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Technology Stocks SEPR MMGR GLC FONR Interesting NetArtcls
An SI Board Since August 1998
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Emcee:  Mark Johnson Type:  Unmoderated
The Internet Financial Connection August 13, 1998

Presented by Mark Johnson Editor of the IFC


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In This Issue:

1. The Decline in Tech Stocks Creates
a Buying Opportunity! by Mark Johnson Editor IFC
2. Sepracor
3. Medical Manager
4. Galileo International
5. Interesting Articles On The Internet by Joe Dancy
6. Highlights on SI: MRI Technology meets Wall Street
7. Highlights on SI: by Tom Taulli
8. SI Discussion Boards: Media Perception is Changing
by Dave Zgodzinski
9. Disclaimer


The Decline in Tech Stocks Creates
a Buying Opportunity! by Mark Johnson Editor IFC

What a market! Anyone who is heavily
invested and has been following stocks on an
hourly basis during the days when the stock
market is open, may need a bottle of TUM's
at their side. The Asian Crisis, economic
worries, and overvaluation concerns for the
stock market have been major reasons why
stocks have not done very well.

The smaller stocks in this stock market are
the ones getting hammered. Many investors
that have invested in them, keep shaking their
heads in despair because of their
performance. Larger cap stocks have been
the ones least affected by the recent market
action. The Wall Street Journal had a
wonderful article on July 30, on page C1,
(you can also read the article online but you
must be a paying subscriber) about the
performance of the overall stock market. The
article suggests that in a universe of around
8,000 stocks, about 5,400 of those stocks
(or stocks that have an average market
capitalization of less than $250 million) ARE
THEIR HIGHS! The stocks that were least
affected were the larger cap stocks. Stocks
that had a market cap in excess of $20 billion
were only down about 12% from their highs.
In the middle of the group, stocks that had a
market cap of between $2 and $5 billion,
were down an average of 20% from their
highs. On July 30, the average stock on the
New York Stock Exchange was down 24%.

The major market averages are down from
their highs but do not reflect the data or the
overall action of stocks as the data above
suggests. This is not rocket science, but the
majority of stocks have been in a traditional
bear market.

Information has also been a factor for the
recent declines in the overall market. If a bad
piece of news was to appear in the financial
media today, that information would be
digested, analyzed and factored into the
market almost instantaneously. Twenty years
ago, it would have taken the markets a month
or 2 to interpret it and act upon it.

In 1997, an average of $17 billion flowed into
equity mutual funds every month. Through
June of this year, it is estimated that about
$21 billion was flowing into those mutual
funds each month. It is also estimated that
over 50%+ of that money flowing into those
mutual funds is contributed by individuals
utilizing company sponsored 401(k) and other
qualified retirement plans. Money will
continue to pour into the market from these
retirement plans, regardless of the global
economic crisis. This will help fuel the stock
market indexes to new highs by year end.
Technology stocks have been under pressure
along with the rest of the market. The
Morgan Stanley HI Tech Index (An index
of 35 High Tech Stocks), hit a high of 670 in
mid July and recently hit a low of 560, which
is a 15% correction off of its highs. That index
has rebounded back up to 600 level. The
NASDAQ Composite, which hit a high of
2228 and touched a low of around 1770 last
week has moved up to 1825.

The key technology Bellwethers such as
Microsoft, Intel, Cisco and Dell, have not
seen drastic declines. Intel has held their
ground very well. They are the laggard of
technology Bellwethers but as I have been
suggesting for a few months now, I expect
their shares to make a high by year end. As
for technology stocks in general, now is as
good of a time as any to buy them. We are by
no means out of the woods. The sector will
continue to be volatile because of the Asian
Crisis (AKA "Asian Herpes" because their
problems just won't go away). New lows
could be made before making new highs.
Right now there is a lot of fear in the market.
Technology stocks have done alright up until
their recent decline (the stocks in the indexes
that is). Buying when the market is unstable or
in doubt is the best time buy! There is a lot of
cash on the sidelines waiting for somewhere
to go. We will continue to see volatile markets
and it is a traders market right now. When the
advance comes again for the technology
stocks, the money will come rushing in and
the momentum players will push them higher.
It is always good to be VERY cautious when
purchasing technology stocks. Saving money
for a rainy day and buying on steep declines
(such as the one we just had) is good to do.

While the market was correcting last week,
the Internet stocks seemed to hold their
ground. Many of them had already been
corrected but while the overall market was
declining, some Internet stocks were going
up. The Internet stocks will continue to be
very volatile along with the technology stocks.

