US Equities
An upbeat pre-announcement from the enterprise software maker Siebel Systems Inc (SEBL, $15.25, CSFB: Outperform) has initiated the short-term rally in enterprise software, while better than expected sales figures at Nokia added legs to communication equipment.
In order for trading oriented investors to capture this short-term momentum we have issued some short-term trading calls on the enterprise software and on the communication equipment sector. The trading ideas are companies, which have a solid track record and a key position in their respective segment.
In the enterprise software segment we have added BEA Systems Inc (BEAS, $13.38, CSFB: Neutral) to the US Recommendation List, along with the Web design software maker Macromedia, as both of them are poised to benefit from the expected pick up in corporate IT spending. BEA Systems Inc provides e-commerce infrastructure software.
The company's systems are used in e-commerce applications in various industries. As Enterprise and application software have a relatively high leverage on a recovery in IT spending, BEA Systems should fully benefit from the momentum driven the sector. We have a target price of USD 15 and a stop-loss at USD 12.
Motorola Inc (MOT, $15.71, CSFB: Neutral), Ciena Corp (CIEN, $6.96, CSFB: Outperform) and Polycom Inc (PLCM, $22.32, CSFB: Not rated) are companies operating in different areas of the communication equipment sector and should benefit from the tailwind coming from Nokia's solid revenue figures.
We expect the handset maker Motorola to post similarly solid sales figures, driven by new models and improved pricing. Our trading target for Motorola is at USD 18, while we set a stop loss at USD 14.90.
Ciena should continue benefiting from a gradual recovery in communication spending, as Q4 ' 03 indicated flat to +10% sequential sales increase and gross margins in the mid 20% range. We believe that Ciena has not yet regained full steam, but positive surprises could come while the company reports its Q1 '04 earnings in late February, including market share gains in the optical business.
Third, Polycom is poised to benefit from the cost cutting pressure in international corporations, as the company's audio- and video- conferencing systems allow an efficient way of communication. The growing penetration of broadband network access has paved the way for Polycom's technologies.
We see a short-term fair price for Polycom at USD 26, but would cut loss should the stock drop below USD 21.80. Our trading recommendation would be suitable for aggressive investors who want to capitalize on short-term momentum. Such trades require a tight discipline of taking profit or cutting loss, as momentum can be short lived and sentiment turn around rapidly.
More conservative investors should find attractive value in dividend yielding stocks, as well as in stocks of small and mid cap sized enterprises, which are often overlooked but offer sound growth perspectives while retaining low valuations.
The multi-line insurer Allstate Corp (ALL, $44.02, CSFB: Outperform) is on of our defensive plays. Although the stock has reached our 12-months price target at USD 44 last Friday, returning a 22.22% profit since recommendation on August 13 last year, valuations remain attractive.
This prompts us to revise our 12-months price target upwards to USD 49, an incremental 11.4%, based on the P/E of 11.74x expected earnings and a price/book ratio of 1.6x, which leave some more room for upside in Allstate's share price.
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Some short-term trading calls (page 1 of 4)
- Tuesday, January 13 - 2004 at 09:51
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So far, the US stock market has been mainly driven by short-term momentum in some of the sectors. We have issued some short-term trading calls.
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Credit Suisse, Private BankingTuesday, January 13 - 2004 at 09:51 UAE local time (GMT+4)
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This article was updated on Sat May 26 2007.
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