Quarter to Quarter Aggressive Growth Stocks

[jackhartmann]

Portfolio down 3.3%, Dow down 1.63%, Nasdaq down 5.99%, S&P500 down 2.44% J-Blimps down 6.7%, Fuel cells/Alt Energy down 4.2%, Gorilla Hunters down 10.0%, Gilder2001 down 8.7%, OC-192 down 12.6%.

Record Nasdaq days on the downside
10/19/87 -11.35 %
04/12/00 -9.67
10/20/87 -9.00
10/26/87 -9.00
08/31/98 -8.56
04/03/00 -7.64
01/02/01 – 7.23% Funds lock in profits, Robbie Stephens downgrades EMC, INKT, NTAP, many others. NAPM Index at 43.7% (consensus was 47.1%), the lowest since April 1991 and indicative of a continued contraction in the mfg. sector
12/20/00 – 7.12% FDRY takes down infrastructures with the warning.
04/13/00 -7.02
10/27/97 -7.02
03/12/01 – 6.30% CSCO warns prior period, Barron’s pummeling fiber optics stocks, ERICY warns.
01/05/01 – 6.20% BAC rumors of bad shortfall due to CA utilities and CSCO rumors of missing quarter sent it down.
03/27/80 -6.15
03/28/01 – NT and PALM warn the night before sending networkers down double digits.
05/23/00- 5.93%

NYSE Volume: 1,302 mln...Adv: 1083...Dec: 1977
Up Volume 411.95 Down Volume 874.03 day 1
New Highs 62 New Lows 46

Nasdaq Volume: 2,056 mln...Adv: 1100...Dec: 2608
Up Volume 143.67 Down Volume 1883.07
New Highs 36 New Lows 192 13 days of 2/1

Put/Call ratio 0.82 (Range 0.75 to 0.85)
Under 0.40 is Very Bullish sentiment, 0.40-59 Bullish, 0.60-0.79, Neutral, 0.800-0.99 Bearish, Over 1.00 Very Bearish. When many are bullish, this may be time to take profit.

April natural gas $5.61 per million British thermal units. Down a penny.

VIX 33.22 up
When it runs below 20, usually a good time to take some profits. If above 35, good time to buy. The VIX, intraday, hit 37.72 on Dec. 21 and posted a 52-week high of 41.53 in last April's carnage.

Sector Watch
Breakout of the day
Drugs ($DRG) 380.86 +2.81 +0.74%

Collapse of the day
Network ($NWX) 423.91 -56.08 -11.68% NT hit so hard.

QQQ at $39 Chart: Down on higher volume Blocks: 636/886 neg for 1 day. Volume%: 70

One stock

Nortel Networks (NT) down 16.47%: Merrill Lynch downgrades to NEAR TERM NEUTRAL from NEAR TERM ACCUMULATE after company negatively pre-released 1Q01 again yesterday citing reduced capital spending and increased pricing pressure; firm lowers Q1 forecasts from EPS loss of ($0.04) to ($0.12) and revenue from $6.3 bln to $6.1 bln; firm now believes Nortel's annual revenue in 2001 may be below 2000 and gross margins will remain under pressure.
Note: It can always get worse.

Portfolio Watch

MDT, PHA, CAT, DRMD were green. BRCD, GLW, NTAP were down double digits.

Brocade Comms (BRCD) This afternoon, Merrill Lynch reiterates NT BUY/LT BUY as firm is meeting with management; near-term reports that visibility is not good, however firm remains bullish on longer-term prospects for two reasons: 1) software will be very important in storage networking and analyst thinks BRCD can be a leader in this area and 2) the market size is much larger than people appreciate
Note: So much for Reg D.

