SHOW ME THE MONEY:
Where is the REAL Value in Technology stocks?
Most market investors don't realize it is a new ball game since the Jupiter/Saturn conjunction of May 2000. As I write this is not uncommon to see some technology stocks moving up or down as much as 50% in a week. This is a classic top pattern. Despite periodic rallies, stock valuations will continue to decline and approach common sense and value. As I wrote last quarter, "while technology is indeed the probable future to quote Sam Zell 'The Emperor Has No Clothes. This musical fable does not question the new technology, just its valuation.' " I continue to strongly agree.
For the time being, I believe the March Nasdaq ceiling
will hold. It is unlikely we will see Nasdaq above 5000 by the Fall and
perhaps not in 2001 either.
The question then is: How low will it go and how long will it
stay down?
Bulls are hoping that support at 3300 and at worst case 3000 is solid
.
Bears are looking forward to at least 3000 or 2800 or lower.
As to how long and our view as to how severe the correction will be,
please read Wall Street, Next
Week regularly.
We reiterate an Outperform rating on IBM
From Out perform to Speculative Buy
Corel (CORL)
From an Under perform to Accumulate
Compaq (CPQ), Xerox (XRX)
From Market perform to Long Term HOLD:
Lucent (LU)
Hewlett Packard (HWP)
From Market perform to accumulate on Weakness
Sony (SNE), Intel (INTC), Computer Associates (CA), United Technologies
(UTX)
From Sell to accumulate on very serious weakness
Microsoft (MSFT)
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.
We maintain a strong SELL on the Internet Sector until the HHH is below its 52 week low of 97 and the IIX is below 300. Naturally it is profitable to continue to trade BOTH sides (with an obvious bias to the downside) on such premium Internuts as YHOO, EBAY and AMZN.
When do we changing our tune and become buyers? When there
is Value to be found. So that means sometime between Today and
2008! :)
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 50% correction from
March 2000 highs, e.g. Intuit (INTU) and Computer Associates (CA) and
3. The Rest- Buy at 75-90% correction from March
2000 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)
Intuit (INTU)
Intel (INTC)
International Business Machines (IBM)
Motorola (MOT)
Oracle (ORCL)
Sun (SUNW)
Sony (SNE)
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