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Index of Companies


 


Activision
Aetna
AFLAC
AIG
Altera
AON
Apache
Applied Biosys.
Am Capital Strategies
ARM Holding
Annaly Mortgage
Atml
Bank of America
Bayer
Bea Systems
Best Buy
BJ Services
Bell South
Boeing
Bradley Pharma.
Burl. Resources
CACI International
Calpine
Capital One
Career Education
Celera Genomics
Celgene
Chesapeake Energy
Chilean Telecomm.
Cincinnati Milacron
Citizen Comm.
Cognizant Tech
CP Ships
Cummins
Delphi Auto. Sys.
DHB Industries
Disney
DMT Energy
Duke Energy
DuPont
Electronic Arts
Entergy
Entremed
Fellows Energy
FileNet
Gannett
Gencorp
Global Crossing
Hospiria
Intervoice
Imos
Impac Mortgage H.
Imperial Chemical
Input / Output
Kaman
Kellogg
Kmart
Lanxess
LSI
Lucent
Markland Tech.
Merck
Morgan Stanley
Nortel
Orbital Science
Paychex
Pain Care Holding
Placer Dome
Procter & Gamble
Progress Energy
Prudential
QLT
Quantum Fuel Sys.
Raytheon
Red Hat
Scor
Sears
Service Corp
Siebel
Sirius Satellite
Star-Craft
Star Gas Partners
Textron
Thornburg Mortgage
TIVO
Toll Brothers
Unisys
Unit Corp.
UTI Worldwide
VSE Corp
Wachovia
Walgreens
Wilson
XTO Energy

 

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Q:  6/10/05 Using your recommendation, I bought APA for $53. Is it time for me to sell this company?

A:  I'm uncertain on Apache (APA - $62.13), however, let me tell you what I do know:
  1.  A month or so ago I attended an investment seminar, by a major wall street firm; they were not positive on the continuation of high oil prices in the $50 range.  
     
  2. The Value Line reports are showing strong EPS growth for Apache in 2005 (2004 EPS of $5.03  vs. 2005 $6.15) and then a decline to $5.15 in 2006. In their 5/20 report (page 1929) Value Line feels that the petroleum producing Industry "is probably reaching its peak." Then they go on and give a semi-recommendation to Apache because it has several promising prospects. They are showing declining projected earnings and increasing projected stock prices.
     
  3. As for ZACKS, they are showing an earnings decline in 2006 (for their low EPS estimate range) from 12/05 estimates of $5.53 to 12/06 estimates of $3.46.
Look, it would be very easy to say lock in your profits until visibility improves, but; I just don't know where oil prices are going to be in February 2006. The problem is this, Apache is a much bigger company then it was 10 years ago and it generates a significant (over $2b annually) cash flow. If the oil industry stays somewhat health you could see an expansion of PE ratios. Thus, lower EPS but higher stock prices. I just don't know! The decision is yours. Good Luck - Joe

P.S. I normally feel if a company's cash flow is strong (like it is with Apache) the stock price should do well.
 
  
Q: 6/7/05 Any thoughts on CECO?
 
I like Career Education (CECO - $35.44), as well as its entire industry. The trends are moving in its direction. However, the government probes are serious, therefore, I would move slowly and carefully. You need to be patent with CECO it may not move for a while. This is really a buy and hold deal.  Good Luck - Joe
 

Q: 6/7/05  I am tracking: American Capitol Strategies (ACAS - $34.53), Sears Holdings (SHLD- $154.91), Annaly Mortgage (NLY- $18.98), and Toll Brothers (TOL - $47.49). They are all near their 52 wk highs, particularly SHLD. Do you think a buying opportunity exists at present or better to wait a while?  Thanks. 
 

 A:  This is how your picks look from my eyes:
 
It looks like your playing a combination momentum and dividend game. Looking for dividends and some juice on the upside. I think for the summer your strategy may be ok. Look, the yield curve is flatting, and has been for at least a year; so its going to be harder for the financials stocks to make money going forward. Companies like NLY should make less PV Profit on the discounting of their MBS. They are going to need volume gains to offset the squeeze in rates.  I don't know the value or composite of the particular holdings of ACAS. I have worked on roll-ups before, you just don't know the quality (cash flow) of the companies you purchase until after you purchase them. The business is very very interesting, but it's risky, with big swings. The insiders mostly likely get "friends of the family" stock, where you don't. In most cases the original owners sell because of problems. I think this is one of the most lucrative industries to be involved in, but as I said its very risky.  Toll Brothers is hot with excellent earnings, backlog, and a reasonable PE. The stock price is up approximately 100 times over 15 years ago. The trends are upward. Greenspan is having a hard time slowing housing, if you look at the 20 year rates they actually dropped 100 bp from a year ago. I don't see a big housing bubble, expensive homes; yes, but not a bubble. However, the government sees a bubble and that is what matters. If they think there's a bubble it is there job to take more action, and that's bad for stocks.
 
I'm concerned with the economy. As the yield curve flattens it implies something is wrong and everyone needs to be careful. Some of the major world economies like Japan, Germany, and France are not doing well. We are six months into a 2nd term presidency, there's no pressure to keep the economy moving forward. Oil is high and interest rates are going up, on the plus side jobs are looking good (even with Friday's report).
 
I think if your going to make any money the time is now. After the summer it may get harder.
- Good Luck , Joe
 
 
Q: 5/13/05 I am looking for a natural gas play but I can't decide if I should but xto or chk.  Any suggestions?
 
A: It looks like it's an even call between XTO Energy (XTO - $27.50) and Chesapeake Energy (CHK -$18.40). They both had a very good 5 year run. I don't have their current reserve figures, but these companies are benefiting from the structural problem in the gas industry which is not going to correct itself overnight. I like both companies and believe they should have a few more good years of growth. These companies are generating significant cash flow! Zacks has XTO's 12/05 (high) EPS estimate of $2.79 or 10 times earnings, versus, Chesapeake's 12/05 (high) EPS estimate at $2.20 or 8.5 times earnings. Additional they are both expected to grow profits over 30% in 2006.  Good Luck - Joe
 

Q: 5/9/05  I am thinking about 2 swaps in my portfolio:  The first is my retail stock selling BBY to buy SHLD and my second move I am thinking about is an utility switch selling ETR to buy DUK.  Do you think these are wise moves?  Thanks in advance.
 

A:  I think success breeds success and that it is a good practice to keep your stocks that are doing well.
 
Entergy (ETR $72.85) versus Duke (DUK - $29.36): Duke is the better company and I like its merge with Cinergy and its dividend increase.  Nonetheless, the stock hasn't moved in 10 years. Entergy has preformed very well over the past 6 years, as such; I would stay with it.
 
Best Buy (BBY $51.53) versus Sears Holding Corp (SHLD $144.70): I think Sears is a better value play, but I would stay with Best Buy, I believe its better managed and has more potential.
 
I think you have two forward moving companies. Why switch? I just don't see a clear benefit to switch, today. Bigger companies don't necessarily translate into higher returns.  Good luck, Joe
 

Q: 4/26/05  I am a recent college graduate who is considering purchasing stock in Kellogg.  Do you think that Kellogg is a good company to invest in?  How would you best determine the present value of the company?

A:  I feel that Kellogg (K-$42.98), as well as other brand management companies such as P&G and JNJ are expensive, but, nonetheless, are good investments for young adults. Kellogg earns approximately $2.28 per share, resulting in a PE ratio of 19 times earnings. That's a high price for a company that has an internal growth rate of 5%; and is not acquisition driven like a GE or JNJ. What makes Kellogg and these other companies attractive is their customer loyalty and stable (perpetual) cash flow. This builds lasting value over time. That said, I prefer PG over K simply because Procter & Gamble does a better job in moving its stock price up.
 
I believe the baby boomers have move out of technology and into these bigger more established, dividend paying, companies like Kellogg. The appeal is that you will preserve your capital, receive a modest cash flow, and grow principle over time as a hedge against inflation. At these prices they are not value stocks, however, for an young adult it's a nice dollar cost averaging vehicle. There is a reason the seniors are avoiding the faster growing technology stocks; they lost big big money on them!  Years of gains can be lost overnight when technology changes, the trend has been going on for fifty years. Burroughs, Digital, Wang and Eastman Kodak were all world class companies that are (mostly) gone. Yet the consumer brand companies are still here and prospering. I would follow the money and the money is going into conservative companies like Kellogg. Good Luck - Joe

Click here for a previous comment on Kellogg.
  

Q:  4/13/05  I would like your comments on two stocks: One, UTI Worldwide Inc.(UTIW), which S&P recommends and another, Hospiria (HSP), which I hold in my portfolio.

A:  Regarding UTI Worldwide Inc. (UTIW -$70.21) It easy to see why its being recommended. Its growth rate of 50% is excellent and it exceeds its 33 X PE Ratio. It business model of being a non asset base logistics company seems to be working. My concern is that it is a low margin business. Its 10/31/04 operating margins are only 4.4%. At the same time interest rates are rising and oil is high; at 33 times earning you are paying a high price for a low margin (but fast growing) business. The stock is up over 7 times since 2001. Short term you may be able to make money. Long term however you need to be careful. A slow down in its growth rate and you could be stuck. If you like the stock, take slow and small steps into it. At 33 times earning there's no rush to jump in. (I believe, where possible, one should try to focus their stock portfolio into high margin businesses)   

Hospiria (HSP -$ 33.30) Nice company but slow growth, a 17 X PE ratio, good margins, good equity, excellent cash flow, somewhat leveraged. I would "Follow the Cash" Hospiria has a solid cash flow and over time that should push the stock price up.

The critical issue seems to be, do you stay with a slow growing company or move into a fast growing company. That depends on your situation. Good Luck - Joe
 

Q:  3/21/05 What do you think of Aetna after the split this week?
 
A:  Regarding Aetna (AET - $73.90) I believe that success leads to more success. As the country is getting older, sicker, and more security conscious Aetna's growth prospects are improving. I feel that the stock has gotten a little pricy over the past year. The dividend is also small, I don't understand why the company doesn't start increasing its dividend payout. In this market I would wait for a better price to present itself before buying. Usually stocks decline after a split. I think most of the short term money has already been made. If your horizon is a few years out, you may do very well with Aetna. Click here to see prior comments. Good Luck - Joe  
 

Q: 3/16/05 I own IO and Qlti. Are you still positive in the long term outlook of these two companies, especially IO with the current legal problems. Thanks!

