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Stock picks by the pros
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March 29, 2000: 1:18 p.m. ET
HWP, GM, Microsoft, DeVry, Citigroup, Disney win praise
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NEW YORK (CNNfn) - Several conflicting views from money managers and analysts made for a lively Wednesday at CNNfn's studios. The "old economy" versus "new economy" debate raged on, while tech stocks were alternately picked and panned.
Among the top picks were a PC maker, two big financial services firms, a Big Three automaker, a handful of oil services companies, two educational services firms, and two media heavy hitters.
Here are some comments on the stocks that recent guests on CNNfn are
buying, and why:
"I think we're in a full-blown mania, especially in the technology sector," said Bill Meehan, senior market analyst at Cantor Fitzgerald and Co., of volatile tech stock prices.
"I was very aggressively bullish on technology as far back as the late `80s," Meehan said, "as it was clear the direction we were going in. But when you start paying triple-digit multiples, when you start changing different metrics for companies that don't have multiples, I think it's very dangerous. We've seen an extraordinary amount of volume, an extraordinary amount of IPO activity, and they are becoming more and more 'junky' in terms of quality. I think the least safe place to be is in the market darlings. When they do start to pull back and portfolio managers start to pare back on those positions, I don't know who's going to take the other side of the trades. Value investors won't, certainly."
 "I think cash is not a bad place," advised Meehan, echoing sentiments expressed recently by market strategist Abby Joseph Cohen. "Wait for opportunities. I think General Motors (GM: Research, Estimates) offers an extremely attractive valuation. There're a lot of asset values there, and I think they'll be able to rationalize those values. A company like Anheuser-Busch (BUD: Research, Estimates) also looks attractive; trading volumes are increasing, the pricing looks good. The stock is down substantially. It's trading at less than 16 times next year's earnings."
Ulric Weil, technology analyst at Friedman Billings Ramsey & Co., on the other hand, expects "Internet-related stocks to be represent the best
opportunity. As it happens, most companies that have their heads screwed on right are becoming Internet stocks in one way or another. Look at IBM (IBM: Research, Estimates) and the effort it is making to create at least the image that they're an Internet stock; they're doing a lot of things that should put meat on those bones. Hewlett-Packard (HWP: Research, Estimates), too, just made an announcement that they're going into Web hosting. All of these big companies, some of which are labeled legacy companies, are making aggressive moves to go from brick to click, if you will."
 "The key factor," said Weil, "is what are all these companies doing to strengthen their position in the Internet space in a variety of ways? Microsoft (MSFT: Research, Estimates) today, for example, will announce a relationship with Boeing (BA: Research, Estimates), involving an aircraft exchange business. There's room for all of these big players, and provided they execute successfully, they will do well. Microsoft, certainly, is a candidate, particularly if they get over their antitrust problems. And companies like IBM are pushing ahead with some real determination now that should pay off later this year and next year in terms of revenue growth and bottom-line earnings. Hewlett Packard, under the leadership of Carly Fiorina, is doing well and should continue to do well. So investors who are a little risk averse might want to stick with those companies, because these companies are already profitable and are on their way to significant [future] growth."
 "We think that media is a great place to be at the moment," said Alan Kral, portfolio manager at Trevor Stewart Burton & Jacobsen. "We think that people have the money, people have the time, people have children who need to be entertained, and companies like Disney (DIS: Research, Estimates) or Seagram (VO: Research, Estimates) that have content are very interesting going forward. With Seagram's, in particular, we think Internet-distributed music, if they find a way to control the royalty stream, this will be a very attractive [revenue source]. And Seagram's has universal name brand exposure that is as valuable as Disney's."
 Kral's other picks include DeVry and Sylvan Learning Systems. "We think that with the wealth that currently exists in the baby boomers, and the fact that a lot of us have children of school age indicates that we're going to spend money to make sure our kids are educated; and a couple of companies - DeVry (DV: Research, Estimates) and Sylvan (SLVN: Research, Estimates) - are not really mainstream education entities, but at the same time, these companies are trying to take advantage of distance education or coaching, and those are the sorts of things that people are going to be willing to pay for because education is just so important."
"Sylvan's in the process of reorganizing the company, for instance, buying a university in Europe in order to start expanding internationally, and I think they are going to become a very attractive stock going forward."
 OPEC's agreement to up production "might actually be a good move for major oil company stocks," said Jordan Horoschak, oil analyst at S&P Equity Group. "If oil prices pull back and stabilize, that could set up a platform for some of the stocks to start to run again."
Global Marine (GLM: Research, Estimates), Ensco International (ESV: Research, Estimates) and Rowan Cos. (RDC: Research, Estimates) are among Horoschak's picks in the offshore drilling sector. "Their stock
performance has been phenomenal year to date and that is a beneficiary of oil prices above $20 a barrel. That's all they really need to spur some of the major oil companies to invest in drilling projects and that's how they can reap profits."
"The old economy, the new economy - it's one economy," said Erik Gustafson, senior vice president and portfolio manager at Stein Roe & Farnham. "We'll get back to thinking that way before too long. Nevertheless, among the 'old' stocks, we like the financials. We think the Fed is almost through raising rates. They'll do it one more time in May and then they'll back up. I also like some of the healthcare names. Nobody wants to own pharmaceuticals because of government intrusion into the space. But that will wane as we go forward. Pfizer (PFE: Research, Estimates), Schering-Plough (SGP: Research, Estimates) for the pharmas, and financials like Citigroup (C: Research, Estimates) and AIG (AIG: Research, Estimates) are very, very well poised here."
"I still like techs," said Grace Fey, portfolio manager at Frontier Capital Management. "I think there are still some very good values in technology. You have Hewlett-Packard (HWP: Research, Estimates), for one, selling at what I believe are reasonable rates, given the acceleration of their growth. They spun off a piece of Agilent (A: Research, Estimates) earlier this year; they will be spinning the rest of it off by June of this year, I think. They are just doing some tremendous things in various areas. The new management is terrific."
'Pros' bonus: Hear Grace Fey, portfolio manager, Frontier Capital Management, on financial services stock pick Chase Manhattan (CMB: Research, Estimates).
Select: [220KB WAV] or [220KB 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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