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The Internet Financial Connection, October 21, 2000 ------------------------------------------------------------- *** Please support our sponsor and visit the link below *** *** Mark Johnson Editor IFC *** changewave.com You are one decision away from saving your 2000 portfolio . Is this Nasdaq meltdown the greatest opportunity of the last two years, or is it a trap that will take investors down a rat hole to Nasdaq 2,300? The answer you arrive at in the next few days will make or break your year-maybe even the last two. Don't go it alone. Check out FREE special report from ChangeWave.com "The Next 5 Monster Stocks of the New Tech Era" first at: changewave.com ------------------------------------------------------------- !!!!THE IFC HAS ONE OF THE BEST TRACK RECORDS AROUND!!!! In 1998, 225 different specific stock ideas appeared in the IFC. As of July 5, 1999, the return of the group of stocks that appeared in the IFC in 1998 rose an astounding 51%. What is even more amazing is that in 1999, 185 stocks appeared in this column and as of July 3, of 2000, that group of stocks was up 56%. ------------------------------------------------------------- Presented by Mark Johnson, Editor of the IFC It appears on Silicon Investor siliconinvestor.com AOL users may wish to view the IFC letter at the link below. AOL sometimes requires that you download emails that have more than 20k of data. siliconinvestor.com -------------------------------------------------------------- To Subscribe to this FREE Newsletter: Send a blank email to <mailto:ifc-subscribe@topica.com> Please tell a friend about this newsletter :) -------------------------------------------------------------- This newsletter can be viewed at siliconinvestor.com In This Issue: 1. Tech Pro focuses on e-commerce and software 2. GenCorp 3. Stillwater Mining 4. Illinois Tool Works 5. Dominant companies make attractive investments 6. Disclaimer ---------------------------------------------------------- 1. Playing the recovery in small-cap techs siliconinvestor.com Mark Johnson, Editor of the Internet Financial Connection, provides the following interview with Bill Schaff of the Berger Information Technology Fund bergerfunds.com. Below is the write-up. Warren Buffet once said, "If it plugs in, don't buy it." He was referring to purchasing stock in technology companies. His investing philosophy seems rather sane given the recent correction in the technology sector. The tech-heavy Nasdaq Composite, which was trading at around 1,000 at the beginning of 1996, is up an impressive 200 percent versus roughly a 100-percent gain for the S&P 500 and the Dow Jones Industrials Index during the same period. People have been exiting from technology stocks as if someone yelled fire in a crowded movie theater. Is there really a fire or is this a false alarm? Bill Schaff of the Berger Information Technology Fund notes that 1999 was pretty much a no-brainer. Almost anything and everything related to the technology space appreciated. He believes that the key to making gains in technology reside in making the right equity selections. One theme Schaff is focusing on is the proliferation of e-commerce, centering on infrastructure and security. Another favorite space is software. One top holding on the software protection side is RSA Security (RSAS 56 1/2), which provides electronic security for e-commerce applications. Schaff states, "I think some old-line anti-viral players which are slow, steady and boring, but generate a lot of cash, have excellent balance sheets and offer good business prospects." One name in that space he finds alluring is Symantec (SYMC 34), which Schaff thinks will continue to post impressive top-line growth going forward. Schaff mentions that he favors software vendors in the fourth quarter because sales are typically strong then. One name he finds enticing in the software infrastructure side is BEA Systems (BEAS 81 1/4). BEAS, one of the leading default enterprise application infrastructure companies that continues to win market share, offers a leading product called Web Logic. Actuate (ACTU 29 7/8) is an appealing software play on the reporting of data used in e-commerce applications. "I like Actuate because it provides a needed application in the information delivery and reporting segment and should do very well," says Schaff. Shares of Broadbase Software (BBSW 10 5/8) have collapsed from a high of $86, set back in March, to just over $10. The company is a leading provider of analytic and automation applications used to analyze customer data in e-commerce infrastructure applications. With shares of Broadbase Software significantly depressed, Schaff finds its stock "attractively valued." Vitria (VITR 26 3/4) is also in the application infrastructure space. Schaff notes that business is going extremely well and the company offers a competitive product, adding that shares of both Vitria and Broadbase Software are heavily out of favor. "I think these companies will recover because they have decent business models and their products are experiencing strong demand," he says. One "special situation" found in the Berger Information Technology Fund is Cabletron (CS 27 1/4), which is breaking up into four separate companies. Schaff figures the sum of the company's parts are worth more than $42. One area Schaff has been avoiding is the commodity chip area. He explains they are highly cyclical even though a lot of people have recently touted them as not being as cyclical. Another area he believes is still overvalued is the optical networking space. "Optical networking, exciting as it is, the valuations were absurd. . . I would not be surprised to see the valuations of that group move down," Schaff notes. Schaff urges investors to diversify and not to "bet the ranch on any one company." The Berger Information Technology Fund mainly invests in profitable technology companies that benefit from corporate information technology spending. Schaff believes