A:  Regarding Input / Output (IO - $6.56), first understand a few things. Their products are expensive, their profits are somewhat back ended towards year-end, and they deal with Russian oil companies. Their is always a business risk of last minute cancellations in their business model. This is a cyclical technology company.  The bet is simple. If the price of oil remains high and exploration continues to pick up. IO should participate in that upturn. I can't comment on their legal issue; I just don't believe the spin; so I don't have the correct facts to properly evaluate the situation. 
 
Regarding QLT (QLTI - $13.04), obviously the business risk is high and the stock price is weak. I don't believe there's an answer to the Visudyne question yet. The jury is still out as to weather Visudyne's sales, profit and cash flow will be materially effected from Pfizer's (Eyetech's) introduction of Macugem.  
 
In both of these situations it takes time for their issues to play out. This is how small capitalization companies operate. The facts are not in yet and it may take a few more months before one finds out how the year is "playing out".  - Joe 


Q: 3/9/05 My friend is not that old but not young either (60) and has saved some money and wants to invest half of it $10,000. She can invest an additional $400 a month for the next four years. She don't want to lose money and  wants her money to grow. What would you recommend?     For some background I told her a few years ago when the market was high to put her money in the Vanguard total stock market index fund and make monthly additions to her $3000. The market went sour for a couple of years and she got scared did not make additional contributions and after a few years (2003) withdrew her money. I buy stocks but told her not to since she don't have enough to diversify adequately.  I don't know much about mutual funds but tend to think she should now try a balanced fund with a stock and bond mix such as the Oakmark growth and income fund.  ----  thanks
 

A:  Let me just think out loud with you for a minute.  She doesn't have a lot of money so her money needs to be protected. The first thing that came to mind is Government I Bonds. Its a very safe recommendation for a website to give. The problem here is that she has a very long run ahead of her. Its risk free, has some hedge against inflation, but the returns are very low. I think we could figure out a better solution for her.
 
The next idea is bonds or bond funds. The problem here is that interest rate were artificially made low after 9/11 to pick up the economy. As Mr. Greenspan increases rates, bonds and bond funds should lose their value. So I don't suggest bonds right now.
 
Over the years I have, somewhat, followed the no load American Century Funds. Their Ultra fund is pretty good. I have not followed them in recent years, however, I did for about 15 years. Ultra won't make you rich, it does fluctuate, but you should do better then I Bonds. I don't follow mutual funds as much as stocks, I would call American Century and get an update and recommendation on their funds. Their number is (800) 345-2021. 
 
Below is a different approach to investing, its more risk then mutual funds, but you eliminate the middleman's markup and it may be the best thing for her. She has approximately a 25 year (plus) run ahead of her. As such, I believe she needs to be invested in stocks that have the potential to grow principle as well as dividend yield. Because trading cost have been lowered if she needs money beyond the dividends she could sell a few of her shares. $10,000 plus $400 a month for four years buys more than one would think. Here are some ideas:
 
Pfizer 100 share at $26.76 - Yields 2.8% - Drugs
JP Morgan Chase 100 shares at $36.94 - Yields 3.64% - Financial Services
Verizon 100 shares at $36.94 - Yields 4.44% - Telecommunications
Service Corp 100 shares at $7.70 - Yields 1.29%  - Services
 
Not including commissions, her cost would be approximately $10,775. Double check my calculation, however, the weighted average cash yield translates to approximately 3.56%.  Additionally, just by Pfizer going to $32, JPM $40, VZ $40 and SCI $8.5 it translates into another approximately 10.5% appreciation. All of which are conservative estimates. This strategy gives her cash and potential upside in price appreciation. You can't estimate how the stock prices are going to move but the dividends normally don't decrease.
 
With the 400 per month she could acquire:
ICI - $21.16  Yields 2.77% - Food, Fragrances, Paints and Chemicals
Repsol - $28.48 - Yields 2.33% - Integrated Oil
 
My one concern is that she will be concentrated in the North East. After the first year she needs to invest in industries like: defense, oil, recreation, reading materials & health care, located away from the North East. I would like to see her pick up a RNT or a LMT but right now they may be a little to pricy.  I tried to pick a selection of low priced, good quality, dividend paying, diversified securities that could serve her well for the remainder of her live with out doing anything.
 
Good Luck, Joe (Feel free to e-mail me if you need more ideas.)
 
 

Q: 3/8/05  Thoughts on FILE (FILE NET) Good bad or not?

A:  FileNet Corp. (FILE - $23.43) has a lot of qualities that make for a successful investment. With $397m in sales, net income of $29m, EPS of 75 cents and a market capitalization just short of $1b; its entering the mid-cap size classification of companies on solid footings. The company's balance sheet is strong, as of 12/31/04 File had $348m of cash & investments, no LT debt and a health cash flow.  74% (estimated) gross margins are very good, however, net margins and ROE percentages need improvement. File is a moderate growth business with positive LT trends moving in its direction. Selling at approximately 31 times earnings the company is not a steal, but it is reasonably priced. If you hold the stock you should be able to make money at these prices. The issue that I have is that its hard to make good money when paying a fair price. There are a lot of good companies that are fairly priced, I look for steals. At these prices File is an ok investment but not a steal. Good Luck, Joe
  

Q:  3/1/05 Would appreciate your thoughts on Cummins Inc. (CMI) and Prudential (PRU). Thanks!

A:  Regarding Cummins (CMI - $74.54) - From an earnings stand point Cummins has a forwarding PE ratio of approximately 9 times earnings, a 1.6% yield and thin profit margins. The PE ratio is exciting, however, even in good times it's a low margin business. The balance sheet is some what leveraged; as of 9/26/04 CMI had a LT Debt to EBITDA ratio of approximately 2 times and a positive tangible net worth of $839m. It's acceptable. Look, I see a cyclical business, that is priced on the high side, in an increasing interest rate environment with high oil prices. I would be very cautious.
 
 
As for Prudential (PRU - $57.58) - A liked Prudential at $44 however at $57 per share I'm not as excited. The trends seem to be going in Prudential's direction. As the population ages insurance becomes a big part of estate planning for high net worth families. The security that insurance offers becomes more valuable as the population ages. Prudential is more fairly valued now then a few months ago. That said; I find it's very hard to make a good return when buying a stock at a "fair price".  Pru is selling at an ok price, however, I would personally wait for a better price. I believe it's better to pass than to over pay for a security.  Good Luck - Joe
 
PS -  I don't see a rush to buy either of these companies at these prices. - Joe 
 

Q: 3/1/05  I am looking to buy a gaming stock.  I am  looking to buy atvi or erts.  Any comments?
 
A:  I'm in a rush so I'm going to make this short. I like Activision (ATVI - $16.62) better than Electronic Art (ERTS - $64.53) only because its smaller and has a reasonable PE ratio. I think in the long term recreational companies are trending upwards. I like your picks. I'm unsure of pure technology companies  I think it's very hard to make real money in technology right now. I went to a investment seminar a few days ago and they were recommending basic industry and commodity stocks. The oils, chemicals, housing products, etc. the story is that China is pushing up demand and prices. The petro chemical stocks are also being "pushed"  I don't know if it's a good move. In the early 1980's I worked for National Distillers (a big petro chemical company) when oil increased in price their profits dropped. Back then they were unable to pass along cost increases to their customers. Wall street is now saying this time it's different and customers are accepting price increases. I'm not sold on that story line yet. Like I mentioned earlier I like ATVI at $16.62 its reasonably priced, has nice growth & earnings, as well as a strong balance sheet (as of 3/31/04 - no LT debt and approximately $587 in cash). Good Luck - Joe 
 
 

Q: 2/18/05  I can not help thinking about Markland Tech after the last news. But maybe you think it's pointless, and you can explain a similar and more profitable stock. Of course, my profile is short-long term and penny stock lover! Whatever you may need from Spanish stock market, just say!
 

A:  Regarding Markland Technologies (MRKL.OB - $0.61) I think Markland looks worse then it really is. While it reported a six month loss of $9.2m; its cash flow from operating activities was a positive $194k. However, I would not play in the penny stock game. It only take about 10 years of investing to build a nice portfolio of stocks. Start thinking in term of companies like Service Corp. Its a nice cash cow. In ten years this could be a big hit. Bombardier at $2.70 your buying a world class turnaround company. It is risky, but its easy picking. Acquiring a taste for some of the more established companies takes time and its very difficult to do. That said; I never met anyone who made big money in penny stocks. Good Luck, Joe 
 

Q:  2/17/05  I bought FLWE in the middle of Jan. It is up about 30%. What is your take on this stock?

A:  Regarding Fellows Energy (FLWE.OB - $1.185) This is beyond my scope. You need to understands the nuances of oil exploration & drilling in the Rocky Mountains and Wyoming region. I looked at their SEC 10KSB filing dated 2/4/04; I noticed that the old management team gave back 52 million shares for $25 thousand dollars. It looks like FLWE is a start-up operation. The key here seems to be in the CEO George Young. This is a small venture so you are backing him and betting that he's capable of finding oil sufficient for you to make a proper return as a shareholder. I think it's important for you to know a little bit about the person you are backing (no matter how small your investment is). I would call him up and talk to him about the company's prospects. The company's telephone number is (303) 327-1525.  - Good Luck, Joe

  

Q:  2/4/05  Did you analyze ABI and CRA?  Is that a good investment?
 

A:  I believe there is money to be made with Applera. Keep in mind Applied Biosystems (ABI - $20.24) is somewhat cyclical and its performance is tied into the drug and bio technology company's capital expenditures. That said, be conservative and don't over pay for the stock. $20 is fair value and a middle of the road price. I would hold off on purchases until a better (bargain) price presents itself.
 
Regarding Celera Genomics (CRA - $12.99); The company has significant cash and short term investments to cover expenditures for the foreseeable future. It only has 73 million shares outstanding. If it develops a "hit" it has the potential to be a big win. This is a good long term "Atlantic City" stock play. I think it's to early to evaluate the potential of the CRA's research pipeline. Celera has a high beta and large losses, I don't see a rush to buy the stock, as such; I would wait for a lower price. 
 
I like Applera! Try to buy low so the investment really pays off.  Good Luck - Joe
  

Q:  2/4/05 What do you think of the stock TMA. It is a mortgage REIT with a dividend yield of app. 9.6%. It deals in only AAA credits and does match funding. Deal only in ARM mortgages.

