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Traders pick top 25 stocks
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May 17, 2000: 8:58 p.m. ET
Short-term investors say we're in a bear market, makes for choppy picking
By Staff Writer Alex Frew McMillan
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LAS VEGAS (CNNfn) - What are the top stocks for traders right now? A panel of short-term trading strategists laid out their best 25 picks for active traders and day traders Wednesday, here in the Pacific Ballroom of Bally's hotel and casino.
 The market looks incredibly bearish, according to all but one of the traders, and the summer doldrums have becalmed stocks altogether.
Since traders like activity, that makes picking stocks paramount, according to the panelists, who included Louis Navellier, portfolio manager of $6 billion in the Navellier Performance Funds, and Jim Oberweis, the newsletter editor and portfolio manager of the small stock oriented Oberweis Funds.
In fact, the prospects are so bad and trading volume so low since the April tech crash that Kevin Marder, an active trader who likes to hold stocks for several weeks to a few months, is 100 percent in cash right now. "I haven't seen anything to make me move off my 100 percent cash position," he said.
"We've had 18 or 19 straight days of below-average volume," and there are several other indicators of a bear market, said Marder, also editor in chief of TradingMarkets.com. He was speaking at the Las Vegas Money Show's lunch panel "Successful Active Traders." Around 14,000 individual investors are here in Sin City for the Money Show.
 Peter Trapp, portfolio manager of the Needham Growth Fund, said the tech correction is different from other dips in the past two years. Though many define a bear market as a correction of 20 percent or more, he said other dips since 1998 have rebounded so suddenly they don't count as bear markets. This downdraft is long enough to qualify, he said. "It feels much more like the slow and steady grind of the 1974-76 bear market."
Negativity not selling well
The negativity was in sharp contrast to the tech-stock pickers who addressed a similar event Tuesday, who were cautious short-term but consistently upbeat long-term. Bad news hasn't been selling well at the Money Show, where investors typically take a more rah-rah attitude about stocks. Whereas 1,100 people crammed yesterday's event and scribbled down the tech-stock pickers selections, only 500 attended today's lunch for active traders.
Wall Street is already moving to Martha's Vineyard, Fire Island and the Jersey Shore for the summer, Navellier said. That removes the volatility and volume traders want in stocks.
But good stock traders can still pick stocks that move, Navellier told the crowd. "It isn't that bad if you pick the crème de la crème," he said. He narrows the scope of companies he picks for his funds down to 32 or so stocks, less than 1 percent of those he looks at, using quantitative analysis.
"We will not get another 120 percent year like last year. I don't mind doing 40 percent or so," Navellier warned and joked. Are he or the other trading specialists likely to get it? You can judge, from their top 25 trading picks. It is important to note that several traders elected to short-sell stocks, predicting they will go down near-term. That is indicated where applicable.
Kevin Marder
Editor in chief of the active-trader Web site TradingMarkets.com, a former hedge-fund equity researcher
Marder said he was 100 percent in cash. He is waiting for the markets and stocks to show technical basis of a rally before he buys. But he said he was watching a handful of stocks to see if they test recent highs, fall back enough for a buying opportunity, and then start to rise on the other side of the "cup" on a stock chart. He also said if he proves wrong, he sells rapidly, before he takes a loss of 5 percent to 7 percent. That is all the more important in this choppy market, he said.
He did not pick five companies, given his negative sentiment, but he identified Siebel Systems (SEBL: Research, Estimates) as his top pick. For telecom equipment maker Ciena (CIEN: Research, Estimates), he is looking for a pullback off a short-term high.
Marder's top picks:
- Siebel Systems (SEBL: Research, Estimates), though he wouldn't buy this second and is watching its chart.
- Ciena (CIEN: Research, Estimates), which has outperformed the market the last four weeks, showing the market likes this stock more than the average stock. But he is waiting for the drop from a short-term high.
- Celgene (CELG: Research, Estimates), a biotech stock he said has outperformed the S&P 500 for the last six weeks. Again, he is waiting.
Louis Navellier
President and CEO of Navellier Securities, portfolio manager of the Navellier Performance Funds and editor of the newsletters MPT Review and Navellier Blue-Chip Growth Letter
Navellier narrows his range with quantitative analysis of factors such as companies' future earnings growth vs. price, pattern of beating expectations, comparative takeover value and whether analysts have been raising their estimates. His top pick is Three-Five Systems (TFS: Research, Estimates). With future earnings looking good and profit margins improving, it and his other picks are "locked and loaded" to break out, he said. "The only thing the stocks need is a little volume." He is watching for institutional money to flow back to the market.
Navellier's top picks:
- Three-Five Systems (TFS: Research, Estimates)
- DSP Group (DSP: Research, Estimates), which he said has strong earnings growth and, like his other picks, could benefit if volume picks up in June and analysts start raising earnings estimates.
