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Stock picks by the pros
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March 14, 2000: 1:03 p.m. ET
Bluestone Software, Xoma, AOL, Computer Associates win favor
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NEW YORK (CNNfn) - Technology and biotechnology names abounded Tuesday as money managers' and analysts' discussed their top stock picks. A well-known Internet services provider, a middleware developer, and two mid-sized biotechs were among the names landing on pros' short lists
Here are some comments on the stocks that recent guests on CNNfn are
buying -- and why:
 "I would have thought that we'd have a big sell-off in March," admitted Mark Klee, technology manager of John Hancock Mutual Funds. "I talked about this possibility at year-end 1999, what my forecast was for this year, and I thought that we would have a pretty good run through January and February, and then, around mid-March, which is obviously where we are here, approaching the Ides of March. I thought we would get a pretty good sell-off because of lack of news and, if anything, bad news just from the preannouncements as we go into that season. [But] I don't think we're going to get many. You know, companies like Oracle (ORCL: Research, Estimates) that report in the off-season are reporting good numbers, they're telling you that business is good. And most interesting is the PC business. We have seen good reports starting mid-to-late February, and, if anything, business in that area is improving. So I think we're going to have very few preannouncements."
 "America Online (AOL: Research, Estimates), I think, is giving you a big buying opportunity in here, even thought the stock has moved up a little bit. Computers Associates (CA: Research, Estimates) is another big-cap name. I've generally been preferring small-to-mid cap names, but those are a few of the bigger ones investors might want to look at."
 "As for some of the smaller ones: Applied Science and Technology (ASTX: Research, Estimates), is one to investigate, and companies like that in the semiconductors space. And there is one little 'special situation' stock to look at, a company called Bluestone Software (BLSW: Research, Estimates), a middleware software company; their products bridge together different computer systems."
"Prices are very much earnings driven," said Annette Geddes, portfolio manager at M.D. Sass, "[but also] by announcements, product alliances and business announcements, which have been so positive for so many tech stocks. We've seen a lot of smaller companies linking up with Microsoft (MSFT: Research, Estimates) and IBM (IBM: Research, Estimates); you can project very strong business trends [with synergistic alliance as the starting point]. A company like Microsoft really examines partners very closely before they link up with them. So going forward, you can see that the revenue growth will be quite substantial."
 Geddes is also looking at stocks in the biotech sector. "One of the stocks we've been buying recently is Xoma (XOMA: Research, Estimates), a name that really hasn't moved yet in the biotech space; probably because they had a disappointment about five years ago and investors have long memories. But this is a company that is doing phase 3 trials with Genentech (DNA: Research, Estimates) for psoriasis antibodies; we think that this company can probably double from here. And right now, people have been overlooking the progress the company has been making."
"I don't know if we'll get some surprises," said Donald Selkin, chief investment strategist at Joseph Gunnar, commenting on the possibility of a steep Nasdaq correction. "Remember, these stocks are 40 out of the largest 100 technology stocks, meaning the large non-financial stocks on the Nasdaq. These are companies like Cisco Systems (CSCO: Research, Estimates), Sun (SUNW: Research, Estimates), Microsoft (MSFT: Research, Estimates), which have no crippling exposure to long-term debt. As a result, they're not affected by Fed policy and rising interest rates as much as some of the more traditional stocks are. For instance, since the Fed started raising rates last June, the Nasdaq is up almost 100 percent and the Dow is down 9 percent."
 "We were buying Ariba (ARBA: Research, Estimates) yesterday on dips. I would wait for an intra-day pullback and buy. Why not? This stock has a tremendous pattern of future growth and future prospects. A few weeks ago, too, we saw the big three auto companies signing a B2B purchasing agreement, and Commerce One (CMRC: Research, Estimates), Oracle (ORCL: Research, Estimates) were both involved in that. On the day of the announcement, those two stocks, Oracle and Commerce One, went crazy. So the future is very, very bright for stocks of this nature. So if you don't buy today, I would certainly buy on the next pullbacks."
"We like Sun Microsystems (SUNW: Research, Estimates) very much. JDS Uniphase (JDSU: Research, Estimates), which split yesterday, is another one of our favorites. As far as non-technology is concerned, that's tough. Most of these stocks have not done well. I think GE (GE: Research, Estimates), once it splits 3-for-1 next month, should do all right. Home Depot (HD: Research, Estimates) is way down. I think that could come up a little bit. We like Omnicom Group (OMC: Research, Estimates) very much. As far as the financials, we like a few stocks here and there, particularly American International Group (AIG: Research, Estimates). We like AIG, it's very well diversified. It's dropped quite a bit, but I think the company's earnings prospects are strong. So there are some buys to be made among more traditional stocks, but obviously the big money is still going to be made in technology."
"I believe the worst of the decline in the 'old economy' stocks is over," said Peter Cardillo, director of research of Westfalia Investments, "and I think what we're seeing here is a consolidation phase, even though this consolidation phase is probably taking place at the lower end of the trading range. I don't believe that yesterday's decline in Nasdaq is the beginning of any major correction just yet. Now, that is not to say that we're not going to have a correction. Indeed, we are. But I just believe that there is sufficient money out there and sufficient demand for these tech stocks yet, and that is not going to disappear so quickly. What we saw yesterday was little profit-taking after a spectacular week."
 Among Cardillo's picks is Bank One. "Bank One (ONE: Research, Estimates) is very cheap down here, and I believe the stock is a takeover candidate; I'd certainly be buying it at these levels, trading near the lower end of the trading range here. It is definitely an old economy stock that should be bought."
MCI WorldCom (WCOM: Research, Estimates), said Cardillo, "has just been hanging around here. This is basically a 'new economy' stock, but it's being treated as an old economy stock right now. But, once their Sprint (FON: Research, Estimates) deal is finalized, I think the stock will probably begin to move up, and I could see it appreciating towards the $60 level."
'Pros' bonus: Hear commentary from Peter Cardillo, director of research,
Westfalia Investments, on market volatility.
Select: [191KB WAV] or [191KB 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. 
-- Compiled by Tatiana D. Helenius
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