| BUSINESSWEEK ONLINE : JUNE 14, 1999 ISSUE | |||||||||||||||||||||||||||
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| COVER STORY
Y2K: The Sky Isn't Falling ...And for the fearless, it may present opportunities Sell bank stocks. That dire advice was issued on May 24 by Credit Suisse First Boston, giving analyst Michael L. Mayo a small place in history. In doing so, he was the first in his profession to counsel zapping a major portion of an entire stock group, largely because of the expected effects of the Year 2000, or Y2K, bug. Mayo is especially down on Citigroup(C), which he predicts will plummet some 40% during the fourth quarter of this year and the first quarter of next year, mostly because its information-processing systems are not adequately prepared to deal with the rollover to the new millennium. The main reason: Citigroup's international exposure to third-party entities that are ''Y2K-unprepared.'' Other banking stocks that Mayo has downgraded or is uneasy about for similar reasons include Bank One(ONE), Chase(CMB), J.P. Morgan(JPM), and Branch Banking & Trust. For those investors who don't believe that the market is going to vaporize, however, the year 2000 may be an opportunity to pick up stocks that have been unduly beaten down. Says David Kay, a financial planner in Dayton, Ohio: ''Once people see the sky's not falling in January, you'll see massive inflows to the market.'' Other possible bargains include technology stocks, specifically companies with businesses in enterprise software, networking, and microprocessors. Weaknesses in these issues are ''already reflected in share prices,'' says Terry D. Sandven, director of portfolio strategies at U.S. Bancorp Piper Jaffray in Minneapolis. One early casualty is Oracle, the second-largest software company after Microsoft(MSFT), which is down some 40% from its 52-week high. Networking company Sun Microsystems warned in April that sales could be hampered if business spending for millennium-proofing puts off other technology-related purchases until next year. Sun's stock is down some 22%. ''The perception is that these companies' clients have spent a lot of money on Year 2000, leaving little to grow their own businesses,'' says Peter J. Canelo, U.S. investment strategist at Morgan Stanley Dean Witter. ''But these are now attractive value plays,'' he says. Other technology companies that are reasonably priced: BMC Software(BMCS), Peoplesoft(PSFT), SAP(SAP), and Network Associates(NETA). Bank of America analyst Kurt King downgraded both Sun and Hewlett-Packard on June 1, citing that as Y2K business begins to dry up in the next year, it would be tough going. Experts say that investment plays on overblown Y2K fears for later in the year will most likely be found in airlines, health care, telecommunications, utilities, and chemical companies. Dennis Grabow, founder and chief executive officer of Millennium Investment Corp., a Chicago-based investment adviser that focuses on Y2K as an investment strategy, says that chemical companies, such as DuPont, and airlines with large international route systems, such as KLM(KLM), United(UAL), and TWA(TWA), and such regionals as America West(AWA) may be cheaper down the road. Since all public companies are required by the Securities & Exchange Commission to file reports on their Y2K-readiness, anyone can check their annual or quarterly reports. You can also find this information on the SEC's Web site (www.sec.gov) or a site such as www.FreeEDGAR.com. As the reports of unpreparedness mount, the Y2K bug may start to cause some market mayhem. But if you don't take the Y2K problem too seriously, these next few months could prove rewarding indeed. BY MARCIA VICKERS _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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 RELATED ITEMS Y2K: The Sky Isn't Falling TABLE: Cashing in On Y2K Overkill
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