 A:  Here's what I think. You need to be careful with Thornburg Mortgage (TMA - $28.49), as of 9/30/04 Thornburg had $24.7b of liabilities with only $1.6b of equity or a 15 to 1 leverage ratio. That's high. Additionally, there is something to be said about the "Buy What You Know Strategy". Look at TMA's P&L! You have, gains on ARM assets & hedging instruments, hedging expense, management fees, performance fees. In Shareholders' Equity you have fair value adjustments. These lending financial institutions have an extremely complicated business model; make sure you understand their business before investing. I realize the dividends are good, however, at the end of the day, if interest rates are rising and loan originations are flat to down, the present value profit from the cash flow streams on new volume should be down. Zack's and Value Line are showing EPS increases in 2005. My concerns are: 1) Are they living off of their old portfolio? and 2) How are they current performing on their new originations? The key is: How is this years production going to effect this year's and next year's profit?  I don't know from my brief review!  I have always believed that these type of companies should be under the umbrella of bigger financial institutions. I would be careful about buying mortgage companies in a rising interest rate environment. Good Luck - Joe
 
 

Q: 2/3/05  What do you think is the long-term outlook for Gannett (GCI - $79.44)?  They seem to be in a downturn at the present time even though their profits are good.

A: Gannett is not a bad investment, It has a 9% to 10% growth rate, selling at 16 times earnings with a debt to EBITDA ratio of 2 times.  I have a similar situation as you; I own Verizon. The world is moving to mobile and I own a (mostly) wireline company. The world is going internet and your considering a newspaper & TV company.  IBM is a good case study. They made the transition from a mainframe company to an integrated computer company. The transition was choppy but successful. However, over the past 20 years IBM's stock was only a mediocre investment. I think the same future holds true for Gannett and Verizon. I think GCI will be an "ok" investment, but not a home run. Good Luck - Joe  
 

Q: 1/26/05 (a) I received a gift of 200 shares of Boeing (BA - $50.05) stock from my parents. The face value of the purchase was $4.00 per share when purchased by them. I have watched the stock currently at about $50.00 per share, and feel a little uncomfortable about it but to sell and reinvest but I would end up with a capital gains problem. I am 58 years old and would like to see a reasonable gain on an investment for future retirement needs. I have a 401 K Plan valued at only $45,000 (excluding the gifted Boeing stock) What are some considerations? Thank you
 

A:  You asked a very difficult question and gave me very little information to go with. Your 401k balance is on the light side for your age, however, most of the country is in your situation. I'm hoping you have a 10 year run which would get the balances up. You need to max out future 401k contributions plus more. Make sure your diversified in somewhat safe investments. Some risk is ok avoid things like penny or story stocks. If you need a mutual fund take a look at the American Century funds they offer solid no-load investments.
 
As for Boeing. Its getting a lot of bad press lately and it seems like its not doing well; BUT it only seems that way. At the end of the day it is one of the most sophisticated companies in the world. It has 3 to 4 separate cash flow streams (Commercial airplanes, Defense, Space and Leasing income) I don't see it as that expensive. Its trading about 18 times Zack's 12/05 EPS street estimates. At $50 per share its high but not expensive. I believe that you should hold on to your good stocks and Boeing would qualify as such.
 
Look; politically things are uncertain, as such; we as a country have to control the high ground / air space and that is where Boeing excels. I believe its value will be protected by the government.  Don't forget to reinvest your dividends (and all your investment income) it adds up quickly. Good Luck - Joe 
  

Q: 1/26/05 (b) We own 4000 shares of Wachovia Corporation (WB - $53.88). What do you think about the prospects of this stock reaching the 60's as it was when the merger took place?

A:  Wachovia is a very good investment. Yes it made some acquisition mistakes which resulted in a drop in price and dividend, but it has come along nicely. This is a $500b bank, I don't know if we are going to see the days of the Money Center Banks selling at 3.89 times Book Value for a while. However, now you own a company with 3 years of earnings and dividend increases and a $30 Book Value.  A two times book value multiple is not unreasonable which gets you back to a $60 value. Many of the bank stocks are being held down because of rising interest rates, high oil prices and inflation concerns. (High oil prices are actual good for WB.)  As long as the economy stays out of another recession, I believe Wachovia will see both EPS advances and a BV multiple expansion which will push the stock price higher (past $60). The company's issues seem to be behind it; WB should be a nice money maker going forward. - Good Luck - Joe
 
PS - Make sure you have proper diversification because you never know what could happen. The time to diversify is when everything looks good.

 

Q: 1/26/05  Hi Joseph, I have written to you before and I am very appreciative of the good advice you gave me. I was wondering if you could explain how to put a stock screener to use. What criteria we should input to achieve a positive indication if a stock is worth investing in. Example what to look for and how to look for it. Any light you could shed on the subject would be a godsend.
 

A:  I know Yahoo has a stock screener, I'm sure others have similar models. I never used them, I should, they could be very valuable. That said; in this market I would sort big companies with revenues of a few billion dollars plus; that have declined over 75% from their high.  Your looking all over the Globe for big turnaround companies that have the potential of the markets turning in their favor. (Your looking for the big declines so the upside is worth it - It's very risky)
 
Another sort is needed in the Oil Service, Oil & Energy stocks. You need to look at who's Up, Down and Flat. Money is being made in energy stocks. Try to participate if you could. - Good Luck, Joe  (PS - It's kind of sad, but the computer is making the newspaper stock sheets obsolete.)
 
 

Q:  1/26/05 (c)  MOST OF MY PORTFOLIO IS IN MUTUAL FUNDS, 90%, BUT I KEEP THE REST AS RISK INVESTMENT. DID WELL WITH SIRI BUT AM NOW OUT.  YOUR OPINION ON ENTREMED (ENMD - $4.12)

A:  Ok, another Cancer research company. Scientist have been trying to find the cure for cancer for over 50 years. Everyone, including myself is trying to find the next Amgen. As of 6/30/04 ENMD had $26m of cash and investments on hand. They raised another $14m in December. Entremed spends about $5 to $7m per quarter. They should have at least 5 to 6 more quarters until additional cash is needed. They know how to raise money, so far they raised $275m. The company needs to be careful because cash is always hard to come by. "Panzen" won't complete their phase III FDA studies for 1 1/2 to 3 1/2 years. There's a lot of uncertainty, risk and speculation until the studies are completed. This is what I call an Atlantic City Stock. I like the fact that it only has a $146m market capitalization; so if Panzen is somewhat successful, Entremed can be an extremely successful stock move. - Good Luck - Joe

 
 

Q:  1/26/05 (d)  CAN YOU GIVE ME ANY RECENT NEWS ON (DMT ENERGY) I OWN SHARES IN THIS STOCK FOR SOME REASON IT HAS QUIT TRADING AND I CAN'T FIND NO INFORMATION OUT ON IT, THANK YOU FOR YOUR HELP

 
A:  Attached is a news article on DMT Energy that you may find of interest. Being delisted is never good and neither is not filing SEC reports since 5/21/00. I don't have enough information to properly evaluate the situation.  A lot of small companies opted to be delisted after Sarbanes - Oxley. For many small companies the personal liability and filing costs out weighs the benefits of being a public company and having access to the capital markets.  Try calling the company. Fred DaSiva's number is 403-265-7869. Good Luck - Joe    PS - Get the facts correct before making a decision. Don't base your decisions on appearances!
 
 
 
 

Q:  1/26/05 (e)  Are there any robotics companies that your interested in?

 
A:  I don't know of any good robotic companies. Over the years I looked at the old Cincinnati Milacron (MZ - $2.99). The story seems to stay the same. Nice revenues no profits.
 
Taking a step backwards, I liked your Orbital Science (ORB - $10.06) idea. There is talk that the government only wants one of the big rocket companies to survive. So if LMT and BA combine their rocket businesses that leaves ORB as a good secondary player for the lighter payloads. This is sophisticated technology, misses and malfunctions is part of the business. Years ago Martin Marietta's (LMT) rockets would blow up on the pad, or the defense budget would be cut, causing big price swings in the stock. Sounds familiar?  Today's issues sound similar. Good Luck -  Joe
 

Q: 1/26/05 (f) I'm considering a buy of Sirius Satellite Corp (SIRI - $5.83). I'm asking your opinion of a "buy-in" price....or would you not buy Sirius now?


A:  At $5.83 I think the big money has already been made on SIRI. I had a similar question in November and my response is the same today. I'm attaching my prior response. Look, the goal is to find both a good company at an inexpensive price. I think Sirius is over priced.  Good Luck - Joe
 
 

Q: 1/14/05   Your site in very insightful and I appreciate and utilize a lot of your techniques.  I was wondering what your thoughts are on VSE Corp. (VSEC - $22.50).  Thanks and look forward to your response.  I would also love if you could email me ways I can contribute to the sight.  Take care!

 
A:  Let me go over my analysis first before my conclusion. I like the business. Its valuation seems reasonable from a PE standpoint.  From reading the 9/30/04 10Q It looks like most of its contacts are cost plus arrangements I didn't see any big exposure to fixed price contacts. The balance sheet looked ok / strong. $6m of cash, no LT debt, $21m equity and a $15m unused and available credit line, not bad!  However, this years cash flow was just awful. The company made net income of $2.4m for the nine months ending 9/30/04 but had a negative cash flow from operations of $1.4m. Because VSEC's balance sheet is so strong its more of a "watch"  item for now.  Its probably a contract milestone issue, hopefully cash flow will catch up to net income by year end. The issue I have is its Profit Margins. For the quarter ending 9/30/04 revenues were $62.2m while gross profit was only $1.6m or 2.57%. That's low and will limit you upside as revenues grow (margins are hard to change).  It ok to have a small portion of your assets in a low margin business, however, I believe the bulk of one stocks should be in high margin businesses. I think its fine to buy a few shares to have your hands in "the pie", just don't fall in love with the company because the margins are to thin and its a very small company.  Good Luck, Joe
  
 

Q: 1/11/05  Hello Joe, "XXX" is interested in CTC (Chilean Telecommunication company).  He has been following it for several weeks (needless to say, he was happy to see it was on your international watch list).  His question is this, in your educational library section discussing ADR's you mention possible taxation issues with ADR's.  Is that an issue with CTC's dividend. Thanks.
 

