HI-TECH SUMMER 1999

FIRE AT WILL:

Remember what Saturn/Neptune did to the Oil sector? We expect Saturn/Uranus to do this doubly for the technology sector. Last year the excuse was "the Asian Crisis"; this year it will be "Y2K." No matter, I believe it is MUCH better to be safe than sorry. Look at the charts of recent Internet IPO's like BNBN or DIR - that and more could be the fate of many technology rich portfolios this summer.

Internut warning! You may have to wait until THE END OF THE summer to get rich - a life time for internet junkies.

As we have written many times:
"BIGGEST LOSERS will be the INTERNET STOCKS twinly afflicted by Saturn/Uranus and Y2K by the second half of the year. Expect a minimum of 50%+ losses for many of these "tulip" companies. Years ago, as a computer analyst, I wondered how Internet companies would eventually make money - what mix of advertising, subscription and/or e-commerce models. The right answer was none of the above - but to sell stock to the public or be acquired by an old-line media company!"

Since the above was written last December, the Internet index has clearly peaked and article after article has been written why the Internet stocks will drop ranging from "over-priced" to "over-supply".

When do we changing our tune and become buyers? Of the big four Blue Chips [YHOO, AOL, AMZN and EBAY], we intend to stop selling rallies on Yahoo as soon as it reaches 20 [40 pre split]. AOL? We have our BUY orders ready for 17! Neither AMZN or EBAY are buys this year or next, in our view, from ANY PRICE.

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.

The ONLY two NEW internet IPO's we may buy this year are the market winning: phone.com (PHCM) and yesmail.com, if and when they go public.

Good Companies, Good Horoscopes

Previously we recommended buying Motorola (MOT) and the 2000 Portfolio Star IBM. But these two are now too rich and we now are writing covered calls on them and have downgraded them to "outperforming holds". Other than that, divide Technology companies into 3 categories:

1: The Best- Buy these near 52 week lows e.g MOT and IBM.
2. The good- Buy near or below 104 week lows e.g. Compaq (CPQ) and Baan (BAANF) and
3 The rest- Buy near 90% correction from 52 week highs.

COMPUTER HARDWARE COMPANIES

Due to the Asian Crisis, this industry group will remain unattractive all year except for special situations i.e. M & A plays. We expect big price wars and declining profits for the rest of 1999. Computer pricing will continue to drop like rocks, and taking it with it the bottom line of most companies. The push toward $300 computer systems will continue to hurt not only manufacturers, but computer stores.

COMPUTER SOFTWARE

Main looming issue is the legal liability of Y2K problem.

Our only long term investing buy again this quarter is BAAN (BAANF).

Our watch list of future good Software buys include:

Intuit (INTU),
Novell (NOVL)
Oracle, (ORCL)
Symantec (SYM)

TECHNOLOGY DOWNGRADES

From Buy to Out perform:

Motorola (MOT)
IBM

TECHNOLOGY FAVORITES

From MUCH lower prices, we plan to eventually to add to our five core Technology holdings. These technology favorites are recommended for gradual accumulation AFTER the Fall, or if your mandate MUST invest:

Lucent (LU)
Motorola (MOT)
International Business Machines (IBM)
Sun (SUNW)
Sony (SNE)

If want to buy from a larger universe, include the Canadian Star: ATI Technologies (ATYT) and Dow component Hewlett Packard (HWP).

While we will continue our practice of selected quarterly updates on computer stocks here, serious investors and traders can receive more timely updating on our Wall Street, Next Week Subscriber Silver premium channel UP STARS, DOWN STARS as well as timing recommendations on our Gold premium channel: Daily Market Commentary.

PREVIOUS HI-TECHS POSTINGS

Return To Main Menu