Investment is not only a long term game, but also a game of odds (page 1 of 3)

US Stocks

The markets were crunched for a second time this year, the first being back in March and the recent one started from September. Except this time around, there may not be a quick recovery because the economy is weakening and more earnings disappointments loom. Although the Fed is relieved that the tech bubble has been burst and the economy is slowing, it still reiterated that it has a tightening bias in the last FOMC meeting on Nov-15-00. This will only change if inflationary pressures have reversed. The economy continues to grow though at a slower pace, meanwhile, oil prices are still hovering around the yearly average of $30.00 and it is early winter.

With the markets testing the lows again, investors are looking for a bottom and a rebound is expected giving rise to trading opportunities. An exclusion risk exists - the risk of not being in the winning asset at the right time. Preoccupation with this type of risk drives much of investors' behavior. Investment is a game of odds - one wins by selecting good quality companies with potential growth and a well-diversified portfolio. Not by decreasing one's odds chasing after the flavor of the month, or speculating on which stock will rebound the most in the upcoming rally (if there is one). Far too often, investors lack the discipline to take profit at the predetermined target, invariably hold out for a higher price and inevitably the stock would drop below the entry price. A frequent problem is that investors have portfolios with characteristics that do not match their performance expectations. That is why setting the investment goals & objectives and adhering to it, is vital.

US Technology Stocks

The technology sector remains out of favour and continues to look gloomy for the rest of 2000. However, we believe the current environment helps set a healthy price floor (expect 2600 to Hold) and has encouraging implications for enhanced performance in 2001. Looking ahead into 2001, we expect performance on NASDAQ to be back-loaded. We expect sentiment to remain jittery and stock price performance to be capped in 1H01. Nevertheless, we believe improved visibility and a recovery in earnings growth potentials to occur in 2H01; thus soothing nervousness and subsequently supporting stock prices higher.

On a week-on-week basis, the NASDAQ Composite Index declined 9% to close the week depressed at 2653 as improving sentiment was shattered by Microsoft's 2Q00 (Dec) profit warning. For the week ahead, we expect NASDAQ to consolidate between 2600 and 2900 as investor sentiment focuses on macro events like the Fed meeting and US economic data releases.

Positive on Oracle Corp (ORCL US, $28.56). ORCL reported encouraging 2Q01 results with EPS of $0.11, beating consensus estimates of $0.10 a share. Total revenues grew 18% sequentially and 15% yoy, to $2.7 billion. License revenue increased 39% sequentially and 19% yoy (to $1,118 billion), while services revenue climbed 6% sequentially and 9% yoy (to $1,541 billion). Presently, ORCL has about 83 customers using its eBusiness suite products (from 15 in 1Q01) and has shipped its Oracle 11i licenses to 3,000 customers. We believe ORCL's applications revenue has strong potential to continue generating good growth. The company is well positioned to maintain revenue growth by tapping into its installed base of 10,000 applications customers, as well as attracting new customers with its "one stop shop" eBusiness applications strategy. We like ORCL but we do not recommend to "chase" the stock at current levels.