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The Internet Financial Connection September 10, 1998 Presented by Mark Johnson, Editor of the IFC techstocks.com It appears exclusively on Silicon Investor techstocks.com -------------------------------------------------------------- To Subscribe to this Newsletter: Send an email to <mailto:ifc-request@mLists.net> with "subscribe" in the message body. Please tell a friend about this newsletter :) -------------------------------------------------------------- This newsletter can be viewed at techstocks.com In This Issue: 1. Technology Stocks Remain Undecided in Their Direction 2. Louis Navellier on the Market & Stocks 3. Universal Electronics Inc. & Colorado MEDtech Inc. 4. Forest Laboratories & Kansas City Southern 5. Interesting Articles On The Internet by Joe Dancy 6. Highlights on SI: by Tom Taulli 7. Need help choosing an online broker? Trading Center by David Z 8. Disclaimer ---------------------------------------------------------- 1. techstocks.com Last Friday evening, Federal Reserve chairman Alan Greenspan signaled that the central bank may cut interest rates to offset the drag from economic turmoil in Asia and Russia. The market followed through with their own "exuberance" with the DJIA rising 380 points, the NASDAQ Composite gained more than 90 points and the Morgan Stanley HI Tech Index (An index of 35 High Tech Stocks) was up about 40 points, or an increase of 8%. The very next day after the rally, the DJIA dropped 155 points, the NASDAQ Composite fell 36 points and the Morgan Stanley high tech Index went 15 points, all on worries about President Clinton being impeached because his affair with ex mistress Monica Lewinsky. Since the recent correction in the overall market, nothing has really changed. The stock market corrected during one of the slowest trading times through the year and when orders came in to sell, there were very little buyers to hold the market up. In this weeks newsletter, Louis Navellier notes, when there is a large volume reversal in the stock market, lows are retested rarely. If that is true, investors may take a sigh of relief because the market was over done on the sell side. Investors need to measure their investments with a speedometer that measures in miles and not in feet. For example, the distance you may drive back and forth to work, would you measure that distance with a ruler or by your speedometer? Hopefully you answered "with my speedometer." The same principal must be done with investments. Measuring day to day fluctuations against performance will produce much strain. Last Friday, the USA Today noted that August was the worst month for stock mutual funds since the stock market crash in 1987. According to that data, the average stock mutual fund lost a whopping 16.5% in August. In October 1987, the average fund fell 22% during that fateful month. From July 16, (the day before most stock indexes peaked) through August 31, the average mutual fund was down a staggering 22% from their highs according to the article. The talk among many technology analysts and experts in the technology field is that PC sales have and will continue to be strong, despite fears of slowing PC growth. Circuit City recently announced that total sales for the month of August rose 21% when compared to total sales in August of 1997. There was strong demand across a broad range of categories which included PC's. The volatility in the technology area will continue as the technology indexes begin to rebound from their lows. If investors wish to sell some of their technology holdings, it may be best to do so when there is strength in that sector. If you wish to buy, do so on market weakness because there will be plenty of ups and downs in the current market environment. Keeping a cool head is your best investment. It may be a smart idea to keep away from the frenzy because you might be selling when in fact you should be buying. Sometimes it is difficult to do but, the smartest investors invest for longer term profits and do not worry about short-term market corrections. The stock market will continue with its volatility. Mark Johnson Editor IFC ----------------------------------------------------------------- 2. techstocks.com Louis Navellier, manager of Large Cap Growth Fund navellier.com, provides the following stocks. Below is the write up. Longtime stock expert and market pro Louis Navellier notes that the last 3 trading days in August were very devastating but were more mechanically related than anything else. Other factors such as the Russian Crisis "is no where near as serious as the Asian Crisis was." Louis believes that the stock market (as a whole) hit bottom last week. "There was a record volume reversal we had on Tuesday (September 2nd), which was very encouraging," says Louis,"Over 1 billion shares traded on the NASDAQ and on the NYSE... When there is a large volume reversal, rarely do we retest the lows." He thinks the rally could persist for a few weeks but feels it could slow down as investors focus on the upcoming earnings season. One of Louis's stellar performing funds year to date is his Large Cap Growth Fund, which survived the recent market turmoil and is up 20%+ this year. Click here for more information on his mutual funds. One key element in the stocks that he has been selecting is that they