Where is the Value in Technology stocks?
We are saying much the same thing as last quarter. The
closer we approach the Jupiter/Saturn conjunction in May 2000, the more
stock valuations will approach common sense and value.
It may even take
until May 2000, but technology sector stock prices will come down
to earth. Technology is indeed the probable future.
But quoting Sam Zell "The Emperor Has No Clothes. This
musical fable does not question the new technology, just its valuation."
I strongly agree.
We are preparing for the third and final Saturn (Down) Uranus (Technology)
Square May 13th. It is hard to imagine that as much Nasdaq insanity will
continue past then given the major Jupiter/Saturn that month as well.
For the time being, its seems the Nasdaq ceiling is in place.
The question then is: How low will it go and how long will it
stay down?
Bulls are hoping for support at 4000 or at worst case 3800.
Bears are looking forward to at least 3500 or 3000 or lower.
As to how long and our view as to how severe the correction will be,
please read Wall Street, Next
Week!
From Under perform to Out perform
Corel (CORL)
From Out perform to Market perform:
Hewlett Packard (HWP)
From Under perform to Sell
Microsoft (MSFT)
Previously we recommended buying 2000 Portfolio Stars IBM and Sony (SNE).
But both are are now too rich and have downgraded them to "market outperforms".
We continue to recommend partial selling or writing covered calls on them.
On Wall Street, the pendulum of investor sentiment historically swings from greed to fear and back again. These days, instead of being measured in months and years, the swings are measured in days and weeks. Greed, stupidity and insanity continues to rule the day for internet stocks.
Our basic forecast: Bubble or "Internet" plays can expect at least 68% correction from 1999 highs as they are truly the junk bonds of the 1990's. Having appreciated 5 to 20 times in 1998 and 1999, it is logical to assume the possibility of a correction. Between now and May's final pass of Saturn square Uranus, is the RING PASS NOT.
When do we changing our tune and become buyers? When there is Value to be found. So that means sometime between Today and 2008! :) We are looking at three Internet stocks to BUY on weakness. These are:
Divide Technology companies into 3 categories:
1: The Best- Buy near 52 week lows
e.g IBM, Sun (SUNW) & Oracle (ORCL).
2. The Good- Buy near or below 104 week
lows e.g. Compaq (CPQ), Intuit (INTU) and Computer Associates (CA) and
3. The Rest- Buy near 90% correction from 52 week
highs.
In no case, buy for much higher than business valuation if investing
for the long term. You can find a value pricing model at the Morningstar
web site.
Adobe (ADBE)
Computer Associates (CA)
Corel (CORL)
Intuit (INTU),
Oracle, (ORCL)
Intel (INTC)
International Business Machines (IBM)
Oracle (ORCL)
Sun (SUNW)
Sony (SNE)
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