The Stocks
of the Future
Are on Sale
by Donald Rowe
Editor, The Wall Street Digest
Many
investors are selling Internet/ technology stocks simply because
an increasing number of brokerage companies are telling investors
to lighten up. One well-known investment strategist recommended
that clients reduce technology holdings by 5%. The technology
stocks plunged, after which a string of brokerage companies made
similar recommendations.
As a result, investors
have been selling the Internet/technology stocks and buying the
Old Economy stocks.
One analyst even issued
a buy on General Motors (GM). To the delight of the brokerage
companies, investors are throwing out the baby along with the
bath water. Brokerage commissions are soaring as the Tech-heavy
Nasdaq plunges and the Dow Industrials are climbing back to old
highs. That is absurd! The Industrial Age ended over two decades
age.
Investors are being
so misled by the media that subscribers are calling our editorial
offices asking:
1) Is the Technology
Boom over?
2) Should I sell all
of my Internet stocks? 3) When will the Dow crash? Responsible
investment strategists who know the Internet Revolution has just
begun have apparently been misled by brokerage company management
for an obvious reason: They are ecstatic with brokerage commissions
that occur as confused investors thrash back and forth between
Old Economy Industrial stocks and the New Economy Technology
stocks.
The Industrial Age
is over. The Computer Age is over. The Internet Revolution is
five years old in the U.S. and just beginning in Europe, Asia,
China and Japan.
The Wireless Revolution
is just beginning in the U.S., but will spread rapidly to the
rest of the world. Selling Cisco to purchase GM is backward thinking.
Cisco is the bluest of blue chip Internet stocks, a company you
should own and hold for at least five years or more. I see Cisco's
revenues increasing 30% a year for the next five years because
of the worldwide wireless/telecommunication boom.
The big 500-point plunge
in both the Dow Industrial Average and the Nasdaq on Tuesday,
April 12th, was the result of margin calls.
Stocks purchased on
margin hit record levels this month and caused some market analysts
to warn that a 1929-type crash could unfold as a result. I disagree.
Stocks purchased on margin amounted to 9.53% of the total stock
market value in 1929. Today, the figure is only 1.65%. Beginning
in 1996, the technology stocks have experienced an annual correction
between April 1st and November 1st.
This year is no different.
The correction is steeper this year because of the steep run-up
in Internet/ technology stocks since October of last year.
After
the annual correction pushes short-term investors out of the
market, a bottom unfolds when long-term investors add to their
positions at much lower prices. There are approximately 380 publicly
traded Internet stocks representing $1.8 trillion, or 8% of the
U.S. stock market. Except for recent market action, Internet/technology
stocks have been the investment of choice because these stocks
represent the future of not just the U.S., but the entire world.
A shortage of Internet/technology
stocks have been chased to unreasonable P/Es by a flood of money
from the Fed, from pension funds, and from foreign investors
interested in our Internet Revolution.
Interest rates are
inching up, but even more important, the Fed is still maintaining
abundant liquidity to ensure continuing economic growth of at
least 4% annually. Mr. Greenspan knows that higher interest rates
will not affect Internet/technology stocks the same way higher
rates would affect the Old Economy stocks.
Developing better,
faster technology is the only way the Internet/technology stocks
can survive on a long-term basis.
R&D for these companies
will not stop, regardless of interest rate levels. Economic growth
in the U.S. is still solid, but slowing somewhat. That is healthy.
Globally, economic growth in the future will be double what it
was in the past. The main reason? The Internet is revolutionizing
the world and no political leader wants his/her country to fall
any further behind the U.S. The single best category of stocks
to own are companies whose products will increase the speed and/or
efficiency of the Internet.
The fastest chips,
routers, switches, search engines, etc., will produce the best
capital gains with the least downside risk.
It is necessary for
us to continually monitor technology advancements to insure that
you are riding the fastest technology horse. Companies with fading
or suddenly obsolete technology fade quickly. We have summarized
ten of the best companies that you should own now because their
products are accelerating the speed and efficiency of the Internet.
A good list to use
for structuring a new portfolio! You should consider these stocks
as core holdings.