are experiencing profit margin expansions. He points out that the strength of the U.S. economy is in consumer spending "and you have to look where consumers are spending their money. A good example of this is Best Buy (BBY 49)." They are a retail seller of computers, TV's, VCR's, software, and appliances. The majority of what they sell comes from Southeast Asia, Japan and Korea. The cost of their goods has plummeted during the last year because of the Asian Crisis and a strong U.S. Dollar. "Sales are going up and operating margins are expanding... It is a tremendous stock," says Louis. Another stock he likes and that is profiting from the Asian crisis is Wal-Mart Stores (WMT 61). "They sell a lot of goods from Asia that have plummeted in price." Other areas in the economy where consumers are spending money is in the refinancing of homes because of record low interest rates. Mortgage lenders require their borrowers to obtain a title insurance policy at the time a mortgage loan is made or to allow the sale of loans in the secondary market. Two companies that Louis likes and that are also benefiting from this are Fidelity National Financial (FNF 31 1/2) and Stewart Information (STC 52 7/8). A few other companies that he likes and has been buying are; Arterial Vascular (AVEI 42 1/2) and Dendrite International (DRTE 21 7/8). There are threads that discuss BBY and WMT on SI. Subject 8412 Subject 14954 ------------------------------------------------------------------ 3. techstocks.com Byam Stevens of HG Wellington & Co provides the following stock ideas on Universal Electronics Inc. (UEIC 10 1/8) and Colorado MEDtech Inc. (CMED 6 3/4). Below is the write up. On August 12th of this year, Universal Electronics Inc., announced that it has signed an agreement to become General Instrument's exclusive supplier for all universal peripherals, including remote controls. Universal Electronics develops, manufactures and markets preprogrammed, easy-to-use universal remote controls primarily for home video and audio entertainment equipment. "The agreement Universal Electronics received may guarantee a 50% growth rate for them over the next three years," says Byam Stevens of HG Wellington & Co.. Next April, General Instruments will begin to ship new digital cable boxes and Universal Electronics will be a significant supplier of the mini-keyboards used to control the new cable boxes. Byam notes that there are about 50 million cable boxes in the U.S. waiting to be upgraded from analog to digital. General Instruments will supply 15 million new cable boxes to Tele- Communications Inc. over the next few years and Universal will supply many of the remote controls for those boxes. Byam figures Universal will earn $0.93 this year, $1.30 in 1999 and possibly $2 in 2000. He thinks their stock will hit $30 once their earnings are realized by Wall Street. Another stock Byam favors is Colorado MEDtech Inc. They perform outsourcing services for the medical device market, from initial market research to production. One of their current products will test for food contamination using DNA technology, which will give an instantaneous result. Using a similar method, blood can also be tested using the same DNA method for blood banks. Blood can be tested for various diseases such as AIDS or TB. Byam believes that they can grow at a 50% rate over the next few years and estimates they will earn $0.50 this year and $0.75 to $0.80 next year. When that happens, he thinks their stock can hit $15 per share within the next 18 months. There is a thread that discusses CMED on SI. Subject 13811 --------------------------------------------------------------------- 4. techstocks.com Christy Wood of the Westcore Small Cap Opportunity Fund 800-392-2673, provides the following stock idea on Forest Laboratories (FRX 39 3/8) and Kansas City Southern (KSU 32 7/8). Below is the write up. Forest Laboratories develops, manufactures and sells prescription and non-prescription drugs. On July 20th, Forest received FDA approval for one of drugs which is called Celexa. It is used in the treatment of depression. That drug will compete with other antidepressant drugs such as Prozac, Paxol, and Zolof. Christy Wood of the Westcore Small Cap Opportunity Fund, estimates that Celexa will have a 10% market share over the next couple of years. She notes that the market in which Celexa will compete in is about a $4 billion market. "That will have a huge impact on Forest," says Christy, "This will be the main driver for the company over the next couple of years." Another plus for Celexa is that it has less side effects than it's rival drug Prozac. Another kicker for Forest is that Warner-Lambert will promote Celexa. "This increases our confidence that Celexa will go well," says Christy. She estimates Forest will earn $1.70 for calendar year 1999 with their stock hitting $50 within that same period of time. Another stock idea Christy finds favorable is Kansas City Southern. They primarily operate a railroad and a money asset management division which includes the Janus & Berger mutual funds. Total assets under management are close to $100 billion. Like most financial stocks, Kansas's stock has been retreating from a high of $57 in mid July to $33 currently. Christy points out that both Janus and Berger funds have been increasing their market share, when at