|
|
Enron Mail |
INTERNET STOCK NEWS [tm]
http://www.netstocks.com ISN Ones to Watch 06/05/01 _________________________________________________________________________ TABLE of CONTENTS 1. General Sentiment 2. Weekly Model Portfolio Results 3. In the News 4. Technical Analysis 5. Changes to Model Portfolio 6. Comments Welcomed --------------------------------------------------------------- Erase a Year's Worth of Pain in the Next Six Months! Get Ready for the coming Nasdaq surge. Get invested NOW in the 5 ChangeWave NewTech stars of the Nasdaq comeback. Discover them all in this FREE special report: "Profiting NOW from the 2001-2002 Tech Comeback." Access your FREE copy right now at: http://www.netstocks.com/passthrough.asp?id=568 --------------------------------------------------------------- 1. General Sentiment I took a week off from some R&R with family and attempted to spend as much time as possible away from the PC and the CNBC tape. It doesn't always work out that as planned. The tech and Internet sectors suffered two down days at the start of a holiday-shortened week and then recovered a little in the following two days. Near-term conclusion: Although volume was light, the two-day rebound, plus the up day this past Monday, indicated that traders/investors appeared relatively optimistic as the market heads into what is historically a slow period for business for technology companies. The damage from the first two sessions, however, couldn't be overcome in the final two days. The major averages gave up some ground in the four-day period with the Nasdaq Composite Index off 4.5%, the Dow 30, off a slight 0.4%, while the S&P 500 slipped 1.33%. Soothing words over the weekend from Federal Reserve Chairman Alan Greenspan about inflation not being a particular and some curious comments about oil prices helped the markets extend their advance for a third straight session. One remark Greenspan made was particularly interesting: The past three recessions (73-74, 81-82, 90-91) have been preceded by a spike in crude oil prices. The Fed chief, however, didn't discuss at length the impact of an inverted yield curve. From a historical perspective, an inverted yield curve - or a condition when short-term interest rates are higher than long-term interest rates- has served as a reliable tool used by economists to forecast a recession. Readers who are unfamiliar with the term "inverted yield curve" can access the Google.com search engine for an explanation. It's well worth the time. In addition, by gaining an understanding of how the yield curve affects stock prices, an investor can avoid a major downturn in the value of his or her portfolio. 2. Weekly Model Portfolio Results As was noted, last week's decline in tech and Internet stocks affected all 15 stocks in the Ones to Watch Model Portfolio - they all finished lower. Xilinix (XLNX) - 8.1% Broadcom (BRMC) - 14.2% Commerce One (CMRC) - 18.8% Nokia (NOK) - 9.1% Corning Corp. (GLW) - 10.5% CIENA Corp. (CIEN) - 8.2% Finisar Corp. (FNSR) - 18.8% Emulex Corp. (EMLX) - 13.7% EMC Corp. (EMC) - 15.2% Juniper Networks (JNPR) - 18% Sun Microsystems (SUNW) - 18.8% AOL Time-Warner (AOL) - 0.15% Check Point Software (CHKP) - 10% Efunds (EFDS) - 7.5% Comverse Technology (CMVT) - 5.48% ------------------------------------------------------------------------ Get 10 FREE issues of Investor's Business Daily with nothing to cancel http://www.netstocks.com/partners.asp?id=560 ------------------------------------------------------------------------ 3. In the News Notice how AOL Time-Warner hardly budged from the previous Friday, while the other Model Portfolio components declined, on average, roughly 15%. Some is written and discussed about AOL Time-Warner everyday in the financial media that keeping up with the developments can amount to a full-time job. 123jump.com writer Janet Evans Arnold provided a recent synopsis concerning AOL Time-Warner's showdown with Microsoft Corp. (MSFT). Here's the report: http://www.123jump.com/story.htm?story_id=11758 My take on the situation: Like any big company, AOL Time-Warner plays hardball with the smaller players in its space, while going head-to-head with its peers, such as Microsoft. In order to keep growing at a reasonable rate at both the top line and bottom line, large companies continually make deals with smaller fish as they seek ways to encroach on each other's established turf. While listening to the post-market commentary on CNBC concerning the AOL-Microsoft browser squabble, I found one remark interesting: It's not so much a battle for market share as it is more a battle for "mind share." In other words, the slogan, "AOL Anywhere" means exactly that in describing the Internet service provider's mission. As for Microsoft, it seems the world's largest software company's mission is to have its software products installed in any device run by electricity. Meanwhile, Sun Microsystems continually pushes its Java programming language as the standard for communication devices, which, in essence, is a PC's main function now. Hardly a day goes without Sun publishing a press release touting its latest deal with a vendor that agrees to implement Java as a programming tool. In some respects, this is a "tell" about how hard Sun and other software applications companies are pushing to remain competitive against Microsoft. The outcome? Apple Computer (AAPL) is probably the best example of what will eventually occur in the programming language/pervasive computing arena. In many respects, although Apple makes PCs and laptops, it's a product unto itself with its own way of doing things that sometimes comes in conflict with the rest of the computing world. In other words, the world will have to tolerate several different computing standards the same way it has to tolerate the fact that not everyone speaks a universal language. When it comes product preferences, some folks drive Renaults, others drive Fords and then there's another group that prefers Chevrolets. It will probably always be this way despite attempts by men like Bill Gates or Scott McNealy or Steve Case to manipulate people into thinking about computers and/or the Internet in only one way - their way. Although semiconductor companies - both producers and equipment makers - continue to warn that the industry is facing more problems, Xilinix said that its financial outlook for the fourth quarter remains unchanged. That's the good news. The bad news is that revenues for the June quarter will still show a decline of 15% to 25% sequentially. Overall, Xilinx is saying its business is nearing a bottom is what is a highly cyclical industry. Nokia continues to capture