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Stock picks by the pros
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December 21, 1999: 12:24 p.m. ET
DuPont, Siebel Systems, Inktomi, Verio, Southwest, GM on short list
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NEW YORK (CNNfn) - Several tech stocks, a U.S. air carrier and a major U.S. automaker won praise from equity analysts and money managers Tuesday.
Here are some of the stocks recent guests on CNNfn are buying and why:
Bill Meehan, senior market analyst at Cantor Fitzgerald & Co., isn’t too fond of technology stocks overall, saying "they’re the focus of the [market] mania, particularly the concept-technology stocks.” On the other hand, Meehan acknowledges, "[there are] some great companies in the United States like Cisco(CSCO) and Microsoft (MSFT) and Dell(DELL).”
Meehan does like GM, saying "I think General Motors (GM) looks very attractive, longer-term, if you focused just on their auto and truck company, even though they have some room for improvement, clearly, both from and efficiency standpoint and from a design standpoint. You’re paying almost nothing, two to three times earnings for that, because they do have lot of assets [which] I think [will] be realized.”
"If you’ve been watching [the tech stock rollercoaster],” says Greg Kuhn, stock market analyst at Kuhn Asset Management, "a lot of the stocks have worked this year, at least in the second half of the year; they’ve shown very strong bottom-line growth. A lot of the growth companies, enterprise computer, software companies; Citrix (CTXS), Siebel (SEBL), Vitesse (VTSS), for example, have all shown very strong bottom line growth. And the value stocks haven’t, although prices were better, they haven’t had that kind of growth, they’ve been left by the wayside. One thing I’ve also learned historically about growth stocks is don’t look at the P/E, don’t look at the valuation. Eventually they’ll run out of steam. But how high is too high for a very strong stock? The market’s going to price it at whatever it feels like pricing it at. If you were to say ‘I’m not going to be involved in the stock because the P/E`s over 30’, you would have been sitting in cash for the last three years, not in stocks.”
And some of Kuhn’s picks? "I like Verio (VRIO), which is an Internet service provider. Now here is a company without any earnings, but it does have very good top line growth.”
Kuhn also likes "Inktomi (INKT), a business-to-business Internet company. [They have] no earnings, but very strong revenue growth. And these stocks are moving in anticipation. They made a new high recently on strong volume. That’s what you want to see in a stock that could be a potential leader. A good example is Yahoo! (YHOO). Everybody complained about it for two years, that it didn’t have any earnings, why was the market pricing it [at that level]? But it did have strong revenue growth. Well, guess what you have now? The earnings are on the table. They’ve come through.”
Kuhn’s last pick is S1 Corp. (SONE); "they provide secure transactions on the Internet for
the banking industry. They have several major banks as customers in this country. Again, another company without any earnings, but a strong bottom line. You can argue with what the market’s doing, [or] you can sit back and just watch it continue to move.”
The U.S. markets are not the only places to find opportunity, says John Murphy, market analyst, MurphyMorris.com. "We’ve liked Asia for a long time. The economy is looking better. Europe is very strong and Germany is the last of the major markets to hit a new high. We like Germany, we like Latin America, Brazil. Telebras (TBR) is a stock that just broke out last week. So we think that it’s time to move in well. Start to move [some] money overseas.”
"We’re being very careful,” however, adds Murphy, about technology stocks, particularly in the U.S., where tech stocks have ridden the Internet wave to staggering new heights. "That’s been the one sector of the market that’s been very strong. The Internet sector. We think that’s getting too dangerous at this point. It is too high.”
Instead, says Murphy, he is looking at picks like "Phelps Dodge (PD), for example, and the chemicals, DuPont(DD), Weyerhaeuser (WY). We’re [also] suggesting a shift into the cyclical stocks and away from the rate-sensitive stocks because those are the ones that will suffer in a high rate environment.”
"Airlines are going to be worth a second look,” according to Joe Battipaglia of Gruntal & Company. "Oil prices, I believe, will moderate. Their volumes will be strong. That means earnings coming [around] again. I think the airlines and the railroads have a very good profile for the year 2000.” Southwest Airlines (LUV) is a Battipaglia pick "because they can grow within a mature industry and new market segments, adding profits very quickly.”
The views presented here are solely those of the analysts quoted. They do not represent the opinions of CNNfn on whether to buy or sell shares of a particular stock. 
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