Legend Holdings is
China's largest computer manufacturer, but will also offer high
speed cable and satellite Internet access for 1.3 billion people
in China. At the end of 1999, there were only eight million computers
in China, but that is changing rapidly. All of the Internet/technology
stocks are "On Sale." Buy these ten blue chip stocks
now. They represent the future of the U.S. and the entire world.
Buy These Ten Blue Chips Now
Applied
Materials Inc. (Nasdaq AMAT) is a Fortune 500 global-growth
company and largest producer of semiconductor wafer fabrication
systems and services for the worldwide semiconductor industry.
The microchip industry has completed a period of low investment
and new orders for Applied Materials' equipment is being driven
by needed capacity and technology requirements for microchips
and semiconductors. As microchips are used in more complex products,
chip making companies are increasingly having to upgrade and
replace existing machinery.
Applied Materials'
machines dominate most segments of the chip making industry.
The company invests
heavily in research and development (R&D) to stay at the
top, which has enabled its high tech customers like Advanced
Micro Devices, Intel, Lucent, and Motorola to produce key components
in their most advanced electronic products. Applied Materials
is also using its acquisitions, such as Etec Systems (a producer
of mask making systems for photolithography), to move into the
few segments of chip manufacturing where it isn't already a major
player.
With an industry up-cycle
just underway, and with growth from all regions in the world,
Applied Materials has a significant upside for the next few years.
As the dust settles
in the technology sector, Applied Materials represents a great
buying opportunity in the semiconductor equipment industry. Applied
Materials has reported triple digit earnings increases of 567%,
999%, and 210%, respectively, for the last three quarters over
last year's same three quarters. Revenues increased by 125%,
133% and 62%, respectively, during the same reported period.
The company expects an earnings increase of 122% this year and
42% in 2001. Company Headquarters: Santa Clara, CA; Phone: 408-727-5555;
www.appliedmaterials.com.
Cypress Semiconductor Corp.
Cypress
Semiconductor Corp. (NYSE CY) is in its second decade
as an international broad line manufacturer and supplier of integrated
circuits for a range of growth markets. The company supplies
its products worldwide to leading providers of data communications,
telecommunications, personal computer, and military systems.
Cypress has made impressive strides in fast growing markets by
entering the high density, programmable logic arena and the data
communications market with leading edge products for emerging
networking technologies, including Asynchronous Transfer Mode
(ATM) and Fibre channel.
Electronics is an integral
part of almost every facet of the economy and the proliferation
of computer and communications equipment has prompted phenomenal
industry growth, driving down prices and sharpening completion.
Cypress has become
an electronics industry leader by introducing newer and faster
processing technologies, such as its ground breaking Complementary
Metal Oxide Semiconductor (CMOS) technology. CMOS uses far less
power, yet outperforms its product competitors. The company's
strategy is to compete in higher volume markets, maintaining
a competitive cost structure and quickly introducing market leading
products. Cypress has taken a number of steps to support this
new strategy.
Product assembly and
testing has been moved offshore, resulting in a cost savings
of more than $100 million.
The company has also
significantly reduced the number of product/package types and
process technologies used in production, which has resulted in
more cost-effective manufacturing. Cypress has had triple digit
earnings increases for the last four quarters and accelerating
sales increases of 15% to 43%. An earnings increase of 90% is
expected for the current year. Company headquarters: San Jose,
CA Phone: 408-943-2600; www.cypress.com.
Oracle Corp.
Oracle
Corp. (Nasdaq ORCL) is the world's second largest independent
software company, yet it is the leading supplier of software
for information management. Oracle distributes its database,
tools and application products, as well as related consulting,
education, and support services in more than 145 countries around
the world. Oracle was the first software company to develop and
deploy 100% Internet-enabled enterprise software across its entire
product line.
It is also the only
company capable of implementing complete global E-business solutions
that extend from front office customer relationship management
to back office operational applications to platform infrastructure.