 

A:  I think "XXX"  has a good pick in Compania de Telecommunications de Chile (CTC - 10.96). Just remind him that Chile is a small country it only has 16m people, so his upside is somewhat limited unless they are able to expand geographically.  Regarding international taxes: according to KPMG.com  "withholding tax that foreign residents must pay for the dividends they receive from Chile is imposed at a rate of 35%". In other words, you have to file a tax return in Chile to get some of your withholding taxes back. I don't know about most people, but I live in NJ and have a very difficult time getting NY state withholding taxes refunded to me.  Forget about getting a refund from Chile. Its just to hard unless the money is large and you know of a "real" tax professional. That said; "XXX"  has one other issue with CTC. I believe the dividend of $1.69 per share, as shown on Yahoo is wrong. Based on CTC's 2003 cash flow statement from Yahoo I calculated a dividend rate of approximately 12 cents per share. He should verify the dividend rate with his broker, their systems should reflect the correct rate. Nonetheless, I like CTC because it is generating significant cash flow returns that should eventually payoff its debt and boast its stock price. Good Luck - Joe
  

Q: 1/10/05 (a) I would like your opinion on Citizen Communication (CZN) and Bradley Pharma, (BDY) which is having some trouble with a drug that is being sold as a generic. I have losses on both because of downgrading. Thank you. I would like to contribute to this fine site but not with a credit card.
 

A:  Regarding Citizen Communication (CZN -$13.85) - High leverage, management changes, declining earnings, and a negative tangible net worth make for a bad story; however, the story sounds worst then what it may be. The company has a nice cash flow and it should be able to support its Cap x requirements, as well as its $1 dividend per share. My concern is with the $1.3b debt payment due in 2006. It looks like with their $719m shelf debt registration; its tight but doable. No wiggle room in 2006; 2007 should be ok. In 2008 there's another $750m debt payment due which should be manageable. Look, yes your getting a dividend, but this is a bankers game at this point of time. The majority of the company's cash flow is carved out for the debt holders, leaving little for the equity holders. No need to rush, however, I would look for a stock where more of the cash flow benefits the equity holders. If you have a very long-term horizon, say approximately 96 months
(or 8 years); as the P&L amortization clears out and the debt is paid down then the equity holders should do well and have better capital appreciation potential. Eight years is a long time and currently theirs no room for surprises or mistakes.     
  
Regarding Bradley Pharmaceuticals (BDY - $14.79) I think the downside is already reflected in its stock price. I don't see anything in the short term that will push the stock price up. I just don't know enough about the company's pipeline. It doesn't seen that bad of an investment. Right now the small specialty drug companies (except for Pfizer) is where you want to be positioned. I've seen EPS estimates at $1.64 for 2005 and $1.45 for 2006. The downward trend in EPS is not good, but the low PE ratio should keep the price up. I don't know your in cost, but you may be able to wait this one out and come out of it ok. Good Luck,  Joe
  

Q: 1/10/05 (b) What do you think about (CTSH - $41.36)? Is it over price or is it ok to get in with this price?
 

A:  Regarding Cognizant Technology (CTSH - $40.39)  I think you picked the right company but at the wrong price. Try looking at the value concept from a different angle. The company has a $5.3b market capitalization. If one could invest that $5.3b at a 6% yield it would earn $320m. Last year Cognizant made approximately $100m. The company would have to triple its earnings for it to catch up with its market value. The stock is "hot" maybe you could make some short-term money on it, however, I would pass. The company is selling at approximately 42 times next years projected earnings (57 times 2004 earnings, I would wait for a better entry point before buying. The goal is to find a good company at an inexpensive price. Good Luck - Joe
 

Q: 1/4/05  What are your thoughts on Capital One (COF - $83.79)? Are there any signs to look for that would indicate a split?

 
A:  Capital One is a good stock and they are excellent at marketing; but be careful, in the short run, because interest rates are rising.  Good Luck - Joe      P.S. This is such a big company that a stock split should not affect its value or your investment decision.
 

Q:  1/4/05  I have Artisan Components (ARTI) and it just united with ARM Holdings...what does that do to the stock I have invested in ARTI?
 

A:  I 'm going to pass on ARM Holding (ARMHY - $6.24 - ordinary shares). I just don't know enough about its technology to make a valid comment. I was unable to access their SEC filings. ARMHY seems to be a small but profitable chip designer for wireless equipment. My only though is that, if you make good money sell it and move on. It hard to find another Intel. Good Luck, Joe
 
P.S. Your brokerage firm should automatically change the securities for you on your statements. The exchange of stock for this deal is complicated and the information on the internet was not clear. It looks like the final price paid for ARTI was $36.3246 per share and the value set for ARMHY was $6.06 so you should receive 5.99 shares of ARM Holding for each share of Artisan. There were also various cash / stock alternatives that were made available. This is where a broker is needed; to ensure that you receive the correct shares and cash amounts. Don't be afraid to call your broker, it his job to make sure the merge is processed correctly. Don't let him sell you anything, just get the accounting right. Be careful here and make sure you review your broker's statements in December / January. - Joe 
 
 

Q: 1/3/05  What do you think of Orbital Sciences Corp.(ORB - $11.72)?

 
A:  I hope you realize that Orbital Sciences is an "Atlantic City" type investment. Just by the nature of its product there will be big swings in the company's stock price. A rocket malfunction or new contract award will move the stock price (either way).  [For my website visitors: ORB develops &  manufactures small space and rocket systems. Its YTD 9/30/04 nine month revenues totaled $500m with net income of $33m on 64m dilutive shares outstanding. Its nine months cash flow from operating activities was strong at $61m. Not bad!  The balance sheet is adequate; with a tangible net worth of $115m and a cash balance sufficient to repay almost all the LT debt.] The bet is whether or not there is room for another rocket and space company. I think the odds are in your favor and I feel that at $11.72 Orbital is a good buy. Good Luck, Joe
  

Q: 1/2/05  Do you think that Kellogg (K- $44.66) is a suitable stock for a 22-year-old about to graduate from college to start a Direct Purchase Plan? My granddaughter asked my opinion.
 

 A:  I like Kellogg for a Direct Purchase Plan (DRIP). I think its an excellent move. When I graduated college (1979), the one stock that I missed out on, and always regretted it, was Procter & Gamble (PG - $55.08). I always thought it was to big, to pricy and grow to slowly. It just seemed like an old man's stock at the time (and it still does). At the time, I didn't appreciate that they are a great marketing company and they know how to move their numbers. Learning to appreciate a quality company is an acquired skill. I like both stocks. I mentioned PG because, I think, its financial returns would be a little better than Kellogg's in the long run, however, both stocks are excellent and should be very good investments. Good Luck, Joe  
 

Q:  12/30/04 (a) I bought Impac Mortgage Holding (IMH - $22.77) at $11.25..love the dividend...is it time to bail...thanks!

 
A:  I like IMH's business model of originating and securitizing mortgages. Just by the numbers they did a beautiful job in execution. The problem is that many of these type of companies just don't survive, for whatever reason. Just by your dividend yield you know other investors have a concern. The stock price to book value at 2 times seems low / reasonable. It has $786m of Equity with $17.2b of CMO debt as of 9/30/04 or approximately 21 to 1 debt to equity. That's a lot for a stand alone company. I realize that you could debate the debt to equity ratio by discussing recourse and nonrecourse debt. Nonetheless, I believe this type of company belongs under the umbrella of a bigger financial institution. If I were management; I would sell the company right now. Interest rates are rising and real estate prices are at their cyclical high. They should sell it and start all over again. In terms of your stock I don't see any immediate need to bail out, but you need to be careful. Good Luck, Joe
  

Q:   12/30/04 (b) What do you think about Bank of America (BAC - $47.05) long?

 
A:  Bank of America is a good overall investment. It's well balanced with a good dividend (3.86%) and some price appreciation potential. My concern is that with interest rates going up, no one is ever perfectly hedge on interest rates, there's probably some exposure on rates, however; with the economy improving credit quality should improve so hopefully its a wash. At $47.05 per share it sells for 11.5 times projected 2005 earnings or approximately 1.8 times bookvalue. While the current stock price seems high, it only seems that way, It is reasonably priced. The "boys" in Charlotte do a excellent job in managing the company. It's a good long term stock to be invested in. Good Luck, Joe  
 

Q:  12/27/04  Is AIG's (AIG - $65.05) stock going up in price ???

 
A:  I can't predict stock prices, no one can, however, I believe this is one of the better investment opportunities in the market place. At $65 per share, it should be a very good investment but not a home run.  I was hoping the stock price would crash in 2004, creating a steal, but it never occurred. Zack's has 2005 projected EPS at $5.00 to $5.35.  If you apply a 15 or 20 times PE multiple you have a nice return. The dividend is nothing to write home about. The company still needs to resolve its government issues, which may result in large price swings next year. There is a certain amount of risk involved, however; AIG is a world class insurer, with substantial equity, good growth and solid earnings; selling at 12 times projected FYE 12/05 earnings. I believe the risk reward equation is in your favor. Good Luck, Joe
 
 
Q:  12/23/04 (a) Long term (1 year) prognosis for Unisys (UIS - $10.05) and  Kaman (KAMNA - $12.38). Thank you.
 
A:  I'm unexcited about both of these companies. If the economy does well it may be possible to make a few points just by the market moving up. These companies won't make you rich! 
 
Look, the goal of Burroughs (UIS) was survive and grow. Burroughs never got over the Sperry purchase. Your only on this planet once, it time for them to change their name back to Burroughs and go after IBM. Burroughs needs to take their skills up a notch. Forget the cost cutting, its time for them to develop or buy new product and to go into new markets.  Good Luck, Joe
 
 

Q:  12/23/04 (b) What do you think of Aetna (AET - $125) at the current price?

 
A:  I think Aetna is pricy, but I like stock and think you could make good money on it. Lets take a step back for a minute. The game is to buy a nice company at an inexpensive price. My concern is that you are paying fair value for the company. The stock is at its high, and the market is high, you are leaving yourself open for no room for a margin of error. That said, you need to be careful.  Good Luck, Joe
 
 
Q:  12/22/04 (a) First time visiting site and wanted what advise/input you might share on Burlington Resources (BR - $43.04)  Yesterday I entered into a Feb 42.50/40 Bull Put Credit Spd, based on an advisory "predicting an imminent rise to 54", instead - today its down 2% and my sold strike is Feb 42.50 Put. The review I did of financials didn't pick up on any FLAGS.  appreciate any useful words, look to be a donator later, OK
 
A;  Here are my thoughts:
 
I don't give price targets, that's not what I do, however, your $54 target is not that far fetched. Look at 2001, the company earned $680m and had a high stock price of $26 in the first quarter of that year. This year (2004) BR should earn approximately $1.5b or 121% over 2001 earnings. Take that same 121% against the 2001 stock price of $26 and you have a $57 target price; that represents a 12 times forwarding PE multiple based on Zack's 2005 high EPS estimates.
 
