Quarter to Quarter Aggressive Growth Stocks

[jackhartmann]

Portfolio down 2.6%, Dow up 1.92%, Nasdaq down 0.53%, S&P500 up 1.13% J-Blimps down 2.6%, Fuel cells/Alt Energy up 1.8%, Gorilla Hunters down 3.8%, Gilder2001 down 0.1%, OC-192 down 2.6%.

NYSE Volume: 1,1 mln...Adv: 1995...Dec: 1077 day 2
Up Volume 818.78 Down Volume 289.78 Huge day 1
New Highs 72 New Lows 27 Huge day 2

Nasdaq Volume: 1.7 mln...Adv: 2003...Dec: 1634
Up Volume 655.21 Down Volume 994.80
New Highs 46 New Lows 89 11 days of 2/1

Put/Call ratio 0.58 (Range 0.49 to 0.59)
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 $5.33 per million British thermal units. Up 6 cents.

VIX 33.18 down
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
Dow Utils ($UTIL) 367.42 +15.94 +4.54% California proposed raising utilities bills 30%.

Collapse of the day
Hardware ($HWI) 217.14 -12.26 -5.34% CSCO hits hard.

QQQ at $41 Chart: Down on very low volume Blocks: 517/574 neg for 2 day. Volume%: 59

One stock

Cisco Systems (CSCO) down 4.35% In an interview with the Financial Times, CEO, John Chambers, noted that the U.S. economic downturn would continue for a least three quarters and that there were signs of it spreading. Chambers said the company had seen the issues expand to the Asia-Pacific region and that it saw early signs in Europe. UBS PaineWebber reduces FY01 est. to $0.49 from $0.57 and FY02 to $0.50 from $0.61. Firm now estimates that sales for the April qtr will be down sequentially 20% (vs -12% est) and gross margin will decline to 52.5% (vs 56% est), resulting in EPS of $0.05 (current mean $0.14).
Note: Chambers spooked the entire sector of networkers

Portfolio Watch

Brocade Comms (BRCD) down 18.70%: Morgan Stanley Dean Witter downgrades from OUTPERFORM to NEUTRAL and cuts estimates: FY01 EPS now $0.47 (revenue: $600 mln), from EPS of $0.55 (revenue: $700 mln); FY02 EPS now $0.64 (revenue: $785 mln), from EPS of $0.78 (revenue: $980 mln). Says channel checks reveal further weakness and the risk reward characteristics for the stock have turned unfavorable.
Note: Momo hedge funds bailed fast. Most trades at retail so funds holding.

Scholastic Corp (SCHL) down 13.67%: Deutsche Banc Alex. Brown downgrades from STRONG BUY to BUY based on very difficult near-term earnings comparisons. Following two years of nearly 40% annual EPS growth, comparisons will be challenging in FY02 (May year-end), particularly in light of the absence of a new release in the phenomenally successful Harry Potter series. Children's book publisher Scholastic announced that it has put the kibosh on its potential purchase of defunct Internet retailer eToys' assets. Before deciding against the acquisition, Scholastic, which publishes children's educational and entertainment books, made a contingent bid of 30 cents on the dollar for the eToys inventory, which would have valued the bid at about $8 million.
Note: I disagree with the assessment. The movie in the fall and a new book probably then mean SCHL will be higher then than now. Someone dumped 401K shares at bid toward end of day. $36 held for most of the day, but that block pushed it lower. Glad Etoys issue is dead. It didn’t fit into the business model.

Watch List things to watch but not trade

C-Cube Micro (CUBE) Agrees to be acquired by LSI Logic (LSI 20.69) Cube in a stock-for-stock transaction valued at approx. $878 mln. Based on the 0.79-to-1 exchange ratio, deal values CUBE at about $16.34 per share.
Note: LSI dropped 12%. One to watch for basing as deal looks good.

Trim Tabs reported that U.S. equity funds lost an estimated $3.6 billion during the three days ending March 22. The fund flow tracker defined liquidity as "horrible," indicating that equity funds had redemptions for a second straight week and for four out of the past five.
Note: This is a vicious cycle of redemptions forcing prices lower and bargain hunters trying to find the bottom.