Oracle's software runs
on PCs, workstations, minicomputers, mainframes and massively
parallel computers, as well as on personal digital assistants
and set top devices. As more and more companies transform themselves
into E-businesses, Oracle's Internet-enabled solutions provide
a cost-effective way to expand market opportunities, improve
business process efficiencies, and attract and retain customers.
By replacing expensive,
unwieldy client/server computing models with the efficiency and
reach of the Internet, companies can deploy a wealth of innovative
applications that can be accessed with a Web browser.
More than 7,000 customers
use Oracle Applications. Available in 29 languages, Oracle applications
allow companies to operate in multiple currencies and languages,
support local business practices and legal requirements, and
handle business-critical operations across borders. The company
estimates an earnings increase of 40% for 2000 and has an earnings
per share rate of 98, which indicates that Oracle produces earnings
greater than 98% of all other companies. Company Headquarters:
Redwood City, CA; Phone: 650-506-7000; www.oracle.com.
Teradyne Inc.
Teradyne
Inc. (NYSE TER) is the world's largest supplier of automatic
test equipment (ATE) for the electronics and telecommunications
industries. The company's products detect and resolve problems
in the design, production, and servicing of semiconductors, circuit
assemblies, telephone lines, networks, computerized telephone
systems, and software. Teradyne also manufactures backplane assemblies
and high density connectors used in high performance electronic
systems. Teradyne is a leader in each of the markets it serves.
In semiconductor testing,
Teradyne is the only broad line supplier of test equipment for
systems-on-a-chip (SOC), analog, mixed-signal, memory, and very
high bit-rate digital (VLSI) subscriber line devices.
The company is also
the world's largest merchant supplier of telephone line test
systems, one of the top three board test suppliers, and one of
the top two suppliers of backplane connection systems. Teradyne
is a highly-diversified company, with 1999 sales of more than
$1.8 billion, 7500 employees worldwide, and a "who's who"
customer list of the world's top electronics companies. Teradyne's
products test the latest semiconductors and circuit boards that
power today's electronics, from PCs to cell phones to car electronics.
Teradyne's backplane
assemblies and interconnect systems are used by leading data
storage companies and in complex military and avionics applications.
Teradyne also tests
more than 100 million telephone lines worldwide, helping phone
companies target problems and fix them quickly. Teradyne reported
triple digit earnings increases of 250% and 500% for the past
two quarters over the same two quarters of last year. Revenues
increased 48% and 74% for the same two reporting periods. The
company expects an earnings increase of 110% in year 2000. Corporate
headquarters: Boston, MA; Phone: 617-482-2700; www.teradyne.com.
Applied Micro Circuits
Applied
Micro Circuits (Nasdaq AMCC) designs, develops, manufactures
and markets high performance, high bandwidth silicon connectivity
for the world's communications infrastructure. The company utilizes
a combination of high frequency, mixed signal design expertise,
higher layer digital content and multiple silicon process technologies
to offer integrated circuit (IC) products for the data and telecommunications
markets.
AMCC uses Bipolar (the
primary way digital information is transmitted), CMOS (electronic
component used for fast data switching) and BiCMOS manufacturing
processes.
It also uses the new,
cost-efficient silicon Germanium (SiGe) technology with its proprietary,
low power "uPower" Bipolar circuitry layout. Applied
Micro Circuits has developed products ranging from application
specific standard products (ASSP) for industry-wide applications
to application specific integrated circuits (ASIC) that are custom-tailored
solutions for specific customer applications.
AMCC's ability to manufacture
ASICs and ASSPs using a choice of four process technologies allows
them to offer a range of solutions at a variety of price points
for its customers.
Their customers include
Alcatel, Cisco Systems, Juniper Networks, Lucent Technologies,
Nokia, Nortel Networks, Siemens and 3Com. The company emerged
from its twelfth consecutive profitable quarter with annual net
revenues exceeding $100 million for the first time in the company's
history. Net revenues were $105 million in 1999, a 37% increase
over fiscal 1998's revenues. Applied Micro Circuits expects a
94% increase in earnings for year 2000. Company headquarters:
San Diego, CA; Phone: 858-450-9333; www.amcc.com.
Atmel, Inc.