Additionally, there is an old stock market timing strategy with oil & gas stocks "buy in August and sell in February". This strategy does have some merit. Buying at the end of December and selling in February is a different story. 
 
With Burlington Resources, you need to interpret page 8 of their 9/30/04 10Q. It seems that they took only a minor production hedge position. If that is the case, then today's high gas & oil prices flow right to the bottom line. I would do the same thing if I were running the company, however, its a risky strategy and can lead to large fluctuation in earnings. (You need to understand page 8 of the Q, I did not read last years 10K.- You need to understand their hedging position - I think they are not fully hedge - which is good for you - get a second opn. on their hedging strategy)  
 
I like the company, industry, timeliness and price of Burlington Resources, however, no one is going to be able to forecast (with certainty) its February 2005 stock price.  Good Luck, Joe 
  

Q:  12/22/04 (b) Do you think Paychex (PAYX - $34.29) is a worth having a long term investment in?

A: This is a nice business especially in today's legal environment. No executive wants to have the personal liability associated with payroll taxes, trust funds and the like. These companies offer Board of Directors, CFO's, and Controllers the ability to protect themselves from personnel lawsuits, as such; these payroll and HR service companies are nice long term companies.

 
The issue I have with Paychex's is its stock price. At 30 times FYE 5/31/06 projected earnings, it is no bargain.  Additionally, Paychex's has a $709m tangible net worth and a $12.9b market capitalization; therefore the stock price is mostly based on the company's (stable) projected cash flow.  The company earned 68 cents in FYE 2001 and is expected to earn approximately 95 cents, per share, this year (5/31/05). In effect it grow 40% in 4 years and is selling between 30 to 40 times earnings. I believe the stock is expensive. If the company and the economy stays statues quo the stock may have an annualized return in the low teens, plus dividends, which is good.  
 
However, you could easily find yourself in the situation that the company is growing and the stock price stays stagnate or is down.
 
Look, Its a good company, however, I believe the price is to high, as such I would pass. The goal is to find both a good company and a low stock price. Good Luck, Joe  
 
 

Q:  12/20/04  Any news on CPN or EMRH?

A: Regarding Calpine (CPN - $3.50)   I don't have any "news" on Calpine, however, I do have some thoughts on the company. As I look at Calpine, I'm thinking, If El Paso was able to turnaround why can't Calpine do the same? As of 9/30/04 the company has about $3.1b of "real" equity (the book value of $4.6b less its intangibles). At $3.50 a share, the market capitalization is approximately $1.9b. Their is value here!

 
With $18.4b of interest bearing debt, $3b of tangible equity and an annualized cash flow from operating activities of approximately $300m, CPN is classified as being a highly leveraged company. It needs to be able to fund both its debt maturities coming due [2004 - $746m (more); 2005 $482m; and 2006  $657m.] and it needs to fund it's capital expenditures. Cap x is running at $1.1b for the nine months ending 9/30/04. Management needs to be able to complete its power-generation projects and then sell them off, or other assets, for a profit. I sincerely don't think the bankers are going put up that much more money.
 
If CPN's management is financially and operationally astute, and the bankers cooperative, I believe the company may be able to become viable again, with a stock price to match. My concern is that with $18.4b of debt; interest rates increases may reduce the little operating cash flow that there is; and then the debt holders may have a bigger issue.
 
Additionally, as the economy improves (or the weather gets colder), the company's utility utilization rates should improve, thereby increasing cash flow.
 
This is a true Atlantic City Stock Play. I believe the odds are 51% to 49% in your favor. Good Luck - Joe
 
PS. I have no information on Energy Holding Inc. (emrh. - $ 0.10)
 
 

Q: 12/17/04 Any thoughts on PRZ?

 
A: Initially my thought process, on Pain Care Holding (PRZ - $2.95), was that its not that bad. It has a Revenue running rate of approximately $41m and a Net Income running rate of approximate $6m or .25 cents per share or 12 times projected earning. However, the details say pass! The company has a GAAP book equity of $38m. If you subtract goodwill of $36m there is real equity of only approximately $2m. So the doctors have already been paid out. Next, the company has $2m of tangible equity with $18m of debt, so its very leveraged. Additionally, PRZ's cash flow does not justify its $100m market capitalization. For the nine months ending 9/30/04 the company's cash flow from operating activities amounted to only $1.7m. Look, book earning mean little; cash flow is where you will make your money. I would wait for further income growth, cash flow improvements, and debt being paid down. The company has a $100m value with only $2m of tangible equity, the risk / reward equation is not in your favor. I would pass on it. Good Luck,  Joe
  

Q: 12/14/04 I have been buying shares of DHB. What do you thing of this company long term? If LU does a reverse stock split would it be negative for the future stock price.

 A: DHB Industries (DHB - $18.22)  I think DHB is an ok move. We are at war and defense spending is strong. The smaller niche defense companies, that are reliably suppliers with long term relationships with the government, is where you make money.  Look, the stock is pricy. I would think of this as a short term play, maybe 1 to 3 years. You need to follow their back log closely. Their back log is a good forecasting tool. If the stock goes up take your profits and leave. I don't think DHB is going to make you rich, but you should make a few points on it. This is a one time blip, remember in 2003 the stock was at $1 a share. When the war spending is over (which is going to be years) DHB may return to its prior running rate. You need to have an exit strategy.  

Regarding Lucent (LU - $3.75) LU is starting to make money. Its gross profit margins are at 42%. It only has a handful of customers, so when they gets contracts they are usually large and the profit can be significant because of its high profit margins. LU could move up a few points. On the negative side, it has a pension liability that is scary. I personally think that a reverse split will have a negative effect on the stock price. However, my official (researched) response is that a reverse split is neutral. I have a write up on my website that may add value to you. http://www.chestnutandcedar.com/Library/FundamentalAnalysis/ShareEquity/LIBFASEstksplit.htm . Good Luck, Joe

 

Q:  12/6/04  What do you know about TIVO...will it ever take off or is there going to be too much competition?

 

      12/17/04 I need to apologize to my readers. I used financial figure on TIVO from the internet that were wrong. This      demonstrates the importants to always double check figures with the original SEC documents.

A:  TIVO  (TIVO - $4.95) (Revised) People love TIVO because it give you the ability to freeze, rewind, play back and record live TV shows. The company has 2.3 million subscribers, of which 46% are recurring paying customers, generating an annualized revenue running rate of approximately $152m. Financially the company has $81m of cash (net of debt), with an approximate annualize cash usage of $74m. Cash flow is getting tight. It has 80 million shares outstanding with an additional 24 million options outstanding. 
 
TIVO has created a nice niche over the past five years. I don't think anyone can predict if this niche is sustainable. The uncertainty of the company's future customer base, along with fast moving innovation by competitors makes the stock speculative and very risky.
 
A lot of money has already been lost. The initial capital was $648m, today's market value is $396m resulting in investors losing at least $250m. Additionally the stock once sold at $80 per share now it trades at $4.95, yes their was the technology bubble, but more money was lost nonetheless.
 
From an investment standpoint I would pass on it and wait for more information to develop. However, It may be a good short term trading stock. Look, the stock is appealing because it has a "cool" product, a fast growing customer base, and a low market capitalization; I still would wait until its cash flow firms up and becomes more visible  - Good Luck, Joe
 
 

Q:  12/1/04 What is your take on NT? Do you think they will ever get over their reporting issues?

A:  Look, Nortel (NT $3.45) has been around forever, if you were the CEO or CFO would you sign-off in this environment? At the end of the day its just a short-term job for them. The punishment for being wrong is so great that timely financial statements are a thing of the past. I would wait for every last person, to sign-off before giving approval to release the financials. I think that when the numbers do come out they are going to be so conservative that future years will look better.  That said; I don't understand why you are solely looking at NT. I think Lucent (LU - $3.97) is ahead in their turnaround efforts by a few years. For the 50 cents price difference take a look at Lucent. The short term upside of LU is better than NT.  NT is not a bad company, if you hold it you should be able to make good money on it. Lucent, however, is running on all cylinders. - Gook Luck, Joe
 

 Q: 11/24/04 (a)  SLEEPERS:  QTWW & STCR is this a good move? GM has some influence. Also GY & Steel Partners, is this workable?

A:  Lets look at your selections very carefully. Quantum Fuel Systems (QTWW) is interesting but It's to far in the future. Holding a few share to keep your hands in the pie in the event something materializes is ok. I like Star-Craft (STCR) it seems to have some upside potential. The message board are pushing it. I also like it, but once again I'm not excited. Gencorp (GY); the merge with Steel Partners is off for now. (I didn't think Steel Partner's reason to drop their bid was valid. I worked for a lot of companies, to much equity is hardly ever a issue) I'm also not excited.  

It seems that you are thinking Detroit and I'm looking at Texas. Just take a look at some of the oil service companies: Input/Output, GlobalSantaFe, and even Halliburton. The oil related companies are making money today. The market is risky, I would invest where real money is being made. - Good Luck, Joe 
 

Q: 11/24/04 (b)  Any thoughts on IMOS? It seems like a good buy at 6$ considering that it has EPS of almost 1$.

A:  I was unable to access their SEC filings so the figures I'm using may be inaccurate. Yahoo has earning estimates at .25 cents while Zacks has a range of .83 to.95 cents. I think the reason it is only at $6 a share is because it's a contract service provider. They provide assemble and testing services, like Flextronics, which historically is a low margin business. Last year-end (12/03) IMOS had approximately $175m of debt on $265m of revenues. That makes it a highly leverage company. I have not seen more recent figures. My concern is that there is a supply glut in the semiconductor industry. You need to be careful. It's an ok play for speculative accounts. IMOS's stock price is going to move with the contract manufactures and the semiconductor groups. - Good Luck, Joe
 

Q: 11/23/04  My father has 4000 shares of Merck (MRK). He is talking about selling it due to the Vioxx deal. His thoughts are that it will continue to drop because of litigation and settlement costs. Also he is thinking it will not continue paying the high dividend.  What is your take on this?
 

