![]() |
![]() | ![]() |
We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level. |
![]()
The Internet Financial Connection September 17, 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. Value Investing in Tech Stocks with The Prudent Speculator 2. Nick Whitridge of the Babson Value Fund 3. Pepsi 4. Zebra Technologies 5. Interesting Articles On The Internet by Joe Dancy 6. Highlights on SI: Tim Luke's Position Trading Forum 7. Highlights on SI: by Tom Taulli 8. Does a Bear Short in the Woods? by David Z 9. Semiconductor Industry Outlook: Explosive Rebound? 10. Micro-Caps Suffer One of the "Worst Declines In History" - Are They Poised to Recover Longer Term? 11. Disclaimer ---------------------------------------------------------- 1. techstocks.com Al Frank and John Buckingham of The Prudent Speculator provide the following interview. An annual subscription is $175 for 12 issues and you may contact them at 800-258-7786. They provide the following interview with Mark Johnson, Editor of the Internet Financial Connection. Below is the write up. Al Frank and John Buckingham of The Prudent Speculator (TPS), run and publish a top performing newsletter. According to Hulbert Financial Digest, which ranks the performance of financial newsletters, TPS was ranked number 1 for having a 5 year performance returning 34% annually. Hulbert also mentions that their newsletter had an annualized return of 20.3% during their 18 years of operation and is ranked #1 in that time frame. "We operate on the principle of buying undervalued stocks and putting them in a widely diversified portfolio and holding them until they reach fair value, using fundamental analysis such as book value and price to sales ratio," says Al. He will then add a stock to his portfolio that he thinks will appreciate in value and usually holds on to it for an average of 7 years. The company that he selects can be any size and in any industry, just as long as it is undervalued by using fundamental analysis. Both Al and John feel that there are many stocks in the technology sector that offer a lot of value and are very cheap. They point out that the stock prices of many technology stocks have (generally speaking) not been this cheap on a valuation basis since 1990. Al notes that technology stocks are very cyclical in nature. An example of this is computer chip manufacturers. Chips become a commodity and too many fabs are built and over produce. The price of these chips go down below the price of production and some chip producing companies go out of business. Inventory is reduced, then a few years later, there is a new generation of chips and a shortage of chips once again. John points out that it is a phenomenal time to be buying the lessor known technology names. He likes areas such as the disk drive makers, semiconductor capital equipment companies, semiconductor stocks and integrated circuits companies. "All of these are selling at very low valuations compared to where they have been." Business has dried up because of the slowdown in orders caused by the Asian turmoil. He thinks the demand for PC's will be strong going forward. In the semiconductor area, John stresses that the area is very cyclical and notes that we are in a technology driven society and people will not stop buying computers tomorrow. "Semiconductor growth will return and if you can buy semiconductor stocks at very low fundamental valuations, it is a positive thing to do." John specifically likes the disk drive sector because that area offers a lot of value. He notes that the disk drive is not going away and every PC that the major computer manufacturers make has a disk drive in it. Some of the companies he likes in that area are; Seagate Technology (SEG 23 3/4), Quantum Corporation (QNTM 15), Western Digital (WDC 9 7/8) and disk drive component maker Read-Rite (RDRT 7). In the capital equipment area he favors; Applied Materials (AMAT 24), Kulicke & Soffa (KLIC 14) and Lam Research (LRCX 10 1/2) For the semiconductor companies John likes National Semiconductor (NSM 8 3/4). In the integrated circuit area John is high on Trident Microsystems (TRID 2 7/8). They are a graphics chip maker with no long term debt, $3 in cash and have a book value of $8 per share. Another one he likes is ESS Technology (ESST 2 1/8). They make highly integrated mixed signal semiconductors for PC's. They have a book value of $3.5 and no long term debt. John mentions that cyclical industries will eventually come back. "Prices go from extreme highs to extreme lows, we think that as long as the demand remains strong (PC demand), then you can buy stocks at very attractive prices, relative to where they usually trade... We think you can do very well with a long term orientation." Some other stocks he likes in general are ZOOM Telephonics (ZOOM 3 3/8). They make 56k modems, have no debt, have about $2 per share in cash and has a book value of $5 per