merger between Yahoo! and Broadcast.com is viewed as a major plus. "This positions Yahoo! well for broadband and the number of people that use it will increase as the year progresses. Broadband will get much more attention over the course of this year. Broadcast is a leader in broadcasting media (such as TV) over the Internet and they are very well positioned to move forward, once broadband becomes more common. Corporate advertisers will be willing to pay much more for this exciting form of media." About 15 years ago, mainframe computers were the only game in town. This was followed by the client/server architechture using high powered PCs. Now, Dennis see's an evolution towards an Internet architecture based computing system. "This means that the PC will run on an Internet browser piece of software, where the brains of the computer reside on centrally located computer. PC's won't need updating with all these new versions of software, because the power will reside on server." A few companies that he thinks benefit from this new type of architecture are Siebel Systems (SEBL 38) and Oracle (ORCL 23 3/8). Both companies have positioned themselves and are ramping up new models for the Internet architecture. All that information needs to be stored in a central location. "EMC Corporation (EMC 133 3/4) is a leader in data storage and is well positioned for this architecture. You won't store all your data on your desk top but on an EMC system. It is much easier for a corporation to maintain their data when it is centralized." Dennis is very bullish on the long-term outlook for tech stocks. He compares the GDP, which may grow 3% to 5% in a hot economy, to high tech items, such as cellular phones, which are growing in the 40% range, and the Internet area which is growing even faster. He firmly believes that the technology area will continue to outpace the overall economy and be a bigger piece of the overall pie. He figures that technology stocks will outperform the broad market but investors must use caution and overlay a bias for high quality companies and diversify technology holdings. ----------------------------------------------------------------- 2. techstocks.com Michael Malouf of the Neuberger Berman Millennium Fund nbfunds.com, provides the following stock ideas. Below is the write up. Michael Malouf of the Neuberger Berman Millennium Fund, looks for high quality, small cap companies with sustainable growth. Since inception last October, his funds return have been truly awesome. The Millennium Fund is up a stunning 62%, versus the Russell 2000 Growth Indexes 24% return during the same period. One of his favorite companies in the tech sector is QLogic (QLGC 69 3/4). Traditionally, they have been a maker of SCSI interface adapter cards. QLogic has been focusing their technology towards Fibre Channel. This technology is quickly becoming the standard for high-speed storage access in large enterprise backbones. Click here for more information about Fibre Channel. Currently, QLogic's Fibre Channel applications have only been primarily sold to R&D groups. Even though Fibre Channel only makes up about 20% of QLogics' revenue, Michael believes that percentage will continue to increase. "There will be a tremendous upflow in orders over the summer and that will further accelerate growth and earnings," he says. He figures they should earn $1.67 in calendar 99' and $2.50+ in 00'. "Their stock should easily trade at 40 times the 00' estimate or $100 within the next 6 months." In the retail sector, Michael is high on American Eagle Outfitters (AEOSD 77 3/8). They are a specialty retailer of men's and women's casual apparel. He notes that there has been controversy surrounding American's ability to post impressive year over year sales. He argues, "their business has been strong and will continue to be strong." American is estimated to earn $2.72 for fiscal year ending in January of 00' and $3.30 in fiscal 01'. Michael thinks both of those estimates are low. He thinks they should earn $3 and $3.75 respectively, with their stock hitting $110 sometime within the next 12 months. There are threads that discusses QLGC and AEOSD on SI. Subject 10520 Subject 11240 ------------------------------------------------------------------ 3. techstocks.com Tim Detloff of the Monetta Small Cap Fund monetta.com, provides the following stock idea on D&K Healthcare (DKWD 24 7/8). Below is the write up. Last year, the Federal Trade Commission had seeked a preliminary injunction against the mergers of Bergen Brunswig Corp. & Cardinal Health Inc. and McKesson Corp. & AmeriSource Health. The remaining two businesses would have controlled 80% of their respective markets, substantially reducing competition. After that injunction all of those companies voluntarily decided to call off their mergers. One company that is benefiting from the breakup of the proposed merger is D&K Healthcare. They distribute a wide range of pharmaceutical products. Tim Detloff of the Monetta Small Cap Fund explains, the proposed merger of the big companies caused uncertainty, which benefited small players such as D&K. "They can give better service to customers than the larger players can... D&K is only a fraction of the size of the their larger