As the Internet changes the way may
consumers work, communicate and purchase
goods, it is here to stay! The fastest growing
sector going forward will be the Internet.
Many Internet stocks have been pushed up to
absurd levels because people realize the
Internet is the future. The largest gains for
individual stocks will be in the Internet related
area over the next several years.

Steve Harmon of the Internet Stock
Report, expects
"heavy roller coaster action" over the next few
months in the market. He notes that it will be
commonplace for tens of millions of people to
buy a gift over the web this Christmas. "If you
think last Christmas was e-tail heaven, this
Christmas could be huge," he said in a recent
report. The companies he feels will benefit this
e-Christmas are AOL, Yahoo!, Amazon,
Excite, Lycos, CDnow, ONSALE, and Cyberian Outpost

Mark Johnson Editor IFC



Scott Schuppie of Grace Equity
Management and David Saks of Gruntal &
Co., provide the following stock idea on
Sepracor (SEPR 58). Below is the write up.

Sepracor is not your typical drug making
company. They will take drugs that have
already been approved for the market and
improve them. Most drugs have two
isomers. One of the isomers carry the effect
that the drug is trying to accomplish and the
other isomer can sometimes carry a bad side
effect in the human body. "Sepracor will
avoid the major startup costs and pick up the
research at pennies on the dollar that other
drug companies have done," says Scott
Schuppie of Grace Equity Management
(whose firm returned 39% in 1997), "They
essentially build a better mousetrap."

Sepracor will basically strip off the bad
isomer and leave on the good isomer. This
changes the compound enough so that a new
patent for the formulation may be obtained.
They have over 20 patents that have been
granted for method of use and 50 other
pending patents. In late 1996, they took
Seldane, stripped off the bad isomers and
came up with Allegra. At the end of 1997, a
deal was struck with Schering-Plough to
reformulate a version of the world's top selling
allergy treatment, Claritin. Sepracor has
received a patent for R-fluoxetine, an
improved version of Eli Lilly's top selling
antidepressant Prozac.

On July 21st, Sepracor announced a
significant licensing agreement with Janssen
Pharmaceutica, a wholly owned subsidiary
of Johnson & Johnson, to develop a new
version of Propulsid. Propulsid had
worldwide sales in 1997 of over $1 billion
and it is estimated that Sepracor's version
could take that drug to over $2 billion in
annual sales. Sepracor recently received an
approval letter from the FDA for their version
of Glaxo's Albuterol called Levalbuterol.
Scott notes that Sepracor's pipeline of
products is full and their future looks bright
because they have agreements with many top
drug makers.

David Saks of Gruntal & Co also believes
that Sepracor will continue to build more
product opportunity relationships with drug
companies. He estimates that they should
have initial profits in 2000 with breakout
earnings of $5.30 in 2001. His one year price
target is $81 per share.

There are threads that discuss SEPR here on SI.
Subject 7382


Patrick Dalton of J.W. Burns & Company
provides the following stock idea on Medical
Manager (MMGR 23). Below is the write up.

Medical Manager provides physician
practice management software for physician
groups. This software helps with certain
aspects of the business such as billing,
scheduling and accounting. There has been a
trend in the industry for physicians to
consolidate their practices and move into
groups of physicians. Medical Manager will
directly benefit from this trend. They have
about a 25% share of the market.

When someone files a lawsuit against a
company, it can sometimes have a drastic
effect on their shares. This is what happened
with Medical Manager. On August 5th of
this year, a class action lawsuit was filed
against Medical Manager. Their shares
immediately sank from $26 down to $20 on
the news. According to the complaint, they
sold licenses for non-Year 2000 compliant
software programs that would not be
functionally operable after December 31,
1999. Their latest software version, Medical
Manager Version 9.0 was released in
November 1997 and is Year 2000 compliant.
Previous versions of their software were not
Year 2000 compliant. Medical Manager in a
statement said, "This lawsuit is without merit
and we intend to vigorously defend against the

One person who is still very bullish on
Medical Manager is Patrick Dalton of J.W.
Burns & Company. He does not see the
lawsuit as a big issue for the company.
"Apparently some physicians who recently
purchased the software are unhappy about
the fact that they are required to pay for an
upgrade in order to become year 2000
compliant." He argues, "At what point can
people say they should no longer have to pay
for an upgrade? Clearly physicians who
purchased version 8.0 when it was originally
released can't make that claim. Version 9.0
also offers many product features other than
begin year 2000 compliant." Regardless of the
outcome of the case, Pat is still very
comfortable about the outlook for the
company. He points to the release of their
electronic data interchange (EDI) services.