investing in companies that are benefiting from considerable amounts of corporate technology spending offers a more stable and profitable way to invest in the tech sector. ----------------------------------------------------------------- 2. GenCorp siliconinvestor.com Cengiz Searfoss of West Broadway Partners provides the following stock idea on GenCorp (GY 8). Below is the write-up. Have this year's technology blues taken a bite out of your investment portfolio? If you answered yes, you are not alone. The majority of investors have felt the effects of the technology crunch. Many of the value-oriented equities have experienced less of a decline when compared to technology related stocks. Cengiz Searfoss, a value equity strategist at New York-based West Broadway Partners, is presently high on GenCorp (GY). The company is primarily made up of three separate divisions: aerospace defense, automotive components and fine chemicals. Searfoss points out that those three entities generate annual revenues of about $750 million. Yet, GenCorp's market capitalization is around $340 million. He notes that the company is trading at about three times cash flow, which is "extremely attractive." Another kicker in GenCorp's favor is that it owns 3,100 acres of land in southern California. The company recently sold one acre of land for $260,000. Searfoss figures GenCorp's combined assets, including the real-estate holdings (which he values at a conservative $100 million), are worth at least $16 to $18 per share. He estimates GenCorp will earn $1.23 in fiscal year 2001. ------------------------------------------------------------------ 3. Stillwater Mining siliconinvestor.com Joe Shaefer of Investor's Edge investors-edge.net, (an annual subscription is $149 for one year, phone 800-947-0085 for more info), provides the following stock idea on Stillwater Mining (SWC 27 1/8). Below is the write-up. Stillwater Mining isn't exactly a name that gets one's attention. At first glance, it appears as if it's a typical mining company. Joe Shaefer of Investor's Edge contends that Stillwater Mining is a backdoor play on the technology sector. Stillwater is the largest North American miner and producer of palladium and platinum. The company's mining activities are focused on the J-M Reef, which is the only known significant source of platinum group metals outside South Africa and Russia. Stillwater holds about 10 percent of the world's palladium and platinum reserves, which are used in a number of electronic devices including cellular handsets, personal computers, fiber optic cables, semiconductors and data storage. Other uses include catalytic converters in automobiles, anticancer drugs, jewelry and dental alloys. Shaefer believes market prices for palladium and platinum should remain stable. He notes that Russia controls about 80 percent of the world's reserves. "With that abundance of control they can pretty much manipulate the market to their advantage," he says. "Within the last several weeks, the Russian Finance Ministry assumed full control of the country's precious metals. That move should secure palladium and platinum prices, with the likelihood of price increases down the road. The Russians do not want lower prices, so the supply is going to be constrained. It is in Russia's best interest to keep the commodity's value high," says Shaefer. Shaefer adds that the demand for palladium and platinum has been very strong and presently outstrips supply. "Regardless of a boom or bust technology market Stillwater will be able to sell whatever they produce," he says, adding that Stillwater has been spending more money on infrastructure and equipment in order to meet demand. The company recently introduced a three-year plan that will vastly increase palladium and platinum production. Shaefer thinks the shares of Stillwater could reach the mid-50s within the next 12 to 18 months. ---------------------------------------------------------------- 4. Illinois Tool Works siliconinvestor.com Ingrid Hendershot of Hendershot Investments (703-361-6130) provides the following stock idea on Illinois Tool Works (ITW 55 1/2). Below is the write-up. Founded in 1912, Illinois Tool Works (ITW) has steadily grown into a $9 billion company. ITW designs and produces highly engineered fasteners and components, equipment and a variety of specialty products for customers around the world. The company has more than 500 decentralized business units in 40 countries. Since 1970, acquisitions have contributed significantly to ITW's growth in sales and earnings. Late last year, ITW merged with Premark, which brought ITW nearly 80 businesses with products marketed in more than 100 countries. Ingrid Hendershot of Hendershot Investments notes that as ITW integrates Premark's operations into its own, management's goal is to double Premark's operating margins from 9 percent to 18 percent within a five-year time period. "While this may seem ambitious, ITW has accomplished such feats in previous large acquisitions," she says. Over the past five years, ITW's net income has grown at an annual rate of 14 percent. Cash flow from operations has steadily increased and now tops $1 billion. Hendershot believes that ITW sports an attractive valuation for a company with a successful long-term growth track record, substantial cash flow generation and a steady record of increasing dividends. ITW is projected to earn $3.83 in 2001, versus earnings of about $3.40 this year, and Hendershot thinks long-term investors should consider adding ITW as a core holding to their portfolio toolbox. ------------------------------------------------------------------ 5. Dominant companies make attractive investments siliconinvestor.com Joe Dancy, co-editor of the IFC and editor of The Lone Star Growth Investor provides the following article. To conserve bandwidth please click the link below to view the article. siliconinvestor.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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