competitors but is a niche distributor and gaining market share over the big guys. They have not shown any signs of slowing down." He further adds that D&K's internal growth is about 20%, margins are expanding, and they're making acquisitions to compliment growth. "They have everything you want in a stock!" Because of the mergers between the larger players were canceled, as noted above, Tim has reasons to believe that one of those companies "will ultimately acquire" D&K, in a deal that could be valued in the $40 area. D&K is expected to earn $1.29 for fiscal June 99' and $1.52 in 00'. Tim figures both of those estimates are low and they should "easily beat" those numbers. D&K has exceeded expectations in the last 5 quarters. Even without a buyout, he believes their stock will hit $40+ within the next 12 months. ---------------------------------------------------------------- 4. techstocks.com Jim Naleid of Lokken, Chesnut & Cape lccape.com, provides the following stock idea on Airborne Freight (ABF 31 1/4). Below is the write up. Anything with a "dot com" in the name seems to be the rage on Wall Street. Internet IPOs usually priced by the underwriters in the in teens, seem to open up for trading somewhere near triple digits. Value investor, Jim Naleid, Editor of Wall Street Notes, News & Reviews and Senior Investment Officer of Lokken, Chesnut & Cape in la Crosse, Wisconsin has been participating in the tremendous growth of the Internet. He has been buying stocks that indirectly have exposure to the Internet, while at the same time, offer value. One of his favorite stocks that he has been buying and that will directly benefit from the growth of the Internet is Airborne Freight. They provide door-to-door express delivery of small packages and documents throughout the U.S. and foreign countries. As e-commerce (e-tail) continues to grow and expand, people that buy merchandise over the Internet will need the goods shipped to them. Even though Airborne competes directly with Federal Express, Jim feels there is enough room for the both of them. "Airborne has positioned themselves to expand their market share greatly across the world as a low cost shipper of goods. They will be buying larger new 767 Airplanes, which are much larger than the DC-8 & 9's that they are currently using. They will increase efficiency, expand margins and cut costs. They will directly benefit from the expansion of e-commerce going forward and should do extremely well," he says. Jim admits that the price of oil is a wild card but should not have a significant impact on earnings. Jim notes that Airborne has fairly low debt levels (25% of capitalization), a handsome book value of around $15 currently, which should move up to the low $20's next year and strong cash flow approaching $8 per share. "They have the characteristics of a value stock... Their stock has little downside risk and decent upside leverage." He figures they should earn $2.85 in 99' and $3.25 in 00'. Jim's near-term target for Airborne is $42 and $65 in the three to five year time frame. There is a thread that discusses ABF on SI. Subject 14425 ----------------------------------------------------------------- 5. techstocks.com STOCKASAUR is an individual investor and an Internet Financial Connection reader. He provides the following commentary on Global Crossing (GBLX 45 1/2). Below is his write up. GBLX is the owner and operator of the world's first independent, global, undersea fiber optic network providing long-distance telecommunications facilities and services. It's Atlantic crossing (AC-1) now connects the US and the UK, the Netherlands and Germany. The company's aspirations don't end there. They want to connect the world. Their expansion plans include building an undersea fiber optic network that will connect 50 of the world's largest cities. Some other planned cable lines include the Mid-Atlantic Crossing (MAC) which will connect the eastern US, Bermuda, the Caribbean, and Central America; the Pan-American Crossing (PAC), linking the western US with Central America; South America's Crossing (SAC), which will link major south American cities together; and the Pacific Crossing (PC-1) system which will connect the US with Asia. As impressive as GBLX's enterprising plans for future domination of the telecommunications industry are, here are the reasons why GBLX has a great chance to flourish. 1. The early bird gets the worm. GBLX has already established itself as a unique player within the telecommunications/service industry. The Atlantic crossing (AC-1) system is the world's first of its kind. And the company promises more comprehensive systems in the future. GBLX will have the advantage over rivals because they will be known as the first company to build a complex undersea network. Furthermore, their plans for expansion (if successful) will surely give them the upper hand, especially if they can deliver on CEO Robert Azzunieta's goal of "providing low-cost global connectivity through the use of the most advanced technology available." I wouldn't bet against the Brooklyn-born Azzunieta. He already has a reputation on Wall Street for taking dark horses and turning them into thoroughbreds. 