Currently, most physicians file medical claims
to insurance companies manually. Medical
Manager has implemented an EDI in their
software. EDI allows physicians to save both
time and money because claims can be filed
electronically using this system. Pat mentions
that the market for software upgrades to the
EDI platform will generate substantial
revenues going forward.

Pat has been purchasing the shares of
Medical Manager during the current
weakness of their stock. He views it as a
tremendous buying opportunity and believes
they can grow earnings at 30% annually over
the next 3 years. Medical Manager is
expected to earn $0.75 this year and $1.00 in
1999. His target is the mid 30's within the
next 12 months.

There is a thread that discusses MMGR on SI.
Subject 14427


Eric McKissack of Ariel Capital
Management provides the following stock
ideas on Galileo International (GLC 37
1/2). Below is the write up.

Galileo International is a leading provider of
electronic global distribution services for the
travel industry, utilizing a computerized
reservation system, primarily plane tickets for
airlines. Their services include the ability to
access schedule and fare information, book
reservations and issue tickets.

Eric McKissack of Ariel Capital
Management finds the shares of Galileo
very attractive. He particularly likes Galileo
because, "they are a very profitable company
that throws off a lot of free cash flow and is a
leader in their field." Their competitors
include, SABRE Group Holdings,
Amadeus and Worldspan. Galileo and
SABRE are the primary competitors in this
industry and both have a very high market share.

Questions have been raised about the
bookings of reservations over the Internet and
the effect that would have with Galileo. Eric
modestly points out that even when flight
reservations are made over the Internet, a
computerized reservation system must be
used (unless the customer books directly with
the airline) in order to provide flight and
scheduling information. Galileo has
developed relationships with many of the
emerging players in the Internet area. "There
are high barriers to enter and develop a
computerized reservation system... Galileo
has developed an intricate computer
reservation system has created and the key
relationships that they have with the airline
carriers," says Eric. United Air Lines and
KLM own 32% and 10% (respectively) of

He estimates Galileo will earn $1.85 in 1998
and $2.14 in 1999. Eric views the recent
pullback in their stock as a very attractive
entry point. He thinks their shares can hit the
high 40's sometime over the next year and the
low 60's looking out longer term.



Joe Dancy of The Lone Star Growth Investor
provides the following links to Interesting
Articles On The Internet. These articles were
from a daily worldwide search of over 150
newspapers and magazines. Subscriptions to his
newsletter are FREE.


Internet day trading allows individuals to stay
home, plug in, and play the market.

Knowing when to get out of a position is the
key to turning a quick profit for day traders.

Saboteurs plant fake documents on the web to
manipulate stocks


Impeachment hearings would be a horrible turn
of events for both the stock and bond markets
according to some. But even worse for investors
could be the opportunistic moves that foreign
governments, like Iraq, might make if the current
political scandal accelerates.

If the economy is indeed weakening, what should
a small investor do?

With jitters in the stock market and suspense
building over the investigation into the Monica
Lewinsky case, memories are stirring on Wall Street
of the bad old days of Watergate.

The prices of many individual small-cap stocks
appear irresistible.

Three views from the stock market's crystal ball

As the Dow Jones industrial average soared to
record highs throughout most of the first half
of the year, investors understandably forgot the
sharp downturn stocks suffered in October. For
active investors, buying on dips was a smart
strategy then. But is it smart now?


The Japanese yen and other Asian currencies
weakened amid worsening economic news from China
and Hong Kong and growing skepticism over Japan's
efforts to stimulate its economy.

Japanese voters and stock markets have set low
expectations for new Prime Minister Keizo Obuchi.
And in his maiden speech before parliament he proved
unable to surpass them.

In fact, many Americans have only begun to feel
its effects and Asia's governments, the International
Monetary Fund and the Clinton administration are
still struggling to find a cure for the region's
economic ills. Until Asian economy recovers, U.S.
market may be woozy


Talk about a morality tale turned upside down:
Free-spending Americans are the economic envy of
the world, while the Japanese, those industrious
savers, are swamped by economic troubles

Figures released by the Commerce Department show
that, during June, U.S. consumers shelled out more
money than ever for cars, household appliances and
a host of other goods and services -- and personal
consumption accounts for two-thirds of the U.S. economy.

Seven weeks after the United States and Japan
launched a surprise rescue of the yen, the Japanese
currency yesterday fell close to its eight-year low,
reflecting growing doubts among investors about Tokyo's
ability to overcome its economic woes.

While the economy is in good shape, the recent stock
market correction has analysts talking about the big
"R" word: recession.


