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CCRD NOKA ALLC Semiconductor/Equipment Stocks to Recover
An SI Board Since December 1998
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Emcee:  Mark Johnson Type:  Unmoderated
The Internet Financial Connection, December 2, 1998

Presented by Mark Johnson, Editor of the IFC

It appears exclusively on Silicon Investor


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In This Issue:

1. Internet IPO's: What Investors Need to Know
2. Concord Communications
3. Nokia
4. Allied Capital
5. Interesting Articles On The Internet by Joe Dancy
6. Semiconductor, Semi-Equipment Sectors Set for Recovery
7. Highlights on SI: Space, The Final Frontier
by David Z
8. Highlights on SI: by Tom Taulli
9. Disclaimer


Steve Harmon, of the Internet Stock Report provides the following
interview. Below is the write up.

One area where there has been a supply/demand
problem is in the Internet IPO area. When the went public a few weeks ago,
primarily institutional investors and a very
small number individual investors were able to
buy the stock before it actually traded on a
stock exchange. The underwriters transfer the
stock mainly to institutional investors and
"special" high status clients with high a net
worth. "It is like having 2 seats in a movie
theater and having 100,000 people waiting
outside to get in," says Steve Harmon of the
Internet Stock Report, "Something is not right
here." A very small number of individual
investors will actually get in on the
underwriting. You will read in press releases
that actually went public at $9 a
share and then soared to $97. In a sense, that
is true. What individual investors are not
understanding is that when opened
for trading, it started trading at $87 per
share. It then shot up to $97 per share and
ended the day trading in the low $60's. Less
than a week after going public,'s
shares hit a low of $32 per share. Steve urges
that investors use extreme caution before
purchasing a fresh Internet company that has
just come to the market and most of all, do
some homework before investing.

Steve notes that the demand for Internet IPO's
are enormous and not enough IPO's are coming to
market to meet demand. "It's like dropping a
small sponge into an ocean, once it hits, it is
quickly absorbed." To add to the scarcity of the
Internet IPO's, from mid September through
October, there was not one high profile Internet
IPO. Steve adds that well known Internet stocks
such as Yahoo! and Amazon could have been
purchased below their opening day prices, if
investors would have waited.

One of the first questions Steve believes that
investors should ask themselves is, "how much
am I willing to lose?" before purchasing an
Internet IPO. He thinks, it would be best if
investors waited a few days until after an
Internet IPO became public to buy their shares.
"Basic fundamentals should also be used such as,
what the company does, their business model, who
is the management, how big is the potential
market and who are their competitors?" He still
thinks some investors can make money in some new
IPO's that have come to market. eBAY is one
example of successful recent IPO. Their stock
publicly started trading at $50. A few short weeks
later, it went down to $25 per share. Recently,
it shot up to $234. Cases like this are rare and
not likely to happen for each IPO.

One of the events driving the Internet Stocks was
the forecast of strong Christmas sales over the
Internet. This strong forecast of "E-tail" items
being sold over the Internet has led to strong
gains in the Internet Stocks. Since the beginning
of November, Yahoo! has gone from $130 to a high
of $227, Amazon went from the $130's to $233, eBAY
from the low $90's to $234. Some pundits think
that the Internet is like a "Tulip Mania." Others
are trying to get in on the bottom floor of the
next great "Industrial Revolution."

I will admit, I think many Internet stocks will
move considerably higher going into 1999, but the
recent pull back in the Internet area was due.
Usually after excessive stock run-ups and when
option premiums become very great on Internet
stocks, like they are right now, Internet Stocks
have been considered overvalued for the
short-term trader.

Another reason why Internet Stocks have made an
enormous run-up is because there is simply not
enough supply out there to meet demand. estimates that the total market
cap of the 20 major Internet companies, with
combined market caps total close to $100 billion.
The stock market has over $10 trillion in
marketable securities. The article notes, if every
investor were to allocate 2% of their portfolio
to Internet Stocks, that $100 billion would turn
into $200 billion. That of course would double the
current price of the average stock in the Internet
area and of course add fuel to present fire.



Richard Gould of the no-load Rockland
Growth Fund
(800-220-0132 ask for Jennifer), provides
the following stock idea on Concord
Communications (CCRD 43 1/4). Below is
the write up.

Concord Communications is a leading developer
of Web-based network reporting and analysis
solutions. Their software analyzes how well
network is running and can predict what may
go wrong within the network.

Richard Gould of the no-load Rockland Growth
Fund (their fund was ranked in the top 5% of
all small cap funds according to Lipper) likes
Concord so much, their company is his funds
largest holding. "As networks become
increasingly complex, Concord is in the
absolute sweet spot of priority IT spending.
Concord's software can save a company a huge
amount of money, that is really the key. The
product pays for itself, often within
3-4 months."