Atmel,
Inc. (ATML), with operations in the U.S., Europe and Asia,
is a leading designer, manufacturer and marketer of advanced
semiconductors. The company's product line includes advanced
logic, nonvolatile memory (storage area in a computer where data
is retained when the power is off), and mixed signal and radio
frequency (RF) integrated circuits (IC). Atmel chips are manufactured
using advanced wafer-processing, complementary metal oxide semiconductor
(CMOS) and BiOMOS technologies.
The company is also
one of the first manufacturers to use Silicon Germanium (SiGe)
a new technology that cost effectively addresses the manufacturing
requirements of the RF and high frequency wireless communications
markets.
Atmel's technologies
combine more functions on fewer chips, which allows for greater
cost and power efficiencies, small circuit boards, as well as
sleeker end-user devices such as lighter mobile phones, leaner
computer peripherals, and more capable electronic appliances.
The company ships over four million ICs per day (more than one
billion ICs per year) for use in a wide range of communications,
computer, automotive, instrumentation, military and industrial
control markets.
Atmel's earnings for
the last three quarters of 1999 increased by triple digit numbers
over the same three quarters of 1998. A 157% earnings increase
is expected in 2000. Company headquarters: San Jose, CA; Phone:
408-441-0311; www.atmel.com.
Legend Holdings Ltd.
Legend
Holdings Limited (Hong Kong Stock Exchange LGHLY), China's
largest computer manufacturer, offers a full range of quality
information technology (IT) products, services and solutions.
LGHLY focuses on five major areas: manufacturing and sale of
Legend brand personal computers, distribution of foreign brand
computer related products, provision of systems integration solution
and services as well as the manufacturing of motherboards and
printed circuit boards.
To cope with the Internet
era, the Group has also been concentrating on three related Internet
categories: Internet access devices, Local Area Network (LAN)
terminal products and information services.
The access devices
include Legend brand PCs, palm sized PCs, and set-top boxes.
LAN terminal products consist of the full series of Legend brand
networking products and servers. Stimulated by the Internet obsession,
the PRC (Peoples Republic of China) computer market continues
to maintain accelerating growth. During the first half of the
year, the number of Internet users increased by 100%.
Legend reported record
high growth of 58% for the corresponding period of last year.
Diluted earnings per share grew 56%.
Legend computers ranked
first in the Asia Pacific region (excluding Japan) in the second
quarter, accounting for 8.5% of market share. The Asian market
is going to be the fastest growing market for the next 10 years.
You can invest in Legend Holdings Limited by purchasing ADRs
from your broker. Legend stock can also be bought on the Hong
Kong Market. Stock code 992. To monitor the stock price, try
stock code 992 at www.quam.net or www.finet.com.hk. Headquarters:
Hong Kong Phone: 852-2590-0228; www.legend-holdings.com/eng/index.html.
JDS Uniphase Corp.
JDS
Uniphase Corporation (Nasdaq JDSU) is a high technology
company that designs, develops, manufactures and markets fiber
optic telecommunications components, modules and laser subsystems.
The company's telecommunications products include semiconductor
lasers, high speed external modulators, transmitters, fiber Bragg
gratings and optical modules for fiber optic networks in the
telecommunications and cable television industries. The company's
laser division produces laser subsystems for a broad range of
original equipment manufacturers (OEM).
Applications include
biotechnology, industrial process control, measurement, graphics,
printing, and semiconductor equipment.
Uniphase Corporation
is in the process of acquiring EPITAXX, Inc., a leading supplier
of optical detectors and receivers for fiber optic telecommunications
and cable television (CATV) networks. EPITAXX's products include
long wavelength detectors and receivers that address a number
of applications, including dense wavelength division multiplexing
(DWDM) and SONET/SDH transmission, optical network monitoring
for terrestrial and undersea networks, test measurement and fiber
optic analog CATV.
The capability to supply
advance detectors and receivers, both in component form and as
part of integrated modules, is a very significant step for JDS
Uniphase in expanding its "active" optoelectronic product
lines.
