| To: StanX Long who wrote (4231) | 11/29/2002 9:34:21 AM |
| From: Proud_Infidel | Read Replies (2) of 24134 |
| |
Article should be titled.....fund manager opinions to avoid.....this guy is shorting some of the best positioned companies near the bottom of a multi-year downturn in the semis, the worst ever....anyone who listens to him will have their head handed to him....JMO:
Stocks to Avoid
Edited by Len Costa December 2002, Worth Magazine
Starry-eyed investors have pushed these tech favorites to unsustainable valuations, says short-seller Bill Fleckenstein.
In fall 1999, hedge fund manager Bill Fleckenstein warned that shares were dangerously overpriced, but nobody wanted to listen. Now may be a good time to pay him heed. Despite the correction, the founder of Fleckenstein Capital, a $100 million short fund in Seattle, says that many technology stocks still have further to fall. "They're nowhere close to their valuations in past down cycles," he says. A former software programmer, Fleckenstein develops short ideas, including the six below, by uncovering bad news from tech companies' customers and suppliers. Investors are confusing big price declines with value, he says. "How far a stock is down means nothing."
APPLIED MATERIALS
Headquarters Santa Clara, CA
NASDAQ AMAT
Fair Value $6
Selling At $14
Shares of the world's largest semiconductor-equipment maker are priced for a return to prosperity. Don't count on it in 2003. Despite a severe cyclical downturn, Applied sells for nearly five times trailing revenue; it has troughed in the past at 1.5 times revenue. Excess chip capacity means customers are in no position to upgrade equipment.
DELL COMPUTER
Headquarters Austin, TX
NASDAQ DELL
Fair Value $12
Selling At $29
Dell's lofty multiple of 36 times its fiscal 2003 EPS estimate is the result of misguided hopes that a major PC replacement cycle is just around the corner. Customers have no reason to upgrade, though. Average prices for PCs are falling, pressuring margins. A move into price-sensitive markets for network switches and storage products won't help.
IBM
Headquarters Armonk, NY
NYSE IBM
Fair Value $42
Selling At $74
Big Blue is an accounting house of cards. During the mania, IBM used pension earnings to manage its bottom line; now it will invest up to $1.5 billion by 2005 to plug a shortfall. Its services business looks vulnerable, but investors can't be sure: Like troubled rival EDS, IBM uses murky percentage-of-completion accounting to book the revenue.
INTEL
Headquarters Santa Clara, CA
NASDAQ INTC
Fair Value $8
Selling At $16
With sales and earnings flatlining, Intel is cutting jobs and slashing capital spending. The company faces a structural dilemma: Its business is built on getting customers to buy high-end processors, but low-end ones work fine for most tasks. Given its build-up of capacity, Intel may have to take big depreciation charges if sales don't pick up.
KLA TENCOR
Headquarters San Jose, CA
NASDAQ KLAC
Fair Value $12
Selling At $34
Hope springs eternal. When this chip-equipment maker reported a dismal September quarter, its shares rallied nearly a buck. KLA sports a bull market valuation of more than four times revenue. Without growth in KLA's end markets, the party can't last.
LINEAR TECHNOLOGY
Headquarters Milpitas, CA
NASDAQ LLTC
Fair Value $14
Selling At $28.50
This analog chipmaker enjoys fat profit margins because its technology is customized for electronics goods. But its stock is no safe haven. Linear expects its December quarter to be flat or slightly up. Trading at 17 times sales, Linear has no room for error. |