Caterpillar stock rose more than 40% over the last five months without attracting much attention. Its core heavy-machinery business, while not exciting, offers investors a chance to play a U.S. economic recovery. Expansion efforts overseas and the power-generation division offer exposure to attractive long-term growth markets. The stock has a history of outperforming the market following recessions and gained 250% between 1991 and the end of the 1994 slowdown. While there is no hurry to take positions, the stock is being upgraded to "accumulate." For investors looking out two to three years, a pullback to the $33-$37 range would represent an opportunity. During the last year, Caterpillar has improved market share in the domestic truck-engine business. And in early March, Cat announced a new product designed to help truck engines meet stricter emissions standards and lower operating costs. The company says the device will also reduce engine noise by up to 50%. The nation’s electricity shortage is good news for Caterpillar’s power-generation unit. Electric-power sales represented 33% of engine revenue last year, and that sector should generate much of Cat’s future growth.
From Dow theory Forecasts.


Watch List things to watch but not trade

Arch Coal (ACI) Coal producer expects Q1 (Mar) earnings of $0.10-0.15 per share, current First Call estimate is $0.04; results are expected to benefit from high profit margins on a small volume of coal sold in the spot market and income tax benefits related to depletion; Arch Coal (ACI) 27.90: Coal producer expects Q1 (Mar) earnings of $0.10-0.15 per share, current First Call estimate is $0.04; results are expected to benefit from high profit margins on a small volume of coal sold in the spot market and income tax benefits related to depletion;
It will be interesting to see USX’x coal numbers to lagging steel production.
What I like are hard facts, like the insight I received yesterday from the gentleman running the hedge fund out of Banc America Prime Brokerage. He told me that his back office people at Bank America, who see a slew of hedge funds, calculated that the short interest -- the sheer number of shorts -- was the highest they had ever seen on Wednesday. That's great information I can use. Or consider this, another piece of data that someone from one of these high-net-worth departments like I worked in at Goldman Sachs told me: "On Thursday a series of very wealthy clients told me they could not take it anymore and five or six of them bailed from some of the biggest highflying Nasdaq stocks. It was true capitulation the likes of which I have never seen before." http://www.thestreet.com/p/rmoney/jamesjcramer/1365192.html
Note: Cramer does have contracts. Sounds like some sign that too much bearishness is there.
The recent run-up in crude-oil prices suffered a severe reversal after the Department of Energy reported a sharp increase in U.S. crude inventories. Inventories had fallen to their lowest levels in a quarter century in early March, but a three-week-long surge in imports has lifted them by nearly 27 million barrels, or 10%. May crude-oil futures on the New York Mercantile Exchange tumbled $1.44 to close at $26.31 a barrel.
Note: Inventory like one big yoyo.
"We're letting more air out. Big-cap tech stocks are obviously not ready to turn around yet. Nortel's announcement is very disturbing and is having very severe effects on the rest of the market," observed Donald Selkin, chief strategist at Joseph Gunnar.
Note: Selling into rallies will become a nauseating theme for a while.

Lucent Technologies (LU: news, msgs, alerts) shaved 12.2 percent. Late in the session, rating agency S&P placed Lucent on CreditWatch with negative implications. The action, S&P said, reflects lower-than-expected proceeds from the IPO of Agere Systems, with about 63 percent now owned by Lucent.
Note: I have watched LU thinking about an entry, but this is a serious negative.
Novatel Wireless warned late Wednesday that it would not meet analyst loss estimates for the first quarter due to a slowing economy. The developer of wireless modems and related software that provides anywhere access to the Internet said that it expects to lose 22 to 23 cents a share vs. an average loss of 14 cents a share expected by three analysts polled by First Call/Thomson Financial. The San Diego-based company also lowered revenue estimates to $18 to $20 million. Novatel (NVTL) did say it expects to break even in the fourth quarter of the year through an "aggressive" cost reduction program that should save the company in excess of $6 million a year.
Note: Haven’t followed it, but wireless is picking up for certain companies like those with LU relationships..

Whirlpool (WHR) said it remained "confident" that it would report first-quarter earnings in the "high end" of expectations. Analysts currently expect the appliance maker to report EPS of $1 to 90 cents, with an average of 96 cents, according to First Call/Thomson Financial survey of 9 analysts. "Given the challenges, we are pleased with our execution of the company's initiatives," said David Whitwam, the company's chairman and chief executive.
Note: First good news out of the durable goods sector after Maytag warned this week.