the same time, the majority of their funds are beating peer funds, when comparing relative performance. Kansas plans to spin off the Janus and Berger funds to shareholders. Christy thinks that their stock will come back strongly and figures that the sum of all of the businesses put together are worth around $55 to $60 per share. Kansas was recently upgraded by Merrill Lynch. ----------------------------------------------------------------- 5. techstocks.com Joe Dancy of The Lone Star Growth Investor members.aol.com 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. members.aol.com INTERNET AND INTERNET COMMERCE Independent firms' global fiber optic networks could cut prices washingtonpost.com The hot, new buzzword amongst the Internet stock trading crowd is the "portal." What exactly is a portal and what are the potential rewards from this cyber experiment? bizfn.com The market potential of Internet companies has yet to be quantified, so investors continue to believe the upside story of incredible potential chicagotribune.com Investors still playing net roulette with fragile online stocks sfgate.com ECONOMIC Global deflationary pressures adding to stock market turmoil washingtonpost.com Why the fed can't just go out and cut rates nypostonline.com Some worry about recession as the global crises dredge up fears, but fundamentals are in better shape than previous downturns detnews.com What brought the bears back? washingtonpost.com The Federal Reserve is under new pressure to lower U.S. interest rates now that foreign financial troubles are starting to spook Wall Street. globe.com Asia is losing confidence in the free-market medicine the IMF and the United States have advised for the ailing global economy. mercurycenter.com MARKETS & INVESTING James Grinney, Senior Vice President and Chief Investment Officer of Northern Trust of Florida discusses their outlook for the market and the economy. bizfn.com But it is almost always a mistake to sell in a panic. In fact, it is almost always a mistake to sell washingtonpost.com There is hope for those in the stock market. The worst might already have occurred. globe.com. shtml Confusion may actually be good now for small investors as they avoid making rash decisions mercurycenter.com It wasn't quite Black Monday, but the last day of August 1998 may go down in stock trading annals as the day the Internet bubble burst. herald.com SEMICONDUCTORS The semiconductor industry has weathered the current industry down cycle far better than many in the past, says Wilf Corrigan, founder and chief executive of LSI Logic Corp. and former CEO of Fairchild Semiconductor Corp. And he expects the industry to rebound explosively next year mercurycenter.com ASIA, JAPAN & RUSSIA The financial contagion that has spread from Asia to Russia is threatening Latin America, the United States' fourth-largest trading partner. mercurycenter.com In a jolting sign of how quickly Japan's economy is deteriorating, Toa Steel Co. said today that it will liquidate, creating the largest failure of a Japanese manufacturer since World War II washingtonpost.com Analysts see economic trouble spots in Asia and Latin America that are more worrisome than a destabilized Russia, which helped trigger the Dow's dizzying drop over the last week. mercurycenter.com Y2K The federal government said Friday it will cost at least $5.4 billion to fix its most important computers to overcome the Year 2000 problem, about $400 million more than previously estimated. globe.com ----------------------------------------------------------------------- 6. The Taulli Report, Voices of SI: by Tom Taulli Will Santa be good to The Learning Company? stocksite.com Investors mostly upbeat about Lucent stocksite.com Investors look for silver lining in market cloud stocksite.com ---------------------------------------------------------------------- 7. Need help choosing an online broker? Trading Center by David Z siliconinvestor.com ---------------------------------------------------------------------- 8. techstocks.com DISCLAIMER: All information contained on this page are from the authors cited. The information is believed to be reliable but there is no guarantee to its accuracy. Stock ideas presented by mutual fund managers, money managers, newsletter writers and SI participants may be bought or sold by them anytime before or after being presented in this newsletter. Anyone purchasing the stock ideas above should consult a financial advisor before doing so. The stock ideas mentioned above are not solicitations to buy or sell but to provide people with information from many sources. I (Mark Johnson editor of the IFC) am not paid any fees by the above writers nor by the companies represented. The stock ideas may represent a starting point for investors. People are encouraged to do their own homework before buying any stock. Neither Silicon Investor or the Internet Financial Connection will be responsible for any loss occurring from the purchase or sale of the above securities or any securities. ========================================================================= To Subscribe: Send an email to <mailto:ifc-request@mLists.net> with "subscribe" in the message body. Please tell a friend about this newsletter :) Shop the best prices on the Web! | ||||||||||||
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