Richard notes that the price of Concord's
software is actually determined on the number
of elements on a computers network. An element,
for example, would be a server, switch, router,
modem, etc. "For every element that is added in
a network, Concord will earn more in revenues.
A company that uses their software will incur
an immediate benefit after only a 1/2 day of
plug and play installation."

Concord is growing by leaps and bounds. In 1997,
they added about 250 customers. When they
recently reported 3rd quarter results, over 100
new customers were added in that quarter alone.
Management believes they can continue to add
90-100 new customers per quarter. Concord
currently serves roughly 15% of the Fortune
1000. "The market in which they operate has not
yet been highly penetrated... They are the
leader in their area and have much room to
grow," says Richard. Concord's customer list
includes well known technology names such as;
Cisco, Ascend, Hewlett-Packard, Newbridge
Networks, America Online, Ericsson and
MCI WorldCom.

Richard adds, Concord will offer a number of
new products over the next few quarters, which
should accelerate earnings. In addition, the
average initial order size is increasing
significantly. Most companies have only
purchased one or two products so far, "but
that number will most likely increase."
"Revenues have been growing at 100% per year
and earnings growth should continue to grow
faster than revenues. Also, linearity of
shipments within a quarter shows much higher
visibility than the typical software company.
The stock should move in-line with its
earnings growth." He figures, they will earn
close to $1 in 1999, with their stock hitting
$100 within the next few years.

There is a thread that discusses CCRD on SI.
Subject 17597



Thomas L Melly of Simms Capital Management
Inc. and Brian Modoff of Alex Brown, provide
the following stock idea on Nokia
(NOKA 100 7/8). Below is the write up.

Tom Melly of Simms Capital Management is very
fond of Nokia, a leader and maker of cellular
phones and GMS (global mobile systems)
infrastructures world wide. They command 30%
of the world's handset market and 28% of the
GMS infrastructure market.

Tom has included Nokia in most of his clients'
accounts and figures the company can maintain
a 25% earnings per share growth rate during
the next 5 years. There has been a slowdown
in the cellular market because of the Asian
crisis... The impact on Nokia has been minimal
because, they have increased their market
share," says Tom. He thinks, the stock will
hit $150 within the next 2 years.

Another Nokia bull is analyst Brian Modoff of
Alex Brown. "Nokia is the Dell in the handset
market... They dominate in volume and are
beating the pants off of their competitors...
They have accelerated the handset product
life cycle, making life tough on the
competition," he says. Brian mentions, they
are "#2" in the deployment of GMS
infrastructures and are gaining market share
from the competition, especially in the
emerging DCS1800 networks.

Brian thinks that Nokia's will perform well,
even if Asia continues to be a problem going
forward. He figures, they will end this year
with earnings of $3.27 and earn $3.55 in 1999.



David West of Davenport and Company, provides the
following stock idea on Allied Capital
(ALLC 18). Below is the write up.

Allied Capital provides loans and
investments in three areas; mezzanine
finance, commercial real estate finance
and SBA lending. Allied will typically
loan money in a situation where a
commercial loan from a bank is not a
viable option.

During the last few months, banks have
been more cautious towards lending money.
"There is evidence that banks are getting
tighter on the condition of loan terms...
This is very positive for Allied!," says
David West of Davenport and Company. Their
stock has come down from a 52 week high of
$29 and hit a low of $12 in October. David
believes that all the fundamentals are
still in place for Allied and business
will only get stronger.

On November 19, Allied announced that they
would raise additional money by selling 3.1
million shares in a private placement.
David notes that this will give them more
capital for loan originations which will
increase earnings.

David figures, Allied will earn $1.65 in
1999 and around $1.85 in 2000. Because of
their tax status, Allied is required to pay
out 90% of their earnings in the form of a
dividend, which is currently around 8%.
David thinks their stock can hit $25 within
the next year.



Joe Dancy, co editor of the IFC and editor
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.


Once barely a blip on the retail radar screen,
online shopping is expanding so dramatically
that it's on the verge of changing how Americans
shop for everything

So, are investors completely crazy? Not
completely. "The Internet will have a dramatic
impact on the economy, creating and destroying
shareholder wealth in historic proportions."

Many Internet sites claim to help consumers
find the best deals online, either by linking
to low prices or comparing product features.
But most comparison-shopping technology is so
new and crude that it rarely works as advertised.