A:  It hard to come up with a position without knowing the investors timeframe, investment objectives and financial wherewithal. However, I believe Merck is one of the best companies in America and once its current issues are behind it will return to its former status with a stock price to match.
 
In the near term, its under an extreme amount of scrutiny. Any company in its position is going to look bad. Everyone is going to have a spin to further their ends. At this point I believe all news on Merck is distorted. The facts and truth are lost and will be until the problem issues are closed down. Understand that, attorneys make fortunes from cases like this. Prosecutors become Governors. People would kill to get their hands on some of Merck's $8b a year cash flow, or a portion of its $100b market value. That said; now there's uncertainty. A normal market drop in stock prices, can lead to a flee to quality. Causing institutions to sell their positions, resulting in a buying opportunity.  
 
Currently thru 2006 the news and comparisons financial results will be negative, as a result the stock may be weak. The dividend is at risk.  In 2007 you should start seeing positive results and hopefully some sort of clear path to resolve the litigation. As court dates get close, the truth tends to win out. I don't think Merck is guilty of anything. All drugs have side effects, some are not known until years afterwards. That's the risk of taking medications, most people understand that fact. Many people are on medications just for their side effects.  At the end of the day Merck creates drugs that save and improve lives, which will make it a good investment.
 
I believe, the settling of law suits may cost a few hundred million shares of stock, but that's it.
 
Remember, while all the disruptions are occurring, the company is still moving forward in its R&D program. I looked at an 7/23/04 Value Line Report before the Vioxx scandal. They had Merck's 2009 EPS at $3.60  with a high target price of $64. If you deduct 20% to settle Vioxx issues you still have a $50 stock price in 2009. Remember Value Line knows that Zocor comes off patent in 2006.
 
In summary, I believe the stock may be very weak for the next two years. Their is also a high probability of an emotional drop in price, similar to what happened to Halliburton in 2002, after that it should slowly start to strengthen.  - Good Luck, Joe
 
 

Q:  11/22/04  Is WLSN at its current price of $5.2 a good buy?

A:  I don't normally follow cyclical retail stores like Wilsons, I would appreciated it if you get a second opinion. Take a good look at the price chart. Except for 2004, usually Wilson has a strong first half, followed by a weak 2nd half. That said you may be able to make money by buying now and selling in the May / June timeframe. Additionally, Value line has Wilson's earning $1.17 per share in the 4th quarter ending 1/31/05. Zacks has fourth quarter earning at $1.14 per share. If the earnings materialize as Value Line & Zacks expects this may be a good pick - Good Luck, Joe 
 

Q: 11/20/04  Thinking of selling my Raytheon (RTN) stock and getting into CACI International (CAI) what do you think?

A:  I think Raytheon and CACI International are both excellent defense companies. CACI would fit nicely into Raytheon. Because both stocks are on the high side, I would stay with Raytheon. I think your short term upside potential (3 to 4 years) is the same, but there is less downside risk with Raytheon. It not your typical trade-off decision between a bigger more stable company, paying a 2% yield verses a faster growing younger company. Raytheon is also executing a turnaround strategy, which gives it added juice. There are no rules saying you can't own both companies. Taking a portion of your Raytheon (say 20%) and investing in CACI may be a good alternative strategy. CACI's simulation business is appealing. - Good Luck, Joe
 
P.S. If you use Zack's 2005 high earnings projections, CAI has a projected PE of 17.4 vs. RTN's 2005 projected PE of 19 times earnings. It is a growth vs. stability decision. Look, inflation is up,  interest rates are going up, the budget deficit is out of control, the dollar is low, and unemployment is still high, I think in this market; preservation of capital is more important then potential growth. - Joe
 
 

Q&A  follow-up 11/19/04 - Sirius hiring Mel Karmazin was a good move that makes their business model that much more attractive, however, with an even higher stock price Sirius's market capitalization is now a bigger concern. It's also hard to make money on a proven (top) manager the second time around. Right now expectations are driving the stock price, eventually profits will become the driving force behind the stock price. Investors are paying a high price for uncertain profits.  Good Luck,  Joe

Q: 11/18/04 - I was thinking of buying Sirius Satellite Radio (SIRI). What is your thoughts on this stock. I know that it has better than doubled in the last year.
 

A:  You need to look at Sirius from a few different angles. Sirius's business model is very attractive and may work. It's early on in the game and it already has 662 thousand subscribers at $10.69 per month, that translates to an annualized revenue of approximately $84m. That's not bad!  You could come up with projected revenue scenarios just as good as me. It's just guess work as to how big the company can become, no one knows. It has $517m in cash as of September 30,2004 and is running an annualized cash flow loss of approximated $313m; given it a remaining cash burn rate of approximately 19 months. The majority of the debt is due in 2009 so the company has some wiggle room. The problem for you, as an investor, is that it already has 1.2 billion shares outstanding, resulting in a $6b market capitalization. If the company's business model works and it turns out to be a financial success your upside will be limited because of the amount of shares outstanding. Fundamentally, I think this is an extremely risky play for the potential upside. As such; I believe it's a bad investment. The risk reward equation, for you, is out-of-balance. However, If your interested in Gambling, then you may have a good short term stock. Emotions or a few good ratings from Howard Stern next year, may push up subscribers and the stock may go up.
 
In summary, I don't consider SIRI an investment quality company, but it does have a strong "Atlantic City" stock appeal.  - Good Luck, Joe


Q:  11/16/04 - What about Disney and Service Corporation International stocks?

A:  I view Disney as a preservation of capital play, Its dividend yield, under 1%, is minor. I believe the big money has already been made, it just seems like a big bureaucracy now. Value Line, however, has 2009 target prices up to $60 per share. I was disappointed when DIS walked away from the profits from Fahrenheit 9/11 (It seems like they forgot that they are a business; and public companies should go for the money first). A lot of their computer animation is coming from Pixar and it seems like Steve Jobs has replaced Walt Disney.  Disney (the company) has a beautiful cash flow. I think for them to realize Value Line's high target price they need to follow the GE model and start to increase their acquisition activities. It sounds like I'm negative on Disney, I'm not!  I'm disappointed that they are not living up to their potential.
 
I have a write-up on Service Corp in my website. It may be of interest to you. http://www.chestnutandcedar.com/stocksofinterest.htm   I like the steady cash flow feature of the company's product. If management is able to execute its business model, Service Corp has the potential to become a very valuable company in a decade. - Good Luck, Joe
 
 
Q:  11/15/04 (a) - I am a long time employee of Walgreens and invest 10% of my salary every 2 weeks. The stock has been good to me over the years. I kind of use it as a savings account. Selling a little bit each year. What do you think of WAG (should I sell 1200 and buy a Bimmer?) Thanks for the tip on SCO, I bought in at $1.70 two days ago. Looks good.
 
 
A:  I think Walgreen is a very good investment. I normally don't care for low margin businesses, however, this is one of the exceptions. The bigger picture here is proper diversification. I don't know your financial situation, however, your employment's cash flow and your savings should be separate where possible. In your situation it may not be simple, because you may not be able to find a better investment than Walgreen. I know the past 6 years look stagnate, eventually Walgreen stock is bound to start increasing again. I like your idea of selling a little each year, and hopefully you are reinvesting the proceeds into something else and not spending it. Look!  A few years ago Merck was one of the best companies in the World, now many of its employees may be fired while their stock positions are substantially down. No one could have predicted that. - Make sure your properly diversified.  
 
I never heard of Bimmer. Do you mean Zimmer (ZMH)? If you mean Zimmer, the orthopedic company. Be careful. The whole world loves this company. However, Its a 15% grower selling at 34 times earning. The returns over the next three years may not be as good as the past three years.
 
Finally, Scor; Its a nice midsize French reinsurer. For $1.80 a share its worth having your hands in the pie. - Good Luck, Joe
 
 
Q:  11/15/04 (b) - What are your thoughts on Bea systems?
 
 A:  Last week I was asked a similar question regarding Siebel. I find that Bea Systems and Siebel have many similarities. In both cases these are nice investments that you should be able to make money on, however, both are pricey. Year-end tax selling may put pressure on these companies. I would hold off on purchases until a better price presents itself.
 
P.S. - Bea has a net cash position of approximately $830m, while Siebel has net cash of approximately $2.1b. Technically, Siebel has a "better" balance sheet; but Bea is cheaper, selling at 24 times next years projected earnings. - Good Luck, Joe
 
 
Q:  11/15/04 (c)- What do you see for LSI ?
 
A:  I own stock in LSI.  I see a company with a lot of potential and a very attractive risk / reward equation (going out 4 years).  Earnings are down, there is a supple glut originating from China, and more importantly, they missed a major move in the market. Altera and Xilinx capitalized on HD Programmable Logic Chips while LSI missed the boat. I was surprised to see a decline in storage system revenues in the September quarter.  Now they are under extreme selling pressure because of weak earnings, and year-end tax selling is around the corner. Its finances seem to be in order, even though 1/2 of their book value is comprised of intangibles. I see a good turnaround stock for 2005. In the short term the stock price is week and may go a little lower. - Good Luck - Joe  
 

Q:  11/15/04 (d) - Is ATML a good buy at the current  price (around 3.2$)?

A:   Let me start out by saying I like Atmel, and believe you could make money on it at the current price. That said, I would wait on purchases, and hope that a better price presents itself. Currently their is a supply glut driven by China, so time is on your side. Earlier in the year the stock was sell in the $6 to $8 range,  therefore, Atmel is a good candidate for year end tax selling. The issue that I have with Atmel is that it is a commodity chip company; as a result it has low margins. It ok to have 1 or 2 low margin businesses in your portfolio, but the majority of your stocks should be in high margin businesses. (click here: for prior comments on ATML) - Good Luck,  Joe 
 
PS: Look, the extra 50 cents that I'm trying to squeeze out of this stock may be your profit if things don't turn out as expected - Joe.   
 

Q:  I hold shares of Bayer AG (BAY).  How do I estimate the initial offering price for Lanxess once it's spun off?