Global chip sales hit US$9.84 billion
(S$17.1 billion) in June, down 2.2 percent from
May and 14.1 per cent from June last year as the
industry continued to suffer from the Asian crisis.

Despite a continued glut of memory devices on the
global market, the Semiconductor Industry Association
is maintaining its growth predictions for the chip
industry as a whole.



James L. Fleckenstein is an active participant
on the Fonar - Where is it going in '98? thread
here on SI. James provides the following
commentary on Fonar (FONR 1 3/4). Below is his
write up.

MRI Technology meets Wall Street
By James L. Fleckenstein, M.D.

"Wobbling spins are the basis of the most
advanced medical imaging tools available for
patients today: magnetic resonance imaging (MRI).
From a quality viewpoint, MRI generally
outperforms all other diagnostic imaging
techniques. It is also among the most expensive
and frequently employed tests in medicine. As
we all know, where there is money being spent,
there is money to be made. Assigning value to
evolving medical devices, however, can make even
a savvy investor dizzy.

MRI = More Radiological Income

In an era of falling medical reimbursements, is
investing in Radiology a smart place for smart
money? In which company should one invest that
can best capitalize on the increasing reliance
of doctors on diagnostic imaging tests? Those that
are the bluest of the blue chip MRI companies, right?

I have no idea. I am simply a radiologist who
spends his day amongst the spinning protons that
make up images of patients' brains and spines.
So it was with trepidation that I accepted the
offer of the Silicon Investor (SI) Newsletter to
write an article about FONAR. But the story of
FONAR is an interesting one to tell because it is
rife with archetypes and allegory and images of
mice and science giants. It also tinkers with the
ages-old question of how to build a better
mousetrap. At the risk of clashing metaphors, this
is in part a re-telling of David and
Goliath and of the Phoenix arising amid the ashes.
That bird roosts in Melville, New York, and if you
listen very carefully, you can hear the wings
rustling under the cover a huge new manufacturing
facility, gearing up to catch the worm and Wall
street by surprise. At least that's the plan....

The origins of MRI and FONAR

This is no regular company. It was founded and is
still reined by a physician, Raymond Damadian,
M.D., a man whose impressive accomplishments
include participating in the think-tank that wielded
from that branch of physics known as nuclear magnetic
resonance the immensely powerful medical imaging
technique, MRI. For his early MR work studying cancer
in mice, Dr. Damadian was a recipient of the National
Medal of Technology from President Reagan, an honor
he shared with Dr. Paul Lauterbur. FONAR Press
Releases state that ADr. Damadian's pioneer patent
in cancer detection is the world's first patent in
MRI. Today there are over 700 patents at the U.S.
Patent Office regarding MRIs - all filed behind Dr.
Damadian's "Pioneer Patent." In fairness, the validity
of the priority of this claim has been contested,
sometimes bitterly. Those battles smack more of
Napoleonic warring than investor issues. Recent
SI posts from knowledgeable, but diametrically opposed
historians of these issues are available:
Message 5371034
Message 5435594

A minor sticking point is image: This issue begins
with the fact that AFONAR is named after an antiquated
technique that no company ever uses. However, AField
fOcussed Nuclear mAgnetic Resonance was a technique
used to make the earliest MRIs of the human body.
Now FONAR, like all MRI vendors, uses MRI gradient
technology to make MRI pictures. This technology was
the product of non-Fonarian' work; credit is
usually given to Dr. Damadian's archrival, Dr. Paul
Lauterbur. The issue of who gets credit for what is
at the heart of this story because scientific issues
and egoistic forays notwithstanding, the US judicial
system has staunchly supported FONAR's claims of
priority and this has revitalized FONAR, particularly
in the last year.

General Electric (GE) gets FONAR-ed

When I finally got my medical school bills paid off,
and I had a few dollars left over, I thought I would
make a little money by investing in MRI. To do this,
I guessed, I should just buy stock in General Electric
(GE), since for a long time GE more or less owned the
MRI marketplace (when I was shopping for MRIs in
1993, a bragging GE salesman informed me that GE just
sold their 1000th MRI device). Somebody pointed out
that the MRI portion of GE represents a zillionth of
the overall revenue of the company and no matter how
well MRIs sold for GE, activity of MRI sales would
never have a direct bearing on the GE stock price. I
figure the same must be true for the other biggies in
the industry, Siemens, Toshiba, Philips, and Hitachi.
I wondered, then how does one place a bet on MRI
technology? Where is there a pure MRI play? The answer
to that question came from investigating the company
that claims to have invented MRI: FONAR. In 1995, when
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