Be a smart shopper (page 1 of 3)

US Stock

So far, apart from durable goods orders, majority of the economic data seems to come in line or better than expected. The economic background appears to be quite sound and further deterioration should be capped by the Fed's move in cutting 150 b.p. Yet, the stock markets continued to go lower with every bit of negative economic and earnings news. The reasons for further decline seem to be no longer valid, as the hefty valuations are being reversed, and bond yields have come off to a one-year low. Furthermore, there is a trend towards stabilization of profit margins as corporations drastically reduce costs.

The initial stock market reaction to the latest Fed Fund rate cut was that the Fed has not yet done enough to restore confidence in the economy. We have seen the "non-tech" defensive stocks being sold-off since the beginning of March. Month to date the performance is as follow:

-DJIA -9.4%
-NASDAQ -10.4%
-SOX +18.6%

The SOX (Philadelphia Semiconductor Index) did exceptionally well, as they were the first to correct due to lower earnings prospect. Perhaps this is the sign that we are looking for; that the stock markets are nearing the bottom of this brutal sell-off, which started a year ago.

With the 1Q ending, and the ritual of the pre-announcement warnings upon us, no doubt there are skeptics out there who think that we not at the bottom yet. But from the First Call consensus estimates, recovery has been delayed further back to the 4Q this year, and any earnings decline should be well reflected.

If the stock exchange is a department store, and the stocks are the merchandises, then it will be the only store in the world that customers run away from a sale. Perhaps they will only come back when these items are no longer selling at marked-down prices, but rather at an inflated one!

Several stocks were highlighted during last week's morning calls, they are recommended to long term investors because they offer attractive valuations.

-Pfizer Inc (PFE $37.53)
-Amgen Inc (AMGN $56 3/16)
-WorldCom Inc (WCOM $16 7/8)
-Texas instruments Inc. (TXN $38.81)
-Apple Computer Inc (APPL $23.00)

So, be a smart shopper; be selective and go for bargains.


US Technology Stocks

With the NASDAQ Composite index closing up 2% to 1928 on Friday last week, many investors have begun to speculate over the weekend that a potential bottom has formed and that the current environment might be suitable for buying technology issues again. We, on the other hand, do not believe so.

Looking into the week ahead, we believe the battle between the raging bear and the sluggish bull will continue, and as such, it is still relatively early to call for a bottom on technology stock prices at the present time. Though we believe prices are in oversold territory, the risk still exists for weak sentiment to drive prices deeper into bear country. As such, we advocate further investment patience for more price stability (during the week) before concluding the establishment of a near-term floor leaders in selected technology segments.

Near-term Neutral on Sun Microsystems (SUNW US, $18.25, CSFB rating: Buy). Last week, SUNW introduced its new mid-range (as well as mid-priced) UltraSparc III products which we believe should help improve the company's competitive position within the mid-range server segment. Nevertheless, CSFB's channel checks have indicated that the server market remains weak.