Consumer commerce on the Internet is growing by
more than 200% annually, even though most people
online still are not making purchases, according
to a report released yesterday by an Internet
retailer's association. On average, only 5% of
consumers who visit Web commerce sites make a
purchase, with concerns about credit-card
security and difficulty in finding merchandise
listed as the key reasons people browse but
don't buy.

Internet companies are emerging as borrowers in
the $430 billion junk bond market, where they
can raise the hundreds of millions needed to pay
for acquisitions and provide the rapid growth
their investors expect

A proposed European Union law on Internet
commerce would allow national governments to
regulate the on-line sale of goods and services,
stopping short of EU-wide controls. All countries
would be required to give on-line contracts the
same legal weight as paper ones and to allow
on-line settlement of disputes between businesses
and customers

Some investors were undoubtedly cheering as the
final bell rang Nov. 13 and shares of
were up more than 600 percent, the strongest
first-day surge ever, according to Securities
Data Group. But here's where the stories
of home run balls and home run stocks diverge

In the manic world of Internet stocks,
is the hot new aphrodisiac, the shooting star of
the month and the latest symbol for the insanity
taking root in investors' minds


The chip gear book-to-bill index bounces up - is
it light at the end of the tunnel? It's not clear
just yet, but North American suppliers of chip
production equipment saw a vast improvement in
business during October when they posted a
book-to-bill ratio of 0.73

The dizzying free fall in personal computer prices
that spun out of last year's Comdex show has
leveled off, as consumers demanded greater
performance and greater service from computer
makers and the prices of key PC components rose.

It will most likely be a year or more before
semiconductor capital equipment spending bounces
back, according to industry analyst Theodore O'Neill,
who follows the segment at Needham & Co

Chip card market growth will be strongest in the
United States and Japan during the next four years,
according to a new study by Dataquest here. The
report predicts that U.S. chip card revenues will
grow from about $20 million in 1997 to $532 million
in 2002, while Japanese sales will go from $14 million
to $390 in the same time frame


When Federal Reserve policymakers met Sept. 29, they
readily agreed they needed to cut interest rates to
cushion the impact of financial market turmoil on the
economy, but they did not want to cut them so much
that they might create "an exaggerated impression" of
the economic risks ahead.


Mountain climbers call the phenomenon summit fever.
As they near the peak of a mountain, the dangers
escalate. The air thins. The grade steepens.
Daylight fades. And, against all common sense, the
mountaineers push to the top. It's often an
all-or-nothing gamble for glory or death. We're
past the point where reason and analysis are driving
investors. Why is the market climbing now?
Because 10,000 is there.


After scoffing at small-company stocks for years,
Wall Street is finally taking notice. The
divergence between large-caps and small-caps is
unprecedented, and many smart investors believe
it can't last

Some mutual fund shareholders may be happy to hear
that their funds are posting great gains - in part
because their fund managers bet big on Internet
stocks even when it was not part of their mission

You might think several months of wild gyrations
in the stock market taught individuals a lesson or
two about investing. For years, personal-finance
experts have been preaching the same message for
investment success: Focus on the long term. Spread
your portfolio among a broad array of asset classes.
Don't make frequent trades. But when a chaotic stock
market put investors to the test, many didn't heed
this advice

"Clearly the valuation levels, expected earnings
growth -- everything from a historic yardstick is
saying small caps are very attractive right now," said
John Pratt, associate director of the personal investor
advisory service at Salomon Smith Barney

When is the proper time to invest? Technical analysts,
who think they know, meet in S.F.

The murmurings of Dow 10,000 are beginning again.
Encouraged by Fed chief Alan Greenspan's
quarter-point interest rate cut yesterday, some
Wall Street strategists confidently predicted
that the stock market would hit a new high
before year end.

The Securities and Exchange Commission believes
too many investors are completely unaware how the
fees they pay take a bite out of total fund
performance. The mutual fund industry's top
regulator is now calling on funds to disclose
exactly how fees affect returns

After a short rest, the bull is ready to run again,
and the bear is going back into hibernation, a
leading market analyst said Tuesday. This bull
market will be fueled by a prolonged period of
peace and new technology, or what Ralph J.
Acampora, managing director of global and equity
research for Prudential Securities, terms a
"secular'' bull market.


THE "Y2K problem" - the need to reprogram computers
to correctly recognize and store dates after the
turn of the century - is helping to reignite
speculative demand for gold. Some of this has been
reflected in sales of gold coins. People out there
in the country across the Hudson are buying them at
an all time record rate.



Joe Dancy, co-editor of the IFC and editor of
the The Lone Star Growth Investor
provides the following commentary.
Subscriptions to his newsletter are FREE.

To conserve bandwidth, please use the link
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