Globix (GBIX) Up 12.50% Chairman/CEO Marc H. Bell exercises options to purchase 55,600 shares of Globix stock and has also purchased $10 mln of the company's 12.5% Senior Notes on the open market. "I am confident in the future success of Globix and in our ability to execute on our business plan."
Note: A new tech buying stock. Novel idea.

Jeffrey Applegate, chief investment strategist at Lehman Brothers, acknowledged his year-end price target of 1600 for the S&P is "silly," and thus lowered it to 1400. "Regrettably, we have been bullish and wrong" for the past year (plus), he added.
Note: No penalty for wrong predictions. Just like Jeane Dixon in the National Enquirer.

Vyyo (VYYO) down 40.77%: Warns that Q1 revenues will be significantly lower than its previous expectations due to significantly reduced orders from system integrators and inability of customers to obtain adequate financing.
Note: Interesting that obtaining financing is still a problem.

A survey of loan officers showed banks continued to tighten credit standards, a finding that could motivate the Fed to further ease interest rates. From wsj.com
Note: Hmmm. This match well. Those with a lot of debt like telcos could have trouble.

Inktomi (INKT) up 0.44%: Banc of America Sec. lowering FY01 est. to ($0.13) from ($0.02) and FY02 to $0.16 from from $0.29. Maintains BUY rating but lowering price target to $9 from $25.
Note: I think INKT is ready to be bought out.

Salomon Smith Barney analyst John Joseph expects semiconductor industry to bottom in August of 2001. Expects June qtr to be materially negative, but will not be as negative as March qtr. Best case scenario for a bottom would be late spring/early summer; worst case would be late fall.
Note: I figure the train is leaving 4-6 months early.

Home Depot (HD) Salomon Smith Barney upgrades from OUTPERFORM to BUY and raises price target to $52 from $45. Believe that improving housing turnover and increased lumber prices provides visibility to the back half of 2001.
Note: I thought lumber prices were down. Seems to contradict what I am seeing in construction.

Manugistics (MANU) said that it met earnings estimates of 5 cents a share on higher-than-expected revenue for its fiscal fourth quarter. The Rockville, Md.-based company said that revenue came in upwards of $89 million, more than doubling the previous year's intake of $43.7 million. "Our differentiated solutions, solid execution at all levels of our business, balanced sales across key industry verticals, and increasing sales strength from our global operations are the key factors driving our market momentum and profitability -- allowing us to overcome current market trends," said Greg Owens, Manugistics chief executive. Reports Q4 earnings of $0.05 a share, in line with the First Call consensus of $0.05; revenues rose 104.6% to $89.30 mln from a year-ago of $43.65 mln;
Note: A quote out a of management 101 book. I would have said we had a good quarter.

Lucent Tech (LU) Reuters reports that KPN is set to award LU a contract worth just under one billion euros to build its UMTS mobile phone network, citing German publication Focus Money.
Note: LU been getting some serious deals coming its way. Think which companies are dependent on LU and they should do well.

Some investors and analysts see warning signs that the lodging industry isn't a particularly safe haven for stockholders, as bookings are down from this time last year and hotels scramble to fill high-priced rooms. From WSJ.com
Note: A slowdown in the economy affects travel, which affects travel. A pettern. J

TranSwitch (TXCC) : Company warns for Q1; sees EPS of $0.09-0.10; current EPS estimate is $0.16. Revenue to be approximately $38 mln. Company cites increased cancellations and push-outs of orders;
Note: Problems, problems, all day long.

A leading telecom expert has told the BBC's Money Programme that third-generation mobile phones may never exist. Over-investment in the purchase of 3G licences is blamed. Professor Peter Cochrane, until recently the head of technology at British Telecom, has told the BBC that the new third-generation phones may never appear. The professor is also concerned that some telecom companies may collapse under the financial strain of trying to develop and run a new generation of hi-tech mobile phones. "Make no mistake about it, this is a fairly serious game of poker. Some people are betting everything on this technology," he told the Money Programme, which is due to broadcast on Wednesday. Professor Cochrane, who was responsible for BT's 3G research programme until November 2000, said the auction process was "a really good study in madness". "It was a bit like lemmings going over the edge of a cliff," he added. In the UK alone, it is estimated that 3G networks will need up to 28,000 new masts and base stations. "I think Europe has shot itself in the foot, and certainly the UK has, because I don't think we are going to see 3G," said the professor Kent Thexton from BT said in the programme: "Now 60% of the UK population have found a way to put into their monthly expenditure their mobile phone bills... and what we're talking about is adding to that." http://news.bbc.co.uk/hi/english/business/newsid_1244000/1244153.stm
Note: The European telcos are suffering with huge debt problems like the US counterparts.