A:  Bay is having their next investor conference call on 11/17/04 you may want to listen to it. I don't think the price is set yet. Usually prices are not circled until right before the spin-off. The ratio is a 10 for 1 distribution. Lanxess is going to be a nice size company. Their six month results are: Revenues: 3.2b,  EBIT: 80m, Debt: 1.5B,  Usually a lot a selling occurs when these type of distributions occur. I have a nice write on spin-offs on my website, it may be of interest to you. - Good Luck - Joe
 
  
P.S. The reason I don't want to estimate a price for you, is that the price of oil is distorting the true EBIT figures of Lanxess. I normally would calculate an enterprise value based on a multiple of annualized EBIT. I need a more "normalized" EBIT figure before I can estimate a price range of the stock.  - Joe  (attached is a prior comment on Bay)
 

Q:  I have owned Nortel for some time. They have had all kinds of problems, should I hold on longer term? I have 25,000 shares

I think your ok with Nortel. Think about splitting your investment with Lucent. Both companies are almost identical, Lucent seems to be ahead on executing its turn around strategy. Diversifying into both of them may be the best approach. The risk is high, they are cyclical, and the upside may only be 6 to 10 points. (If you hold the stock until the next election cycle in four years.) - Good Luck - Joe 
 

Q:  Your opinion on Red Hat (Rhat) please.

A:  Red Hat is only for speculative accounts. That said; I like RHAT. Financially; its generating positive cash flow and has a cash net of debt position of approximately $380m. It seems to have the financial wherewithal to execute its strategy. It is, however, a very High price security even at $11.33 per share. The consensus is that it will earn about 40 to 47 cents a share next year. It sells about 26 times next years earnings. Finances aside, there is always a place for competitive lower price products. Don't expected it to be another Microsoft, and you should have an exit plan on this stock. - Good Luck - Joe
  

Q:  I own about 700 shares of BJS. I'm not that familiar with the stock market ins and outs, but I would like to know your opinion on what you think the future (near and far) predictions are for it.

A:  Right now Oil and Defense are the places to be. BJS is a major player in the pump business. I realize that the analyst wanted better earnings, but they always want better earning. BJ's is not overpriced at 20 times earning. As long as oil is strong, BJ's is a nice investment to own.  Look, many industries in the north are down, Drugs: Merck, BMY and the rest are having major problems. Insurance: its blowing up by the minute - just yesterday MM laid off 3,000 employees. Telecommunications: Lucent & AT&T, laid off most of their former employees. etc.  Bush has a problem, he has to keep oil strong. It's one of the few places in the country where real money is being made. That said; BJ is right in the heart of it.
 
I believe, however, there may be only a two year window to make money. The last two years of a second term president are usually down years for the market. I realize you live in Houston and all the local companies should do well, Baker, Hal, EP, etc. However, you also need to be diversified (outside of oil)  in case the economy changes quickly. - Good Luck - Joe
  

Q:  What are the best investment options if interest rates rise dramatically. Historically, stocks have been 50/50 in such an environment. Are there stocks that do well in those kinds of times??

A:  Usually when rates raise the stocks affected the most on the downside are the banks and finance companies. The stocks that do well are those companies with little debt and pricing flexibility. It used to be the consumer stocks do well. Lately they seem to have lost some of their pricing flexibility. In this market I like the lower price defense companies like Raytheon and the food stocks like Unilevar. However, if rates go up dramatically; I think we could have a back to back recession and all stock will decline. Right now; I hope the government puts job growth ahead of inflation. - Good luck - Joe
  

Q: I'm wondering if Siebel systems is a good buy now and if I hold for 2 years.

A:  Siebel is a nice company but it's selling for approximately 36 times next years earnings. I like that it has a tangible book value of approximately $3.75 per share. Look $9.44 is an ok price for the stock. However, I have found that buying stock at "fair value" or an "ok" price means you never make as much as you expect or deserve. Currently, most of the market news is favorable, I would wait for some bad news on the economic, jobs, inflation or war front before buying. A lot of times that extra $2 you are paying comes from your profit at the end. That said; I would wait for the price to go down. Good Luck - Joe  
  

Q:  Back in 01 I purchased some Global Crossing GX. Another Global Crossing has emerged GLBC.Is there any correlation?

A:  I believe when the old Global Crossing emerged from bankruptcy the old shareholder were eliminated (received nothing) while the banks and unsecured creditors received 38.5% of the new company. GLBC are the newly traded shares. I believe the old shares are worthless. I'm not sure if any of the participates in the class action law suits received any new share. (They may have?)  The company is located in Floral Park, N.J. You should call their investors relations department to confirm that the share are worthless and the status of any shareholder lawsuits. Their telephone number is (973) 937-0100.
 
If you look at the Atlantic City Section of my website there is a write-up on them. I think that the assets of Global, XO and VSL may someday be worth something. That said; if I were an old shareholder holding worthless shares I would not invest more money. - Sorry Joe
  

Q:  What can you tell me about SCI?

A:  I have a whole write up on SCI in my Stock of Interest section of my website; it may be of interest to you. 

Here's the deal: I was trying to find an investment similar in growth characteristics as ADP and the closes one I found was Service Corp. I realize that a lot of writers feel that the future of the funeral parlor business is going to occur at super stores. I think that funerals are emotional and the lowest cost provider (with in reason) may not get the sale. That said; SCI is in a nice slow growth, cash cow, business. This stock has the potential to have a 30 year run! Think about the possibilities.              Good Luck - Joe
 

Q:  What is your opinion of Celgene?

A:  Celgene has come a long way from when it sold water purification systems. I noticed that the Prudential Equity Group and The Value Line Survey both think that CELG's product pipeline led by Thalomid has a billion-dollar market potential. That said; the risk are high but so are its rewards. Its a gamble!  Its $5b market capitalization is going to limit any significant premium if it's acquired. Celgene is for investors with Atlantic City money to invest. - Good Luck - Joe
 

Q:  Do you think Bellsouth is a good investment and what do you think about the merger of at&t and cingular will that help the stock; and what other points do you think will happen with the telecom laws

A:  I think BellSouth is a good investment, but it won't make you rich. It pays a nice 4% yield and has the potential of 10 to 15 points on the stock price if you can hold it a few years. The purchase of AT&T wireless was a very expensive but prudent move. BLS is moving in the right direction with VOIP and DSL, but as a group, I think the baby bells, took too long to execute and lost their market to the cable companies.  As the next generation starts their households they are keep their cell phones and many are not getting regular phone lines. This reduces the cash flow potential from the company's $23b investment in PP&E. Additionally, with less customers the company still has to support its retirees.
 
I live in the Northeast where Verizon operates. I use KISSLD for my phone service and Cablevision for my broadband. I don't use Verizon. The ground moved from under their feet of the phone companies. The same thing happened to the Big Drug companies. That said, the cash flow will come out of Cingular. If their are 3 to 4 wireless operators they should be smart enough to keep pricing sufficient to ensure proper returns. However, it just takes one player to start a price war and then there is a problem with your investment. You need to make sure that you are diversified. - Good Luck - Joe
 

Q:  I own 12,500 shares of AFLAC stock.  It is currently trading at about $36.50 down 3-5 points in the past week.  Do you foresee a growth of the price of the stock in the next 1-2 years?  Would I be better off to sell a portion and diversify?  What other stock(s) would you suggest?  I am looking for stocks that hopefully pay a dividend.  Have not invested in penny stocks before but might be open to that idea for a short run.  Thank you for your assistance.

A:  You have an interesting situation. I hope you understand that you own a world class growth company. Yes, its growth rate is slowing down, but with a PE of 16 it's very reasonably priced. You may not be able to replace this company with a similar company. Under NO circumstances should you take this money and invest in penny stocks. Your need to diversify is a real issue. You also have to take into consideration the tax consequences of selling. Here is my idea, but you need to get a second or third opinion before doing anything: 

I would sell 5% of AFLAC each year. Your dividends would cover the taxes with the proceeds reinvested in another quality investment like Procter & Gamble. You need about 10 stock to be properly diversified. Start with one (PG) and every few years add another world class growth company. I'm hoping that AFLAC would continue to grow over 5% each year, so you would always have AFLAC. The growth and dividends of AFL would be the currency used to fund your diversification efforts.  Good Luck - Joe
  

Q:  When will DuPont stock rise up to 80 again?  It's been in the 30's and 40's for years!

A:  I don't have an absolute answer for you. The 1998 DuPont, with its DuPont-Merck Pharmaceuticals and the equity in Conoco is gone. The financial execution, however, over the past few years has been excellent. Margins and EPS are increasing. Equity is rising and debt is being paid down. Dividend increases normally follow. The company needs a few new products to give its stock a lift. DuPont is a well managed conservative stock. It pays you 3.3% now and has the potential of 25 to 30 points down the road, (if it continues to steadily improve). Given the other opportunities in the market place this is a good investment. - Good Luck - Joe
  

Q:  I own about 400 shares of BAY. Would I be better off to sell and purchase another company with possibly more earnings potential?

A:  I would hold Bayer (BAY). Its a high quality reasonably price stock which also pays a small dividend. BAY is spinning off its chemical and polymer business in early 2005 (which should net you 40 shares in Lanxess). The remaining businesses (mainly: Pharmaceutical, Healthcare, CorpScience and Diagnostics) are healthy and growing. I believe you will be leaving money on the table if you sell now. - Good Luck! - Joe
  

Q:  I have sold a number of naked calls against Kmart. What is your short term opinion on this company (1-4  months)? It seems to have really no business except real estate and the reputation of the new owners and CEO. Can it keep going up? What do you think is its realistic stock price?

A:  I was surprised to see that Kmart's finances seem to be in order. As such, I believe that Yahoo's $101 price target is reachable within four months. BE CAREFUL and Good Luck. - Joe
  

Q:  I'm a small time investor having fun learning. I recently doubled my investment in Unit Corp (UNT - $37.24). I'm aching to sell now and go into fnix. Should I?

A:  I would hold Unit. Oil is in and the oil stocks may still go up a ways. I don't know how well Fonix (FNIX.OB - $ 0.16) is going to do. I think you may be throwing good money away. I would rethink your stock investment strategy. Get into the habit of keeping your winners. Good Luck - Joe
 

Q:  What has happened to Delphi stock?  Is the company in danger of folding?

A:  I think Delphi Automotive System (DPH - $8.41) is feeling the economy. High oil, steel, and labor costs, combined with higher interest rates will have a negative effect on auto sales from GM; resulting in reduced earnings and thereby the stock price of DPH.  I think the stock is at a low point. As the economy improves DPH should also. - Good luck - Joe
 

Q:  Has PGN a real financial problem?

