My Tracking Board

[BSWB]

By: joeygrose
03 Aug 2004, 03:22 PM EDT
Msg. 79630 of 79650
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on james cramer's realmoney.com

in case you all did not see this

"People always want speculative stocks. They want some cheap stocks that could amount to something that are basically calls, long-dated calls, where the worst that could happen is that you get diluted to the point of oblivion, but the best that could happen is lightning strikes.

I think these "calls" are good to have as part of a portfolio; in fact, I would advocate that discretionary portfolios could put up to 20% into some specs, with the idea that a couple get wiped out, a couple break even and the rest pay for the whole shooting match and then some.

Two years ago, I put together a speculative basket of big-name telcos that paid off in spades. I am looking right now at a bunch of speculative names that I think could be long-term calls on some big trends. This time I am not putting my money where my mouth is, in part because of trading restrictions that keep me from taking action, and in part because I already own some of them or analogs that already are leveraged to these industries.

But I like these specs, so I am sharing them with you.

Here goes:

1. Sirius (SIRI:Nasdaq - commentary - research): NFL made ABC. NFL made Fox. NFL made DirecTV. I think it can do the same for Sirius. Everyone thinks that Sirius paid too much to get the NFL deal. Everyone thought ABC, Fox and DirecTV paid too much, too. I don't think so. Possible downside: Sirius dilutes the heck out of you if it doesn't go cash-flow positive in a couple of years.

2. Revlon (REV:NYSE - commentary - research): The same bad news just keeps getting discounted here. How about if Jack Stahl pulls it off? He fixed the balance sheet. Can the sales be that far behind? Everyone's giving up on this brand, but it is a brand, a famous one at that, and I don't mind owning a $2 call on that industry.

3. Lucent (LU:NYSE - commentary - research): How can this company be trading with Nortel (NT:NYSE - commentary - research) when it is doing better than Nortel with no accounting issues -- total transparency -- and better management? I own Nortel, just bought more, because I think it is doing better than people realize, but the price in Lucent is ridiculously compelling. Buy it, put it away, forget about it. It will come back.

4. JDS Uniphase (JDSU:Nasdaq - commentary - research): Listen to the conference call, gosh darn it. The company's got big orders, great balance sheet. It is stuck at this price because of a hefty convert that has convertible guys leaning against the common. Can't last forever.

5. Avanex (AVNX:Nasdaq - commentary - research): This company reported a terrific quarter just now with revenue projections nothing short of terrific. If they can get some gross margin improvement, you get a double.

Again, it is possible that all five of these go down. I just find that hard to believe in the cases of Lucent and JDS Uniphase, both of which have much better balance sheets than people realize. I know that the short-term numbers with Revlon are disappointing but the market cap of the equity here is $700 million. That's about one quarter of the cost to build the brand out from scratch. Too silly down here. Avanex and Sirius: I like rapid revenue stories even if they aren't making money. These two could pan out.

Speculative but exciting, cheap, but not on earnings. Classic calls. Grab 'em."