Stock Ideas (#2)

Last updated Saturday, 02-Oct-1999 03:12:01 UTC.

What follows are descriptions of stocks I have been following of late that I think are good bets either long or short. This list is for September 1999.

This month's picks focus on stocks with real growth (or death) opportunities. I am establishing a model long/short portfolio that I will be updating here. You won't be disappointed, regardless of market direction.



Symbol Name Price Rating Comments
C Citigroup 46 *****

I continue to like this monstrosity of a financial services company. Following the Bank One and Capital One announcements it occurred to me that Citigroup may be moving ahead in the credit card game. It is not priced for perfection, but more than 50% upside is hard to imagine. It has been strong, though AXP and JPM seem to have less trouble making new highs. A strong move into the low 50s would be a fine place to buy.

(I have a pretty favorable outlook for interest rates; it may be less attractive to those who don't, or have enough exposure to that effect already) Disclosure: I am long this one.

PCLN Priceline.com 80 yukyukyukyuk

This company still sucks. Remain short. Those who took my advice sold it short at 139.

AMN Ameron 45 *****

While valued like an airline, this company displays earnings quality and growth that are on par with much more expensive companies. Their recent strength and the possibility of a new high is reason enough to love the shares here. Could reach a split-adjusted 100 if they avoid any missteps.

NDB National Discount Brokers 31 ****

The market has not been kind to NDB. Though analyst coverage was extended to them with $100 price targets, concern about online trading in general has brought them down. Sellers seem not to care that AMTD and EGRP have already split so many times, since they all decline equally whenever e-finance stocks are sold off. I have added to my position and will do so again if it retests 25.

Buy under 60 and hold for 150-200. Disclosure:I'm long this stock. I really, really like this one.

ACAI Atlantic Coast Airlines 20 ****

No change; this airline is in much better shape than its valuation indicates. The forward P/E is 8 and 20% profit growth is projected. Regional carrier service appears to me to be an untapped market, so 20% growth seems conservative.

Buy under 25; reaching P/E of 25 could mean 300% returns.

CHINA China.com 49 yukyukyukyuk

This is my next pick for an Internet play that sucks. Hyped to these levels by virtue of being the only cyber-Asia play around, it is starting to sink in that business is not terribly good. They are censored by the Chinese government, involved in a dispute about Taiwan and not even among the top 10 websites visited by the citizenry. Cute symbol, but a real loser when investors start to care about earnings. Hit some poor fool's bid at 49 and place your stop at 55.

CTXS Citrix 55 ****

The market is starting to come around again to the notion that other software players may be able to grow despite the enormous influence of Microsoft. Citrix has delivered excellent earnings growth, and probably deserves its current valuation. If the real trend moves toward software-on-demand then these guys will strongly dominate and have the stock performance to prove it.

DELL Dell 45 ****

I am proud to enthusiastically recommend Dell once again. After a period of concern by investors, they came back with a blowout quarter just when people were beginning to write off the business. They take true advantage of e-commerce and nearly put Compaq out of business this year. The next few weeks could see a new high in Dell shares and there are no disappointments in sight. Buy now and hope for 100.

MTN Vail Resorts 17 yukyukyuk

This inflated company is dropping back to earth these days. The P/E is 60 and earnings growth is in the bottom quintile of US companies. Short now, short often. At 17 1/4 with a 19 stop this one is a good hedge to other long highly-valued holdings.

PETM PetsMart 5 ***

This company is near an all-time low, well below sales and nearing liquidation value. The risk in taking some below $5 is that there is no clear reason for this to be a bottom; however, the risk/reward is still good at these levels.

Buy on a 1-point scale below $5; hold for at least 100% gain on your capital.

SLR Solectron 76 ***

This company is climbing nicely and is a strong growth play. The valuation is rich, so be careful.

BTGC Biotechnology General 10 ***

A handful of biotechs have a rich business with real opportunities in the next decade, but few exhibit this kind of profit growth at such a reasonable price. It's under accumulation, so pick some up at 10 while you can.

DK Donna Karan 8 yukyuk

With poor profit performance and price strength, this company is a good a short as any. Look for the bottom to drop out of DK if results don't improve soon, as investors still expect a lot from them. I commonly establish a protective buy stop on short sales that is near the downward trendline. On the day it hit 7 11/16, I would have shorted a hundred or so with an 8 1/2 stop.

BWN Brandywine 17 yukyuk

This realtor is slowly being given a more reasonable price for its mediocre earnings performance. Establish a short position with, say, 19 as the stopping point.


Copyright (C) 1999-2000 Joseph Fouché.
The above does not constitute a recommendation to buy or sell any securities.

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