 
A:  I don't see a "real problem." The company is weakened by the high fuel prices and Hurricane damages, but I don't see a fatal situation. This may actual be an appealing situation for many investors. It pays a nice dividend and, if you hold it, you may make 10 points (or more) on the stock. Good Luck - Joe
  

Q:  What do you think of Morgan Stanley (MWD) and Glamis Gold (GLG).

A:  Morgan Stanley is a excellent company, however, $50 per share for Morgan Stanley is on the high side. I would wait and try to get a better price. I also believe JP Morgan Chase is a better investment (I own stock in JPM). If investors continue to pay 1% to 2% asset management fees, to companies like Morgan Stanley, their profit potential is enormous and recurring. That said; a Bush victory should be very favorable to MWD. The one issue that you need to get a handle on before purchasing MWD is its potential litigation exposure from client losses.
 
Regarding Glamis Gold (GLG): This is beyond my scope, I would see if Sanford Bernstein has any research on it. Good Luck - Joe 
  

Q:  I am interested in Placer Dome. I don't own any Gold now. Do you think this would be wise. I want to get in soon (this week) as the price is down a little. 
 

A:  I think diversification in gold is good. Placer Dome (PDG - $21.74 on 10/27/04) is a good company, however, I personally try to stay away from companies located in Vancouver. (Over the years many big fraud case happened in Vancouver.) Right now there is a lot of uncertainty in the markets because elections are next week. I would hold off until after next Tuesday. A Kerry victory may cause a decline in gold prices. - Good Luck - Joe
 
 
Q:  What is your opinion on Textron (TXT)?
 
A:  Textron is a nice investment but it seems pricy at 19 times earnings. Think about Ingersoll-Rand, the company may have a weak fourth quarter, but at 13.5 times earnings it seems more palatable. - Good Luck - Joe
 
  
Q:  What is your opinion on INTV, what does your crystal ball tell you??
 
A:  Over the years I've been involved in many companies like Intervoice (INTV). Fundamentally the company doesn't seem that bad. My only suggestion is that, if it goes up sell it. Don't expect Intervoice to become another Microsoft. - Good Luck. - Joe
  

Q:  I PURCHASED  7000 SHARES OF SUNW AT 4.05.WHAT ARE THE CHANCES OF SUN TURNING AROUND. DO YOU SEE THE STOCK PRICE GOING UP? IS THE COMPANY A POSSIBLE TAKE OVER CANDIDATE?

A:  The two things I like about Sun is its CEO (Scott McNealy) and its cash. If you have time on your side, I think you could made a few points on the stock, but that's it.  I don't think its a takeover candidate (until a turnaround occurs), because its business model makes no money and it has a high market capitalization.  - Good Luck  - Joe
  

Q:  What to do with AON [aoc] stock?

 
A:  The answer to your question depends on your personality, financial situation and timeframe. Read my comments on Marsh & McLennan in my "Market Thoughts" section of my website, it applies to Aon to.
 
My added concern with Aon is that, it is a Chicago company. I think politically, it is a lot easier to beat up on a Chicago company than a NYC company. That said, I believe the short term upside is little, while the possible downside is a lot. The dividend may hold Aon up somewhat. From now until year-end it is going to be touchy, especially because tax selling is around the corner. - Good Luck  - Joe
 
P.S. If you own it, and have the wherewithal; I would do nothing and ride it out. Risk management is in and is here to stay - Joe
  

Q:  What info can I get on ALTR?

 
A:  Altera does approximately $1b in sales. Zacks has earnings estimated at 73 cents this year and 85 cents next year. At $22 per share that translates into a PE ratio of 30 times earnings, with a market capitalization of $8.2b. Altera has no LT debt and approximately $1b in tangible equity. However it competes against Xilinx which is the market leader in the HD programmable logic circuit market. If you are choosing between Altera and Xilinx, its an even call.   - Good Luck Joe 
  

Q:  I cashed in a 401k from a previous job that was less than a $1000.00.  I have never bought stocks on my own, so I looked at stocks, watched business news on FOX TV, and signed up for E-trading. I would like your opinion of my picks.  ADEX, ESPD, NVDA, OVTI, SPN WFR.  Remember this is under a GRAND is I'm having fun watching this.

A:  The most important thing is to protect the IRA tax status on your $1,000. Check with E-trade on the time frame, I believe the IRS only gives you 30 or 59 days to make the roll over into a IRA..  Be careful here. 

Keep in mind the business news shows are just entertainment. There is very little investment value in most of the business shows. Contrary to what brokers think a $1,000 is a good deal of money. That $1,000 is going to seem like a million dollars, when you're married, with a new born, a big mortgage, your wife can't work, and your boss wants to fire you.  

The stocks that you mentioned seems that you are trying to find the next Microsoft. I suggest you take a different approach. Start by buying some of the more quality names. Don't start with a technology stock. Technology stocks need to constantly reinvent new products to survive, eventually the grind gets to them and the shareholders lose their money. There are the exceptions like IBM and Microsoft, but I could name you hundreds of companies like the ones you are picking that are no longer around. 

I would like you to look at Imperial Chemical Company ("ICI"). Look at the "Stocks of Interest" section of my website as there is a write-up on it. It's the type of stock that you have to acquire a taste for. Don't follow the newscasters. - Good luck - Joe

  

Q:  Why is Lucent a most active stock, yet on Friday 10/22/04, its price only changed a penny?

A:  When the papers list the most active stocks; they are tracking the number of shares that were traded that day (or period). Many of the same names appear on the list every day. They are normally the companies that just have too many shares outstanding for the size of their organization. These are the Lucents and Sun Microsystems of the world. These companies really should have reverse stock splits to reflect the diminished value of their organizations from their glory days. When you look at the most active list disregard the standard big names. Look at the unusual names or the smaller companies on the list, this is where the action took place for the day. If you noticed the insurance companies are now making the most active list, that is because of what's going on in NYC. When the fighting passes they would drop off the list.
 
Lucent being even in terms of its stock price is no big deal. I personally did not notice it, but I expected it. The company is performing as the street expects. As such, when the Dow Jones dropped 107 points on Friday it was only a 1% change for the day.  Lucent trades at 3.51; 1% is only 4 cents. It right their.
 
However, we are here to make money. Here is why investors like Lucent. Lucent has turned the corner. It has cut so many employees that approximately 40% of sales is gross profit. That is excellent. It only has a few customers, so when it wins a contract it can be in the billions of dollars. With a gross profit margin of 40% Net Income can swing quickly. The next push in capital expenditures for the cell phone operators, as well as the local phone companies could represent a big turn around for Lucent and its stock price. (The phone company's capital expenditures are Lucent's sales). - Good Luck -  Joe
  

Q:  I only have 200 shares of SGU but it has gone belly up! There are 2 different firms starting a law suit. What do you think about joining in on a class action law suit? There isn't any money to recover right? So what purpose does it serve?

A:  Their may be money here, SGU - Star Gas Partners did $1.2b in revenues for the nine months end 6/30/04. Look, the reason the brokers don't usually focus in on the class action law suits is because its complicated and there's no money in it for them. Just do this:  Set up a separate file with copies of all the correspondence. Fill the forms out and send them in. Wait a few days and call the law firm up to ensure that your paper work was received, is in order, and the claim is registered. This can drag out a long time. Write down who you spoke to and what was said. Follow up periodically. Every situation is different and payout is different. It's usually not much money but it makes you feel good if you receive anything. Don't leave money on the table. - Joe
 
  
Q:  What about Amazon? Is it a buy now or is it better to wait and see if it goes further down?
 
A:  I think if you are willing to hold Amazon for a few years (4) you could make money here, but not as much as you think. The big money has already been made. That said; Their may also be a short term Christmas pick up in the stock. - Good Luck - Joe
 
PS - I have a better Idea! Forget Amazon, for the same price look at Raytheon (RTN).
 
 
 Q:  I cannot find SRV anywhere.... you have Service Corp as a recommended stock. Has it changed it's name or merged?
 
A:  The company changed its stock symbol to SCI. This is not an easy stock to own. Service Corp. is a true "buy and hold" company; you need to be disciplined in order not to sell it. Good Luck - Joe
 
 
Q:  I hold AIG, UNH and BRK-B and I am worried, as a result of the current Spitzer probes. I do not know if I should dump them all -- right now?
 
A:  Your decision is ultimately going to be based on your personality, financial situation and your time frame. That said, however, I liked your selection of insurance companies. It seems like your selection was good but the timing (price) was bad. Most likely there is are going to be more short term selling pressure on these companies, especially because year end tax selling is coming up. If your time frame is 4 years or more, I would hold on. I believe AIG is worth over $100 per share. I don't believe in selling nice companies. The world has moved into risk management (insurance) at all cost, which should translate into more profits for the insurance companies not less.  - Good Luck - Joe
 
 
Q:  CP ships ..what is happening here?
 

A:  CP Ships is a nice company. However, letís take the company, its accounting issue and the price of oil out of the decision equation. What is left is the push, in this country (US), to check the shipping containers as they enter the US ports. That is what scares me about CP Ship. Itís costly and messy. Even though only about 50% of CPís volume is transatlantic business, itís still significant. The handling of the security issue may have a big effect on CP Ships. I would not sell, but there is no rush to buy. If you like the company, I would not pay over $8.00 per share. Three to four points is not a lot, but it can be the difference between a good investment and a poor one.  Good luck Ė Joe
 

 

Q:  What is your take on ATML?

 

A:  At $3.00 a share you should be able to make money on Atml. My concern is that the next few quarters are going to be bad. Profits are a year away. That said, if you can hold Atmel for a few years (at least 4) you may be able to make a multiple of the current price. - Good Luck - Joe 
 

Q:  I WOULD LIKE TO ASK MR. SPINELLA IF HE HAS STOCK IN LMT,  THIS AFTER HIS DISSING TTN, THOSE WERE PRETTY STRONG WORDS. BIGGER IS NOT ALWAYS BETTER. 

A:  I don't inherently believe in the "bigger is better" theory. My comments represent my thoughts. LMT has had some very big wins over the past few years. It has an "unofficial" backlog going out approximately 30 more years. Its performing on all cylinders. I do not own stock in LMT, I do believe it is a better investment than TTN. - Good Luck - Joe
 

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