share. Rouge Industries (ROU 7 7/8) is a steel producer that has no long term debt and has a book value of about $20 per share. Gymboree (GYMB 7 5/8) is a specialty retailer of high quality apparel for children. They are expected to earn around $1.15 next year and trades at 1.2 times book value. John points out that buying stock in companies that are trading at low price to sales ratios, low price to book values and with low PE ratios, historically over the last 75 years have exceeded the returns of the overall market. "We are very excited about the longer term prospects in the companies that we are investing in today". ----------------------------------------------------------------- 2. techstocks.com Nick Whitridge of the Babson Value Fund jbfunds.com, provides the following stock ideas in an interview with Mark Johnson, Editor of the Internet Financial Connection. Below is the write up. "It is a difficult time for value oriented investors because the market is favoring growth stocks," says Nick Whitridge, who manages $1.4 billion in the Babson Value Fund. When the market declined in August, many stock values were created. One stock that did not perform in his fund last year but was a big winner in his fund this year was Apple Computer (AAPL 37 3/8). When this stock was down and out in 1997, this savvy pro stuck by their stock, was accumulating shares and averaged down his position in their company. His fund currently holds 875,000 of Apple and he is still bullish on their company even though it has run up in price. "It is not a cheap stock but we think there is more upside because of the success of iMac and PowerBook G3," says Nick, "The demand for iMac is higher than most people expected... They have reported 3 positive quarters in a row and the outlook for the next quarter is very favorable." Another stock that he likes but has been beaten down in his fund is US Steel Group (X 20 3/4). Asia steel producers have been "dumping" steel but Nick believes that has peaked and should slow down. Other factors such as the General Motors strike have reduced the demand for steel and steel products. Nick notes that most people consider US Steel "a dinosaur" but assures that there will be demand for steel because it will be needed for building structures and automotive parts. He does not see high impact plastics immediately replacing steel parts in automobiles. Even though earnings estimates for US Steel have been cut recently, Nick figures they will earn $3.50 in 1999 while having an 8% growth rate going forward. US Steel also sports a 4.7% dividend yield, which is better than most money market accounts. He feels that earnings are not being valued like they should be and that patient investors that own their stock should be rewarded. In the banking sector, Nick likes Chase Manhattan (CMB 48 1/8). Most banking stocks have been depressed because of the fear of an interest rate cut (which can squeeze profit margins) and exposure to foreign loans. Chase did report some foreign exposure but nothing that is significantly material. Chase is trading at about 12 times trailing earnings and yields around 3%. Another beaten down stock that Nick likes in the healthcare sector is United HealthCare (UNH 38). They are a provider of managed care services, such as health maintenance organizations (HMO's) and preferred provider organizations (PPO's). Nick notes that they are restructuring their Medicare business, which has not been very profitable and and a recent writeoff has caused a significant drop in their stock. He favors their longer term potential with their stock trading at about 13 times earnings which could grow at a 15-18% rate. ------------------------------------------------------------------ 3. techstocks.com Jeff Cornell of the Country Wide Equity Fund (800-438-9060) provides the following stock idea on Pepsi (PEP 31). Below is the write up. Pepsi has declined from a high of $44, which was set back in July of this year to a new 52 week low of $27 a share recently. Jeff Cornell of the Country Wide Equity Fund notes that there has been specific concerns raised by investors and that has helped push down their stock besides market fundamentals. One of those concerns was Pepsi's purchase of Tropicana on August 25, for $3.3 billion. Some investors believe that amount was too much pay for the juice maker, but Jeff thinks otherwise. "This will allow them to put more of their products in distribution internationally... Tropicana has a great international distribution system that Pepsi can leverage off of," says Jeff. Another concern is that there worries about a slow down in Pepsi's snack food division Frito-Lay, which comprises 55% of their revenues. Snack food sales are released on a monthly basis and during the months July and August. Sales were lower than expectations because of slowdowns in production of the new Olestra based WOW! chip product line. Jeff adds, "The