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Stock picks by the pros
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January 5, 2000: 12:45 p.m. ET
Navistar, Genzyme, Cisco, MCI WorldCom, IBM, Intel head list
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NEW YORK (CNNfn) - Despite the Nasdaq’s morning plunge, analysts and money managers are still giving the thumbs up to favored tech stocks. Top picks were found in Internet service providers, e-tailers, and those building the infrastructure to support e-commerce.
An oil drilling services company and a biotech also made Wednesday’s pick list.
Here are some of the stocks recent guests on CNNfn are buying and why:
"What typically happens during interest rate fears, is people go to safe-haven names,” notes Megan Graham-Hackett, technology analyst at S&P Equity Group. "So...we’re not really looking for any strong moves in the Nasdaq over the next three months.”
However, despite the pounding tech stocks have taken, Graham-Hackett is recommending three companies in that area. "Probably our favorite one, as [it is] very well positioned this year, is Cisco Systems (CSCO). It’s selling into some very rapidly growing markets, it’s got an excellent, strong management team, execution has been superior. I would still buy it [even though the stock price is steep] because you could say six months ago that it was expensive, or even six months prior to that. It’s just going to be one of those premium-valuation plays. But it really has very little competition as far as leveraging the Internet internally to reduce its cost structure. [Two other companies to look at are] two of the most undervalued stocks, Intel (INTC) and IBM (IBM).”
"There are a lot of very expensive stocks [out there], says Charles Crane, market strategist ay Key Asset Management , "but I’d also add there are a lot of inexpensive stocks in fully valued markets. I think there are three stocks that I would look at right now. In the communications sector, which has been quite hot over the last year, I would look at MCI WorldCom (WCOM). The stock is trading at around 49 1/2. That’s toward the lower end of its 52-week range. This company has pulled together a great business strategy that is not fully reflected in its current stock price.”
Crane’s second pick, truck maker Navistar (NAV), "is a bit more prosaic than an MCI WorldCom. But I believe that many of the cyclically sensitive sectors of the market look very intriguing here. The reason interest rates are higher is the global economy has heated up, and heated up considerably. That’s great news for a company like Navistar.” Even if the Fed were to hike interest rates, says Crane, "I don’t think it’s a matter of taking a pin and pricking a bubble. The economy is not going to go [bust] all of sudden. It will perhaps decelerate a little bit. But it’s not just going to fall flat on its face.”
Crane’s last pick is biotech Genzyme (GENZ).
"This is one of the prolific biotechnology companies in the sector. It is a company that has made a little bit of a confusing capital structure by spinning off a number of subsidiaries as publicly traded tracking stocks in the last couple of years. But overall, I do think this is a terrific company.”
About AOL (AOL) and Cisco (CSCO), Crane says "I think they’re great companies that have very solid business plans and good prospects.”
‘Pro’ bonus: Crane on tech stocks
Choose: [382K WAV] or [382K AIFF]
"For the next two or three days,” says Ulrich Weil, technology strategist at Friedman Billings Ramsey & Co., "we’re going to have a very highly volatile market on the downside, and then, very possibly, we’ll have a very volatile market on the upside as well. This is our fate now, given what has happened in 1999: volatility ruled supreme on both sides, up or down. And tight now we have it on the downside, not unexpected, I might add. But it will take a few days to iron itself out and then buying on the dip will resume, the momentum players will come back in and pick up bargains and we’ll have another turn at the wheel until the FOMC meeting, maybe, in early February. So it goes up, down like a yo-yo. You need a heart/lung machine to be happy here.”
However, Weil says, investors still can "find buy-quality [stocks across the] tech sector. The Internet sector still will shine, but you’ll have to be with the top brands: Amazon (AMZN), AOL (AOL), eBay (EBAY), Micro Strategy (MSTR), Network Solutions (NSOL), Exodus (EXDS), those types of companies. Network Solutions, too, is a business-to-business company, in a way, since it controls the registration of businesses in the domain names field. Network Solutions was disturbed a couple of days ago because of the entry of a competitor, register.com. But that’s like an ant hitting an elephant in this case, so there is nothing to worry about, that stock should do very well. The [stock price is] below the trend line, they are profitable, and enjoy a positive cash flow and big profits.”
"If you go for second- and third-tier players, you’ll get bailed out if somebody buys these companies. That helps the second-tier players. But other than that, you want to stay with [an] Ariba (ARBA), a Commerce One (CMRC) and so on, to be reasonably safe. If there is a significant downdraft, they’ll go down as well, as you pointed out, but they’ll come back and some of the others may not come back.
"In the regular hardware sector, HP (HWP), Compaq (CPQ), IBM (IBM), these companies, will of course not go down nearly as much because they never went up as much. And they will also come back because they’re quality companies, although they’ll suffer in the general downdraft. So for the next few says, sit tight, fasten your seatbelt, ride it out and you’ll be all right. Don’t panic.”
Coming up at 2:50 p.m. ET on CNNfn:
Larry Wachtel, analyst at Prudential Securities, discusses his top stock picks. Here is a sneak peek at his favorites:
Baker Hughes (BHI): "This group [oil-related services providers] is going to come on as you translate the higher oil prices into greater drilling activity.”
Compaq (CPQ): "They are solving their inventory problems, their new management is solving their marketing problems. It’s a good [company].”
Brooktrout (BRKT): "[This] electronic messaging company has a very good future.”
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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