GX has 433K of shares getting dumped by insiders per form 4s filed since 3/23/01
Note: Always fun when the insiders want to diversify their holdings.

Japanese industrial production in February rose less than companies expected, missing forecasts for the eighth month, as businesses from Sanyo Electric Co. to NEC Corp. slow assembly lines in response to a slide in export orders. Factory and mining production rose 0.4 percent, seasonally adjusted, last month, after falling a record 4.2 percent in January, the Ministry of Economy, Trade and Industry said. From a year ago, output fell 2.1 percent, the first drop in 21 months.
Note: The yen is weak to the dollar so exports should have been better.

"We believe that (the quarter ending in) June will be worse than March in terms of revenue declines for the entire communications components industry," wrote Lehman Brothers analyst Arnab Chands. "We are hard pressed to find safe havens at this point."
Note: No safe tech havens until April 15 has passed.
According to TheStreet.com, short interest in March increased over 160 million shares to 3.6 billion. I am also noting lately an unusually large number of emails asking about shorting. Contemplating the movement in the Nasdaq from one extreme to another, it occurs to me that Joe Investor is often late. Many were entering enthusiastically still at Nasdaq 5000. Now, with such an extreme move downward, many are looking back in hindsight, thinking "if I had only been short". If Joe Investor is now jumping on the short band wagon this late in the game, I am wondering if he won't be run over again on the way back up. Ken Wolff of TSCM
Note: Short near my 1500 target? The risk reward is not there despite poor visibility.

A poll conducted by Reuters queried 13 Wall Street strategists who concluded that by year-end the S&P 500 will rise 40%, the Dow will be up 33% and the Nasdaq up 80%. Jay Shartis of TSCM
Note: Someone spiked the Kool-aid over on Wall Street. Wishful thinking at its best.

I wonder how much malice was in Nortel's timing of their preannouncement. In the midst of a smart rebound, and a day before their biggest competitor's IPO -- an IPO Lucent desperately needs for cash -- NT lowers their expectations for the quarter. Since they have to preannounce, why not time it for maximum advantage? Barry Rizholtx of TSCM.
Note: NT is sucking air and they wouldn’t be in this position if they didn’t order so much. To say they planned this gives an incompetent management credit for a flash of brilliance. I don’t buy this apple.
Quote of the Day

HOWEVER, stocks bottom well before there is ANY visibility regarding an improved fundamental outlook. This is especially true given the backdrop of such a large decline - especially on the NASDAQ. Consider a year to fifteen months ago when everything was just fine. Stocks began to slip well in advance of any evidence of a fundamental deterioration. The market is the final arbiter, and time after time is an accurate discounter of future events. Sometimes evidence of stability of fundamentals, or substantially lower prices which sufficiently discounts poor fundamentals makes for a bottom. Nevertheless, the nice thing, as it relates to Technical analysis, is that the Technicals (developing price action) often are a KEY to a turn in the fundamentals. That is why I find good technicians to be worth their weight in GOLD.
Doug Kass on TSCM
Note: I disagree with the above post. Maybe true overall, but I got out of the biotechs in March because the fundamentals were going down. Also, LU warned in January 2000 and took a 30% hit. MOT warned in March 2000 and this was the sign that handsets were going to weaken. I just missed this signal.

Summary

Last time NT warned (in Feb 15), it went down 32% and started a four day Nasdaq slide. Might be best to miss a bottom opportunity than watch the trade sink.

I met with several contractors. Many are seeing let payments and they are concerned how the summer will shape up. The spring looks solid, but booking for the summer is behind last year pace in the Chicagoland area.

Visited a gray iron foundry. Laid off a shift due to slowing automotive business. They are seeing replacement truck parts start to pick up but felt too much trucks sitting in lots. They said the industry overbuilt and new truck orders may be three-six months out.

Jack