demand was there but supply was not because they were ramping up on new products." A national ad campaign was kicked off on Monday to reinforce the response of consumers who have purchased more than 150 million bags of WOW! chips. This aggressive five-week marketing campaign is expected to reach roughly 100 million people. The bottling facilities that Pepsi owns, Jeff notes are very capital intensive, expensive and take up a lot of cash flow. Competitor Coke, has spun-off their bottling facility and it is a separate company. Pepsi has indicated they may be willing to sell or spin off their bottling operations. That would allow them to use the additional capital to further develop their products and distribution systems. As the foreign markets become more unstable, stocks that have more exposure in foreign markets have been more volatile. Pepsi derives about 66% of their revenues domestically, where as Coke only generates 35% of their revenues in the U.S. Pepsi is estimated to earn $1.31 this year and $1.51 in 1999. Jeff has been accumulating shares of their stock during the current weakness in the stock. He thinks their shares could easily hit $40 per share within the next year. There is a thread that discusses PEP on SI. Subject 11887 --------------------------------------------------------------------- 4. techstocks.com Ingrid Hendershot of Hendershot Investments provides the following stock idea. An annual subscription is $45 for 4 issues. You may contact them by phone at (703)-361-6130. Zebra Technologies (ZBRA 28 3/8) is a recent selection from her newsletter. Below is her write up. Zebra Technologies provides bar code solutions, principally to manufacturing and service entities worldwide, for use in automatic identification and data collection systems. The company designs, manufactures, sells and supports a broad line of computerized label printing systems, related specialty supplies and PC-based bar code labels. Applications for the company's systems include inventory control, automated warehousing, just-in-time manufacturing, employee time and attendance records, file management systems, hospital information systems, shop floor control, library systems, prescription labeling and scientific experimentation. Since the company went public in 1991, Zebra Technologies has reported steady, profitable growth. Over the last five years, both sales and net income have raced forward at zippy compound annual rates of 22%. Zebra anticipates that its future growth will be enhanced by two continuing trends: bar code label standardization programs and focus worldwide on improving quality and productivity. Over the last three years, about 45% of sales came from international markets, primarily from the United Kingdom. Sales in the Asia-Pacific region are less than 10% of total revenues. Management believes international sales have the potential to grow faster than domestic sales due to lower penetration of bar code systems outside the United States. In mid-July, Zebra agreed to merge with Eltron, a manufacturer of bar code label and plastic card printers, secure card printing systems, ribbons and self-adhesive labels. The no-dilutive transaction is structured as a pooling-of-interests tax-free merger and is scheduled to close by early October. On a pro-forma basis, the combined company would have generated sales in excess of $313 million in the 12 months ended March 31, 1998 Zebra and Eltron management cited several important strategic benefits resulting from the merger, including the creation of the broadest line of bar code printers in the world, expanded distribution of both companies' product offerings, and opportunities to reduce costs through greater economies of scale. With the largest product development team in the world dedicated to bar code printer products, Zebra expect to more rapidly develop new printer products to serve the expanding needs of its customers. As of June 30, 1998, the combined companies boasted more than $145 million inn cash and virtually no long-term debt. This excellent financial position provides management with a strong competitive advantage. Other substantial competitive advantages include Zebra's dominant market share, broad and diverse channel structure, technically superior products and the strongest brand name in the industry. At the end of last year, Zebra estimated that it had over 290,000 bar code printing systems installed at approximately 30,000 user sites around the world. While Zebra many not be the king of the jungle, the company's profitability measures provide investors with plenty to roar about. Since 1990, high profit margins have translated into consistently superb returns on equity of greater than 20%. Long-term investors should consider taking a ride on Zebra given the company's steady, profitable growth and outstanding financial condition. Management owns a substantial position in the company. (There