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Stock picks by the pros
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January 3, 2000: 1:38 p.m. ET
Cisco, Concentric, WorldCom, Circuit City, Plantronics on short list
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NEW YORK (CNNfn) - Tech stocks continue in favor, with two e-commerce-related IPOs also coming in for praise. Here are some of the stocks recent guests on CNNfn are buying and why:
"I think it's a huge trap,” says Michael Farr, president, Farr, Miller & Washington, of today’s heady tech stock prices. "I think you have to remember those old roadrunner commercials when the coyote goes soaring after the road runner and suddenly ends up way out over the end of the canyon and looks down suddenly to see there is nothing under him. I think you can get carried away with this great enthusiasm of trying to catch the roadrunner. You don't need to catch it, necessarily. You do need to watch where you're walking and you do need to be careful because I think one of these days, you can look down and all of a sudden look down and find that there's nothing but air underneath. These stocks are dangerous because they suck you in. Stick to the fundamentals. Remember, you're an investor. Gambling is best done Las Vegas or Atlantic City.”
Some of Farr’s picks for the prudent include American Power and MCI WorldCom.
"I like American Power Conversion for a couple of reasons. American Power Conversion (APCC) makes mostly the strips that you plug your computers into. They protect against power surges, and [American Power] is the market leader. It's a great company, it's a nuts and bolts company and it's a way to get involved with technology without really owning a technology stock. They're growing earnings somewhere around 23, 24 percent. They're 23, 24 times next year's earnings. I think it's a great solid company. They beat their earnings estimates in the third quarter and increased expectations and Street guidance for the fourth quarter. That's my kind of company, the stock looks good to me.”
MCI WorldCom(WCOM), says Farr, is also "a much more solid safe way to get involved in the [tech area] of the market. MCI WorldCom has all the really fundamental pieces, they're growing their earnings very nicely. The P/E to me isn't too risky. They're about 30 times earnings, 30 percent growth rate. They've got one of the best CFOs in the business. They have cobbled together just a fabulous company. I think you can get carried away with the speculative stocks; this is not a speculative stock and I think if you own it five years from now, you'll be very happy you bought it.”
David Braverman, senior investment officer, Standard & Poor's discussed his "power picks" on CNNfn Monday morning. "Each of our experienced industry analysts goes out and picks favorites for the upcoming 12 months. So we have a diversified portfolio, heavy in technology, but we also include such things as transportation and utilities, too." The S&P "power picks" list currently includes a batch of 29 companies.
From that list, Braverman mentions Concentric Networks (CNCX) as a favorite. "They have some Internet style to it. It is one of these companies that [offers] digital subscriber lines and we see a lot of that taking hold in the year 2000.”
On Cisco (CSCO), Braverman says, "If you bought three years ago, you probably paid about $16, $17 a share, not bad. We think it's got a lot more to it even though it's now a big cap stock. It is a monstrously big company. But it's a monstrously big market that they serve and growing very rapidly. It's hard to find companies that, you know, continue to grow, you know, 30, 40 or 50 percent a year. We see $1.48, $1 50 for next year. It's a high P/E but, you know, we still see a lot of upside.”
Braverman also like retailer Circuit City (CC), saying, "We see a lot of upside there. And consumers are continuing to love gadgets, DVD players are certainly hot right now. And, you know, large screen TVs are hot, and high definition TVs are going to come into play fairly soon. In a year or two, (HDTV) is going to be a really big deal, just as DVD players were a big deal this past Christmas, along with computer sales.”
Plantronics (PLT) is Braverman’s last pick. "Plantronics is a major producer of telephone head sets. You will see them in telemarketing operations, trading operations, you are going to see football coaches wearing them all over the place. It’s just a sign of the times.”
"So we won't start to see the (IPO) market kick off in earnest until mid to late January,” says John Fitzgibbons, IPO analyst, Red Herring. "Right now we've already identified about 30 stocks coming to market, asking about 2.8 billion. The average was about 25 with 1.8 billion in January.”
Among the IPOs worth watching, Fitzgibbons selects "buy.com, it's a large department store on-line, with revenues close to 400 million for the nine months against 125 million all of last year. They are open 24 hours a day. They have over 50,000 items to choose from. [They expect] soaring sales.”
Another IPO pick is Via Networks. "That's an Internet access provider [targeting] small to medium-sized businesses located in Europe and in South America. These are growing marketplaces. A lot of people say for the future of the Internet is overseas, and this [company] one fits that bill.”
Linux-related IPOs have done extraordinarily well, points out David Menlow, president, IPOfinancial.com. The operating system Linux "has really been a buzzword. Red Hat (RHAT) did well, has now announced a split, there was VA Linux (LNUX), which really set the opening price point, and then Andover.net (ANDN). But the Linux-related IPO has not yet gotten top-level saturation," so there is still opportunity available in upcoming Linux IPOs.
David Menlow, president, IPOfinancial.com
Listen to Menlow’s full commentary on Linux-related IPOs: [506K WAV] [506K AIFF]
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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