Investments via equity funds (page 3 of 3)

The fact that Ericsson and Alcatel entered into similar agreements with France Telecom underlines how desperate telecom operators are to get cash. While vendor financing does not necessarily have to be negative it increases the business risk equipment companies have to take in order to receive orders. We remain cautious on the sector even though these orders are positive for the three companies in the long-term.

The profit warnings of software companies such as Ariba and Autonomy caused European software companies to post big losses. We decided to take loss on Cap Gemini. The rapid decline of software spending in the US might cause earnings revisions for Cap Gemini, which leaves the stock at high valuation compared to its US competitors. Should the downward revisions come through the current fair value for the stock would be in the area of EUR 100-110. We were stopped out of Schneider Electric (SU FP; EUR 65.90) with a loss of 10%. Despite Schneider's attractive valuation we believe that its cyclical appeal might take longer to materialise with the recovery in the US to take longer and Europe to slow down.

Carrefour (CA FP; EUR 61.60) is scheduled to report 1Q01 sales on April 11. We do not believe that this report will provide tangible evidence of a recovery in Carrefour's sales. The market will be looking for the impact of the foot and mouth disease in Europe and the problems in emerging markets such as China and Argentina. Despite the short-term difficulties Carrefour faces we believe that the worst is over and newsflow will start to improve in the months ahead. We would use weakness related to the Q1 sales report to buy the stock for medium term investors.

Volumes are likely to be low ahead of the long Easter weekend. This could cause volatility to increase in the following days. The season of earnings reports will take off next week.