- Photon Dynamics (PHTN: Research, Estimates), also with strong quarter-over-quarter earnings and revenue.
- Applied Micro Circuits (AMCC: Research, Estimates), a smaller cap stock that had a particularly strong quant score of 81 on his scale, where 88 is usually the top attainable score.
- Triquint Semiconductor (TQNT: Research, Estimates), a chipmaker, which makes products for global-positioning systems.
Jim Oberweis
President of Oberweis Asset Management, portfolio manager of The Oberweis Funds and editor of The Oberweis Report
Many investors have never been in a bear market, and this is the first in a decade, he said. The average bear market lasts around 12 to 18 months, he pointed out. In January, he started a short-selling portfolio for the first time, thinking the market was overvalued. It has outperformed his long positions year to date, with the shorts up 38 percent and the longs up 9 percent. However, all his picks are for investors to buy "long," on the basis they'll go up.
Oberweis' top picks:
- Andrx (ADRX: Research, Estimates), a drug maker, to lead out his rounded portfolio. It looks like good value at 40 times next year's earnings, he said.
- American Technical Ceramics (AMK: Research, Estimates), a tech company that he said he likes selling at a P/E of 20.
- Chico's FAS (CHCS: Research, Estimates), a retailer with good first quarter earnings, he said, and a very low price vs. future earnings of 4.
- Extreme Networks (EXTR: Research, Estimates), putting together "next-generation software solutions" but which Oberweis likes at 50 times next year's earnings.
- Monterey Pasta (PSTA: Research, Estimates), a food company that sells refrigerated pasta across the country and has a price vs. next year's earnings ratio of 9.
Bernie Schaeffer
Chairman and CEO of Schaeffer's Investment Research and founder of The Option Adviser newsletter
Schaeffer, who tracks option put and call activity and tries to read stock sentiment, was the only optimist of the bunch. This is not a bear market, he said, because Nasdaq has not fallen below its 10-month moving average, which is still rising. It is nowhere near its 20-month moving average, and dipping below that is the sign of a true bear, he pointed out. Note that Schaeffer shorted one of his picks, AT&T Wireless (AWE: Research, Estimates).
Schaeffer often takes a contrarian viewpoint to investor sentiment in reading put and call information. He also said he thinks too many investors have confused investing with trading in the great bull rally of last year. Investors should be safe holding long term in this market, but traders need to know what they're doing and be very discerning in a tricky environment, he said.
Schaeffer's top picks:
- Nokia (NOK: Research, Estimates), which he said has a substantial number of puts to calls, making it attractive.
- Charles Schwab (SCH: Research, Estimates), which Schaeffer said had strong short skepticism, which makes him think it a buying opportunity.
- LSI Logic (LSI: Research, Estimates), which also has big short selling positions in it.
- Telmex (TMX: Research, Estimates), the Mexican telephone utility, which has both short selling and hefty puts versus calls, he said.
- AT&T Wireless (AWE: Research, Estimates) (short position), the biggest U.S. initial public offering is close to a broken IPO. "AT&T is bound to screw it up sometime," he quipped. It has heavy calls versus puts, meriting short selling, in Schaeffer's book.
Peter Trapp
Managing director of Needham & Co. and portfolio manager of the Needham Growth Fund
Trapp "paired" his trading picks, with a long position matching a short position in a stock in the same industry.
Trapp's top picks:
Pair One:
- Benchmark Electronics (BHE: Research, Estimates) (long position)
- Celestica (CLS: Research, Estimates) (short position)
Both are contract manufacturers, with Benchmark selling components to the likes of Motorola and Northern Telecom. Benchmark is a turnaround after a disastrous merger and a missed earnings quarter back in September, he said. The price tanked. But despite controversial management, Trapp feels it is on the way back. At 14.2 times 2001 earnings, it is undervalued while Celestica, at 34.1 times 2001 earnings, is overvalued, he said. Celestica was spun off from IBM with "gobs of goodwill," he said.
Pair Two:
- Advanced Micro Devices (AMD: Research, Estimates) (long position)
- Rambus (RMBS: Research, Estimates) (short position)
AMD is a pretty large-cap company for Trapp. But the chipmaker's management "were the cops that couldn't shoot straight last year," he said. They had manufacturing pileups they've since sorted out, according to Trapp, who thinks AMD may split its stock and have a secondary offering to alleviate debt. At 16.5 times 2001 earnings, he thinks it's a much better value than Rambus, which he said is selling at 159 times 2001 earnings and has competitive pressure from Micron.
Trapp had three other picks that were just straight "buy long" recommendations:
- Conmed (CNMD: Research, Estimates), which fits his "Growth at a Reasonable Price" or GARP philosophy.
- PolyMedica (PLMD: Research, Estimates), ditto.
- SCI Systems (SCI: Research, Estimates), which he mentioned as an "extra" pick along with a couple of other GARP-friendly stocks.
* Disclaimer 
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