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Lemonides: Avoid Dell
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November 7, 2000: 3:51 p.m. ET
M&R Capital's CIO and senior portfolio manager also bearish on NT, GLW
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NEW YORK (CNNfn) - Charles Lemonides, chief investment officer and senior portfolio manager at M&R Capital, advised investors Tuesday to hold off on Dell as the downside risk going forward for the company could outweigh the upside potential. Lemonides was also bearish on his outlook for Nortel and Corning.
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Name: Unknown
Question: Dell (DELL: Research, Estimates). SDL Inc. (SDLI: Research, Estimates). Please comment on your short- and long-term outlook for DELL and SDLI. Would you be buying at current levels?
Answer: In a word: No. I wouldn't be buying at current levels. In looking at SDLI, take your cue from DELL. A couple of years ago Dell was a perceived market leader, with an unassailable business model, great management, great demographics, great everything -- and a share price that reflected it. Since then, the company's business has better than doubled in size, and they have executed wonderfully, but the share price is half its high and still quite fully valued. Can SDLI be in the same place in two years? My answer is yes. Look at what happened to Compaq (CPQ: Research, Estimates) to see what could happen next to Dell. Increased competition, lower margins, a more mature market, and a similar valuation. I think there is more downside risk in either than is justified by the upside potential.
Name: John, California
Question: Sprint Corp. (FON: Research, Estimates). Earthlink (ELNK: Research, Estimates). With the telecoms being depressed, do you think that since Sprint already owns around 28 percent of Earthlink, that they will eventually be buying Earthlink?
Answer: Unfortunately, I think FON has enough on its plate to deal with such a purchase. Also, I think they would find it problematic to actually buy the company for anything close to today's price. I expect ELNK to turn things (especially the share price) around without any special transactions. I think there is an advantage to everyone for ELNK to have a separate corporate existence, so I do not expect a bid.
Name: Naoyuki, Hawaii
Question: Do you think oil stocks will be profitable? What stocks do you recommend for a long-term investment for about five years?
Answer: I see more opportunity in the service companies than the exploration & production or integrated oil companies. I expect strong energy prices to translate into higher exploration spending, benefiting companies such as Rowan Cos. (RDC: Research, Estimates) (an offshore driller) and National Oilwell (NOI: Research, Estimates) (an equipment supplier).
Name: John, North Carolina
Question: Nortel (NT: Research, Estimates); Corning (GLW: Research, Estimates). With NT and GLW, both stocks have been taken down, and both had great earnings growth. Should I buy, sell or hold? How do you feel about the optical stocks?
Answer: I think the great move is behind these guys and you should spend some time looking for under-followed, unloved issuers that could become tomorrow's darlings, not yesterday's.
Name: Steve, New York
Question: I am a new investor and would like to buy stocks that are high-risk, cheap, and have potential. I own Earthlink and Doubleclick already. Which others do you recommend?
Answer: You are taking the exact worse course you can, in my only-sometimes-humble view. Investing in such type shares takes the highest level of expertise and discipline. As a novice investor, you are highly likely to get burned and as a result turned off to equity investing. Take a more cautious approach and buy name-brand stocks until you become a much more seasoned investor, and then dabble in aggressive small caps with only a portion of your portfolio.
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