Investing Recommendations and
thoughts on specific companies
(Updated Feb. 2,
Microsoft (MSFT) (recommend owning this
leader is PC software is Microsoft. While they have their share of
problems with the antitrust law suit, the company is doing well overall.
The company does an excellent job at providing a broad range of software
applications and operating systems to meet people's needs. They generally
build a leadership position in the segments they go after. While Microsoft
has it share of failures or limited successes, they keep on working at
things until they understand the customers needs and get the products
right for those needs. Over the past 5 years (7/1/94 to 6/30/99) The
revenues have grown at 35% CAGR and earnings grew at 52% CAGR. At the same
time EPS grew at 46% CAGR due to new shares issued. You have a hard time
finding quality companies with that good a record of success. For the
future I expect them to continue growing at 30% (revenues and earnings) as
Windows 2000 gets rolled out to customers and then following that will be
a new version of Windows 98 (Millennium) as well as new versions of their
software development tools and office applications in 2001. Microsoft is
seeing growing competition from Linux. In the handheld market Palm OS has
a 70% share and Windows CE is getting under 30% share. On the desktop and
laptop markets Windows has a large share with limited competition from
(recommend owning this stock)
| CMGI operates and invests in a number of internet companies. Buying CMGI
stock is an investment in an Internet conglomerate that is also building
strong cross company synergies and support networks. In my opinion CMGI is
one of the leaders at building new Internet companies.
(ENGA) (recommend owning this stock)
| Is a CMGI company that has a key role in the sale of ad
banners for internet web pages. Engage has a database and software system
that tracks what web pages a user views (keep the user information
completely private) and uses that past viewing history to display ad
banners that would be the most appropriate for that user. They can then
sell higher value, targeted ads to advertisers.
The worldwide semiconductor market is expected to
grow by 16.9% in 2000 to reach $147B. (The Semiconductor Industry Assoc.
forecasts 2000 sales to be $174B, growing at 21%. Source: WSJ 10/28/99,
page B8) With a lot of this growth taking
place in the wireless communications market segments (phones, base
stations, wireless internet.) This growth is expected to continue at this
rate in through 2002. In fact the CAGR for the semiconductor industry is
expected to be 25% over the next 3 years. (Source: Cahners In-Stat Group,
reported in Electronic News 1/3/2000 P4).
ARM Holdings (ARMHY) - (recommend
owning this stock)
(INTC) - (recommend not owning this stock)
Dominates the PC chip CPU market. The PC market is
growing around 15% per year now so that seems to be a limit on Intels'
overall growth. Sets the overall pricing levels based on their production and competitive
pressures. They are converting their manufacturing to use 0.18 micron
processes in 1999 and 2000. Major PC CPU chip competitor is AMD. AMD is
keeping up, but losing money. Intel is also working hard to expand it's
share in networking related chips for future growth. Over the past 5 years
(ending 12/99), Intel' revenues grew at CAGR of 16% and earnings have
grown at 19%. This is growth is slowing down and I am expect INTC to have
a stable or declining stock price. As of 1/14/2000 the stock was a t
This company has gone through a turn around and I expect
them to be growing revenues and earnings rapidly again. The company is now
focused on producing critical chips for implementing wireless phones and
| Tyco has become a powerhouse in supplying passive
electronics (resisters, capacitors, inductors, connectors) for the
electronics industry. Tyco Electronics has acquired a number of the
independent companies in this area. Passive electronics are critical
pieces for implementing equipment. While they have none of the glamour of
semiconductors they are heavily used in every device. For example a cell
phone may have a few IC's, but they also have some 600 passives per phone.
And, cell phones are a disposable item. You use it for a couple of years
and then get a new one from your phone company, because of all the new
features that get added to the phones every year.
Tyco also has a big business in home security and in
the business of laying down undersea communications cables. Tyco now is
the dominate company for deploying undersea communications (optical)
cables to link the world together.
|| General Electric (GE)
||The PC market is
estimated to be growing about 10% to 15% a year on a revenue basis. Most
companies keep their PC's for 3 to 4 years before users get newer PC's.
This may lengthen out to a 4 to 5 year time frame. PC's companies are
working to bring out a new generation of low cost PC's that companies
could update/replace existing desktop systems with.
Dell Computers (DELL)
- Dell is the industry leader in building and selling PC's direct to the
end customers through telephone, internet and catalog sales. Dell is
growing faster than the overall PC industry by gain market share from
second tier PC companies as well as the existing leaders of Compaq, IBM
||(Updated Jan. 3,
No company to recommend here.
This industry is going to be under long term pressure on pricing and
competitive issues. The US government is going to have to find an acceptable
way to reduce drug prices for the elderly and Medicare users. Currently,
these folks are one of the only major markets in the world where there is
not government price controls or industry price limits (e.g. HMO's). These
people are the least able to afford drugs and they are generally being
charged list prices when everyone else is getting discounts. With this as a
political issue in the 2000 elections, drug company profit margins are going
to be under continual pressure. At the same time as drug companies try to
merge to increase scale and reduce the costs of operations governments in
the US and Europe are likely to take a very hard look at the
anti-competitive issues in the new rounds of large mergers.
Towers - Crown Castle International, one of the nations leading
operators of towers. They rent out space on the towers for cell phone
operators to hang their antennas. Tower placement is a challenging issue
since many communities do not want towers located near homes and view them
as eyesores. Crown Castle is working closely with Bell Atlantic and GTE.
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