With EPITAXX joining
the JDS Uniphase family, JDS has built a powerhouse providing
advanced products and technologies for the rapidly growing fiber
optics telecommunications market. Over the last three reported
quarters, JDS Uniphase's earnings have increased 700%, 100%,
125% over the same period of last year and sales have increased
270%, 104%, 119% over the same three quarters. Earnings are estimated
to rise 94% for the year 2000 and 57% for the year 2001.
Company headquarters:
San Jose, CA; Phone: 408-434-1800; www.jdsunph.com.
Cisco Systems
Cisco
Systems (Nasdaq CSCO) is the worldwide leader in networking
for the Internet. Cisco's networking solutions connect people,
computing devices and computer networks, thus allowing people
to access or transfer information without regard to differences
in time, place or type of computer systems. Cisco serves customers
in three target markets.
Enterprise: Large
organizations with complex networking needs, usually spanning
multiple locations and types of computer systems. Enterprise
customers include corporations, government agencies, utilities
and educational institutions.
Service Providers:
Companies that provide information services, including telecommunication
carriers, Internet Service Providers (ISPs), cable companies
and wireless communication providers.
Small/Medium Business:
Companies with a need for data networks of their own, as
well as connection to the Internet and/or business patterns.
Cisco develops its products and solutions around widely accepted
industry standards. In some instances, technologies developed
by Cisco have become industry standards themselves. Cisco also
aggressively acquires new companies with leading edge or breakthrough
technologies.
Since shipping its
first product in 1986, the company has grown into a global market
leader that holds the number one or number two market share in
virtually every market segment in which it participates.
Cisco has increased
earnings 44%, 33% and 38% for the last three reported quarters
over the same period of last year, and a sales increase of 53%,
51% and 49% for the same period. Company headquarters: San Jose,
CA; Phone: 408-526-4000; www.cisco.com.
EMC Corp.
EMC
Corporation (NYSE EMC) is the world's leading provider
of enterprise storage systems, software and services. EMC Enterprise
Storage intelligent disk arrays, software products and services
is the information storage and management solution of choice
for every major computing platform in today's business enterprise.
EMC is the recognized "time to market" leader in delivering
advanced storage and retrieval technology to companies whose
success depends on rapid access to and transmission of information.
Major customers include
the world's largest banks and financial services firms, telecommunications
providers, airlines, retailers and manufacturers, as well as
governments, universities and scientific institutions.
These industry leaders
rely on EMC's storage solutions for such applications as Online
reservation systems, transaction processing, customer billing,
year 2000 compliance, the Internet and corporate intranets, business
disaster recovery, data mining and data warehousing. EMC is represented
by more than 100 sales offices and distribution partners in more
than 50 countries.
In addition, EMC has
formed alliances with the world's leading software, application
and database companies, including Microsoft, SAP, Oracle, Baan,
and PeopleSoft.
EMC is a Fortune 500
company and was ranked ninth on "Business Week's 1998 Info
Tech 100" list of the world's best performing information
technology companies. In February 1999, Fortune magazine identified
EMC as the driving force behind one of the ten tech trends for
investors to watch. Fourth quarter earnings were up 35% and sales
were up 21% over the same quarter last year. Corporate headquarters:
Hopkinton, MA; Phone: 508-435-1000; www.emc.com.
Editor's Note: Donald
Rowe is editor of The Wall Street Digest, One Sarasota
Tower, Ste. 602, Sarasota, FL 34236 1 year, 12 issues, $150.
Published continuously since 1977, The Wall Street Digest is
one of Wall Street's most widely read investment and financial
publication for economic trends and investment direction. This
highly-regarded advisory newsletter provides specific investment
advice for stocks, bonds, mutual funds, precious metals, stock
and bond markets. Visit the Web site at www.wallstreetdigest.com.
Donald Rowe will conduct
an Investment Seminar at Sea on November 28 aboard the Six-Star
Crystal Harmony. The Grand Panama Canal Cruise departs Ft. Lauderdale,
FL on November 27th and arrives in Acapulco, Mexico on December
8th. For a free brochure call 1-800-929-8638.