2. Management is highly competent and is effectively anticipating the future. This cannot be understated. In the ever-changing world of technology, it's important to be one step ahead of your competition or face the daunting prospect of losing ground to tomorrow's next Microsoft. Though it's too early to tell with GBLX, I like the moves they are making so far. On 3/24/99, they announced plans for the Altantic Crossing (AC-2), a new undersea, fiber optic cable, linking the major cities of Europe with the Americas and Asia. This new cable system can operate at 2.5 terabites-per-second. This represents an undersea capacity increase of more than 25 times what is now available on the trans-Atlantic route. It is also two times the capacity of any undersea cable previously announced according to officials at GBLX. Recently it merged with the American company, Frontier Corp. Frontier has established itself as one of the leading providers of integrated communications services, including Internet, data applications, long distance and local telephone to business companies nationwide. They provide customers with greater bandwidth capacity while offering great reliability through faster transmission speeds. The merger is significant for GBLX. The explosion of Internet use in Europe is expected to increase bandwidth demand on the Atlantic route at about 80% per year. Now, GBLX has positioned themselves as a significant provider for the demand for bandwidth to handle Internet data, video and voice transmissions. Management's vision has ensured that in the future GBLX will have the fastest global fiber optic network in the world. 3. Media coverage has arrived. Three months ago GBLX was just a small blip on Wall Street's radar screen. Since the merger with Frontier, along with the Atlantic Crossing 2 Cable announcement, they have received steadily ever-increasing coverage by media giants such as CNBC (Note: the day of the merger CNBC extensively discussed the positive effects of this at intermittent times throughout the day). They have also been gaining the increasing attention of analysts. Most of these analysts have GBLX on their moderate buy/strong buy lists. Wall Street has embraced the merger with Frontier as favorable and the end result has seen the stock price soar significantly since the positive reaction of the news. 4. Proof is in the pudding. Since mid-October of 1998, the stock has been on a steady uptrend. It hit a high of 62 (post-split) in early March of 1999. It has been in a retracement over the past three weeks, but given the strong run-up over the prior two months, it is only natural that the stock is taking a breather. The fundamentals are solid and have not changed. The company beat analysts expectations last quarter by 14% (0.12 /share) and are expected to earn .20/share this coming fiscal year. The consensus estimate for the next fiscal year is expected to be .17/share, however, given the company's vast network expansion projects, I feel this is understandable. At any rate, GBLX proved in the past it is capable of beating analyst's expectations and may do so next fiscal year regardless. While it takes years to establish dominance within a new industry, especially a rapidly changing telecommunications industry, I believe that thus far GBLX has been paving the way to do so. Earnings may not be significant until much of GBLX's comprehensive global network is in place, so only time will tell. After all, the company is investing an inordinate amount of money for their undersea projects. The company is still very young, however, and they are literally delving into unchartered waters (no pun intended) so investors may have to exercise patience when evaluating this company's performance in the next few years. For those investors, though, that can have enough vision in tandem with GBLX's foresight for the future may prove 5-10 years from now that the risk was definitely worth the reward. ----------------------------------------------------------------- 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 Are we about to see a New Media company swallow up an Old Media company? latimes.com Dell Computer has announced plans to use Red Hat Software's Linux operating system. usatoday.com A new study bucks conventional Internet wisdom that expected portal sites to be the gateways for consumer e-commerce. techweb.com A cold war has erupted between TheStreet.com founders. nypostonline.com AOL takeover talk was the subject of a thinly-sourced report appearing Monday in the online edition of the San Jose Mercury News. techweb.com Of course Al Gore didn't invent the Internet. That's preposterous, no matter what the vice president claimed in a CNN interview last month. bergen.com Some say yes, some say no. But a few -- looking at the talks the two companies have been having and considering the high price of entering the online media business -- say it's inevitable. CBS, which is only a broadcast network, is getting outpaced. mercurycenter.com Wireless Usage to Soar. technologypost.com | ||||||||||||
|
| Home | Hot | SubjectMarks | PeopleMarks | Keepers | Settings |
| Terms Of Use | Contact Us | Copyright/IP Policy | Privacy Policy | About Us | FAQ | Advertise on SI |
| © 2025 Knight Sac Media. Data provided by Twelve Data, Alpha Vantage, and CityFALCON News |