market share from its rivals in the cellphone market. According to research firm Gartner Dataquest, Nokia has increased its world market share to 35.3% from 33.9% in the fourth quarter. Nokia is also working behind the scenes to establish a wireless infrastructure for 3G mobile phones. But so are its rivals. Here again, we have a condition in which a large company does things its way. Check Point Software, the leader in firewall protection software, took a 10% hit Monday after some obscure research outfit called Off The Record Research last Friday claimed that Check Point was facing a significant sequential slowing in revenue to price competition from rivals. Interesting how a report shows up after the bell on a Friday from an independent research firm and gets blown up all out of proportion. But that's the stock market. Comverse Technology reported first-quarter financial results Monday of 43 cents a share that was a penny better than the Street estimate. The stock traded higher in extended hours, but not by an appreciable amount. The Street's reaction was interesting to observe, considering the fact that Comverse Tech, the leader in voice-messaging services, beat the consensus estimate while setting a new record for year-over-year growth in revenues and earnings 35% that were in line with its five-year growth rate. 4. Technical Analysis Although it may be considered as a consolation prize in the same way a contestant in a beauty contest wins the "Miss Congeniality" award, all 15 stocks in the Model Portfolio finished the week ending June 1 above their 52-week lows. Most of the lows occurred between April 3-6 when the Nasdaq marketplace hit absolute (we hope) bottom. AOL Time-Warner remains above its 200-day moving average, a good technical sign, but the other components have slipped a little in the past 2 weeks. 5. Changes to the Model Portfolio While surfing the Net for financial tid bits, I came across this heading: "Oracle goes after Ariba, Commerce One with new software." I've already dropped B2B software platform provider Ariba (ARBA) from the Model Portfolio and replaced it with Nokia. Web hosting services firm Exodus Communications (EXDS) was dropped in favor or small-cap player Efunds, a recent spin-off from Deluxe Corp. (DLX). Oracle is the world's No. 2 business software maker behind Germany's SAP AG (SAP). Like any corporate giant, it's under pressure to shore up its top line and bottom line during tough times. One strategy large companies employ during difficult times is to enter new markets, which was meat of the story concerning Oracle's thrust into the B2B procurement space supposedly dominated by Ariba and Commerce One (CMRC). The outcome? In the short-term, it means pricing pressure when a new competitor enters the ring. Ariba and Commerce One are already facing hard times since it's become apparent that large businesses are its chief sources of revenue. Implementing this software is expensive for middle-sized and small businesses. Procurement can be still be achieved by such arcane technologies as fax machines and telephones. So it's out with Commerce One, the other major B2B player in this space. Its replacement, believe it or not, is 1-800-Flowers.com (FLWS), an e-retailer that sells - you guessed it - floral arrangements over the Internet. The company is actually a "multi-channel" retailer; it provides access for its flowers and gifts via the Internet, telephone, catalogs and boring bricks & mortar locations. 1-800-Flowers.com does have competition from FTD.com (EFTD). In fact, both companies went public at roughly the same time in September 1999. Both are still trading below their IPO prices and both stocks have similar charts. There are several positions for switching positions: -Low price to sales ratio of 1.45 for the trailing 12 months -Low debt-to-asset ratio of 0.15 -$84 million in cash -Rising sales and falling costs -Rising profit margins -The company expects EBITDA (earnings before interest taxes depreciation and amortization), cash flow in other words, to be positive in the current quarter that ends in July. There are some caveats: -Flower sales is a seasonal business. The company's best quarter is the fourth quarter that ends in April and includes Valentine's Day and Easter. -Company is still burning cash. Profitability is still a conjecture. -It has competition from FTD.com. -The slowdown in the U.S. economy, including worker layoffs, could eventually affect retail sales in the second half of 2001. More pluses, however: -More participation from institutions (mutual funds, pension funds, insurance companies, bank trusts) compared to FTD.com. -More than just flowers. FLWS sells gifts such as foods and gardening equipment after a recent acquisition of catalog company Plow and Hearth. -Despite the fact that insiders own 81% of the outstanding shares, there has been little insider selling in the past 6 months. Means insiders are patient with the company. -Good chart pattern. The 50-day simple moving average line crossed the 200-day moving average line. -What's interesting to observe is when the moving average lines crossed (a technically bullish indicator) it was in mid-February. The was the exact time when the Nasdaq Composite Index and the Nasdaq 100 Index both went into a precipitous tailspin that eventually exhausted itself on April 3-4. A diversified portfolio can be diversified in several ways. One way is a concentration in large-cap stocks that cover several industry groups. Another way is to divide the capital into large-cap, mid-cap and small-cap holdings. Wall Street at the present time is showing little interest in large-cap stocks. I've outlined a few of reasons in this newsletter. But all of the money hasn't taken flight to the safety of bonds in the past few months. A considerable portion has drifted toward small-cap stocks. Let the trend be your friend. 6. Comments Welcomed A resident of Wilmington, NC, Dave Jennings writes the Market Highlights report for 123jump.com. He can be reached at djennings@ec.rr.com. --------------------------------------------------------------- Advertise With Us: For more information about advertising in our email newsletters please visit: http://ns.123jump.com/contact.htm Helpdesk: To unsubscribe or update your settings please visit our online help desk: http://ns.123jump.com/help.htm --------------------------------------------------------------- INTERNET STOCK NEWS (ISN) ? 2001 Read our disclaimer: http://www.netstocks.com/aboutus/disclaimer.asp --- You are currently subscribed to isnweekly as: alewis@enron.com To unsubscribe send a blank email to leave-isnweekly-60870D@newsletter.netstocks.com
|