| BUSINESSWEEK ONLINE : DECEMBER 27, 1999 ISSUE | ||||||||
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| WHERE TO INVEST -- THE SCOREBOARD
Making the Most of a Good Situation BW's Scoreboard helps galvanize your earning power As we close the books on 1999, it's clear that the boom in corporate profits will continue. Earnings for companies in the Standard & Poor's 500-stock index are projected by I/B/E/S International Inc. to increase 15.8% in 2000, on top of 1999's 14.4% gain. But many are expected to do better. Now is the time to review the stocks in your portfolio and scout for new opportunities. You'll want to know which industries will be on the upswing, and which companies have the best track record. A good place to begin is BUSINESS WEEK's Investment Outlook Scoreboard. Historical data and performance ratios for 900 companies were compiled by COMPUSTAT, a product of Standard & Poor's Institutional Market Services. I/B/E/S, a Primark company, provides the earnings estimates and projected long-term growth rates for the companies based on its survey of 4,101 analysts. With this information you can analyze the companies several different ways. Generally, stocks that do well one year will continue to shine the following year. This simple strategy produced some notable picks last year, including Apple Computer (AAPL), which went up 139% in 1999, following a 143% rise in 1998, and Best Buy (BBY), which rose 104% in 1999, after gaining 213% in 1998. This year, digital wireless communications leader Qualcomm (QCOM) leads the pack with a 1,299% stock price increase in 1999, as its shares exploded from 26 at the end of 1998, to 362 by the end of November. Another wireless wonder, Nextel Communications (NXTL), logged in with a 320% increase, jumping from 24 at the end of 1998, to 99 at the end of November, and Sprint PCS Group's (PCS) shares soared from 23 at the end of 1998, to 92, a 297% jump. And although it's not a wireless communications company, Siebel Systems (SEBL), a maker of front-office software systems for businesses, did just fine, going from 17 at the end of December, 1998, to 70 at the end of November, 1999, up 313%. While it would be miraculous if all these companies maintained this triple-digit pace in 2000, they should continue to perform well into next year. HOME IMPROVEMENT? The search for undervalued stocks is a bit less glamorous, but it can be just as lucrative if you can find a stock ready to bounce back from its lows. One way to look for these companies is to find stocks with both a low price as a percent of book value ratio and a low price-earnings ratio. This could indicate that a stock is undervalued and may be poised to rise. This year's list has a number of homebuilders on it. At U.S. Home (UH), earnings were up 10% for the first nine months of the year, but the stock price has sagged with rising mortgage rates. As a result, U.S. Homes' price as a percent of book value and price-earnings ratios dropped to 60% and 5.2, respectively--considerably below the scoreboard average price as a percent of book value of 498% and price-earnings ratio of 33. The demand for new homes stays strong, and as long as the overall economy continues at the current brisk pace, that demand should remain strong in 2000. Looking for a solid technology company? Turn your attention to the High Growth Tech Stocks table. Companies were drawn primarily from the electronics, computer, and telecommunications industries. To make the list, they had to best the average long-term earnings growth rate for tech companies of 21.7%. The remaining companies were then sorted by the S&P Equity Ranking, a measure of a company's historical earnings and dividend growth. The result: an all-star roster of high-growth technology companies. Shares of Cisco Systems (CSCO), maker of computer networking equipment, have risen 92% in 1999, while the company's long-term earnings are expected to increase 30% a year. At Solectron (SLR), shares were up 78% in 1999, while earnings are expected to grow 30% a year long-term. And shares at specialty electronics maker Xilinx jumped 175%, while long-term earnings growth is projected to increase 25% annually. Maybe you want to diversify into smaller stocks, or are attracted to companies in distressed industries. Start with the data presented here and go on from there. The Scoreboard should be the beginning of your research, not the end of it. By FREDERICK F. JESPERSEN _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS Making the Most of a Good Situation TABLE: Industry Group Winners & Losers TABLE: A Menu of Investment Opportunities The 2000 Investment Outlook Scoreboard (.pdf) INTERACT E-Mail to Business Week Online | |||