Vitesse Semi (VTSS) Company warns for Q2; sees $0.10-0.11; current First Call EPS estimate is $0.21; cites weakness in demand and order cancellations in the quarter; reduces Q2 revenue forecast from $150-160 million to $120-125 millionl; President and CEO, Lou Tomasetta, says " Near-term visibility at a majority of our customers has worsened over the last few weeks and we expect this phenomenon to continue into the next quarter.";
Note: Commuication chip companies are in trouble. Watch BRCM and AMCC to be next.

Dutch telecoms firm KPN is selling off chunks of its business as it gets serious about reducing its £13.7bn debt mountain.
Note: Not as big of debt as ATT, but interest payments are killers. Same company that gave LU a big contract. Go figure.

PMC-Sierra (PMCS) 33.94: Communications chip maker lowers Q1 outlook to $0.02-$0.03 vs $0.12 First Call mean. Reduces revenue forecast to $118-$120 mln. Company to cut workforce by 13%, or 230 employees, in response to the slowdown in customer demand.
Note: Ugly as recession in sector is going to be longer.

Kazakhstan has opened the first major pipeline offering a direct link between Caspian oil fields and international markets. Kazakh Prime Minister, Kasymzhomart Tokayev, turned on the tap on the 1,580-kilometre (950-mile) link via Russia, which analysts say strengthens Moscow's hand in the race to control the region's oil. The pipeline runs from the huge Tengiz oil field in western Kazakhstan to the Russian Black Sea port of Novorossiysk and has an initial capacity of 560,000 barrels per day
Note: More oil, low prices. Just like 1998.

Conexant (CNXT) Down 5.62%: Warns that Q2 results will be lower than previously anticipated due to continuing weak demand and excess channel inventory. Anticipated Q2 net loss of $0.35-$0.40 vs red ink of $0.24 anticipated by analysts. UBS Warburg in their afternoon note says that the company's warning that total revenues will decline 35-40% sequentially in the March 2001 quarter was largely expected; leaves FY02 revenue and EPS estimates unchanged; lowers FY01 EPS estimate to a loss of $1.23 from a loss of $1.14.
Note: Will hit old favorite KOPN as CNXT was 40% of revs.

Quote of the Day
Earlier this month, AT&T Wireless (AWE) started to advertise this new full service -- 3G wireless service, access to the Internet, streaming video, audio, the whole bit. They pointed out that what this was is this NTT DoCoMo I-Mode service, that it used this wide-band CDMA [code division multiple access] chipsets from Qualcomm (QCOM). Then I saw the announcement that Verizon (VZ:) was giving Lucent (LU) a $5 billion contract to build out the infrastructure for this service. When we started to build up our exposure to communications-equipment business in late-December 1996, it was on the same basis. Contracts, after like an 18-24 month period, in December of 1996 were being led by the wireless companies to build out the PCS digital-wireless spectrum. We made the first meaningful uptick in our exposure in technology in some time. We bought an investment position in Lucent, and we bought an investment position in Qualcomm. I mean, $5 billion is a huge contract, and it's more likely to be front-end loaded than back-end loaded because AT&T Wireless is offering this service. I'm sure they're using Lucent and Qualcomm components in this thing. Larry Fuller
http://www.thestreet.com/p/funds/fundjunkie/1361968.html
Note: I’m glad someone else noticing the wireless deals. It seems the press doesn’t want to discuss this trend in better visibility.

Summary

Watched QCOM for a trade. Right now, we see the sell all rallies theme still holding. LU news is good. NTRO should benefit.

We are seeing the hedge funds rotating in and out of sectors. Best to watch and not get suckered into any false rallies. Ease into tech over a ten month timeframe.

1998 was similar but the price of oil was half of what it is now. Inflation, unemployment, interest rates, and stock prices are similar to then. Perhaps, we might be a little more tied to natural gas and oil for the recovery than anyone wants to admit.

Jack