is a thread that discusses ZBRA on SI. Subject 14114 ----------------------------------------------------------------- 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 E-commerce threat oversold: retailers chicagotribune.com In Paris, making a case for a pay-as-you-go internet washingtonpost.com At least three Internet broker systems reported glitches that caused orders to back up in a falling stock market. chicagotribune.com SEMICONDUCTORS Worldwide sales of semiconductors fell 17 percent in July according to the Semiconductor Industry Association (SIA) scmp.com The decision by three of Japan's "Big Five" chipmakers to close manufacturing facilities in the U.S. and Europe and to lay off employees is widely viewed as a response to the triple threats of overcapacity, unfavorable currency exchange rates and plummeting memory prices. sumnet.com ECONOMIC Rubin, Greenspan working to steady jittery world detnews.com Greenspan steps into leadership vacuum chicagotribune.com Deflationary forces loom on economy dallasnews.com Threat of deflation is very real nypostonline.com Global deflation hits home chicagotribune.com, 00.html Take a global currency crisis, toss in the possible impeachment of the U.S. president and the prospect of a worldwide recession no longer seems a stretch. canoe.com Rumors flew that the Federal Reserve would calm world financial markets by cutting short-term interest rates half a percentage point before the day was out, or next week, or at least sometime soon. washingtonpost.com MARKETS & INVESTING Micro-caps suffer one of the "worst declines in history" but are poised to recover bizfn.com Can small-caps be nearing a turnaround? washingtonpost.com When the going gets tough, investors head to safe havens globe.com r.shtml Flight of foreign investors is driving force in stock sell-off mercurycenter.com If Wall Street could talk, its advice to Congress on handling Kenneth Starr's case for impeachment of President Clinton would be succinct: Whatever you do, do it quickly. chicagotribune.com The quicker the political problems are over, the better for Wall Street nypostonline.com Despite market's gloom, this may be good time to buy stocks globe.com ASIA, JAPAN & RUSSIA For Japan, the prospect of a recession in the United States prompts wide-eyed horror, but it also carries a whiff of sweet redemption. detnews.com The Mexican economy may have avoided the Asian flu, but it sure has caught the Russian cold. detnews.com Japan's central bank today said the battered economy was deteriorating and recovery was not in sight, as a top Finance Ministry official warned that the nation was teetering on the edge of a deflationary spiral mercurycenter.com scmp.com Demand in Latin America for high-tech products has fueled a boom in South Florida. but now slows herald.com The spreading global economic crisis seized its latest victim - Latin America nypostonline.com Japanese bank experts warned that the nation's financial crisis is deepening, despite government promises to revive the economy and international pleas for bolder action washingtonpost.com America isn't looking very safe to foreign investors. nypostonline.com The sudden meltdown of Russia's currency and the volatile swings of the U.S. stock markets have triggered a crash of confidence in the West's prescription for Asia's economic crisis. freep.com ----------------------------------------------------------------------- 6. techstocks.com Tim Luke is the creator and an active participant at the Tim Luke's Position Trading Forum thread on SI. Tim provides the following commentary about what goes on there and what his thread is all about. Below is his write up. I started my thread "Tim Luke's Position Trading Forum" to bring together other SI members who trade in this fashion. The object of this thread is to post what stocks people feel are the best position plays. The time span on holding a position play is anywhere from 2 days to 2 weeks with a return of 20 to 60 %. I'm also trying to get other investor's to post their thoughts on the short term market ( 3 months ), being bearish or bullish. I know their are many savvy investor's lurking on SI and I wanted to pull these people in for my benefit as well as for others to get a different prospective on stocks and the market in general. I spend countless hours searching for news and stocks that might make for a quick short term gain. Many of these stocks I will trade many times through out the week buying and selling on every dip. I feel that for myself being a day/position trader is the safest way to play this market. As you well know that many of the long term investor' | ||||||||||||
|
Home | Hot | SubjectMarks | PeopleMarks | Keepers | Settings |
Terms Of Use | Contact Us | Copyright/IP Policy | Privacy Policy | About Us | FAQ | Advertise on SI |
© 2025 Knight Sac Media. Data provided by Twelve Data, Alpha Vantage, and CityFALCON News |