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During the past 20 years, the author has watch China move from being a developing country into an industrial superpower
Money Moves, 5/24: Chocomize Co-Founder Fabian Kaempfer talks with Bloomberg’s Deirdre Bolton about the business of customizing chocolate
The president's campaign has a new rule—no cell phones allowed
In honor of remote control inventor Eugene Polley, we recognize other influential but neglected inventors who have felt the sting of stolen glory
Forget Adderall. Traders now pop chia seeds to stay focused and energized
The Italian automaker and others are adding hybrid technology to elite cars
The storied bridge that links San Francisco and Marin County changed the face of California
Schools cultivate ties with startups before they're big successes
Dave McClure's traveling venture capital show scours the world for promising startups
Get Four
|  | OCTOBER 19, 2004
It's Quality Time for Stocks [Page 2 of 2] Q: Do you like to take advantage of bad news, like Chiron (CHIR ) with its flu vaccine? A: That's a great question because we try to judge stocks by how they act in the face of bad news. Chiron is also in the $30 price range, and sales continue to grow 10% a year. They will be able to handle this tough time and recover. Q: How has your fund done so far this year and longer term? A: When the market recovered last year, we were up 106%. That general market recovery stopped last January, and we're up 6% this year. So you can see that our fund depends on a stable market to be able to make money. The tough year this year led me to open a second fund, targeting defensive investing, and our real-estate fund has done very well. This is something people might consider on their own. We buy waterfront raw land and just tuck it away. There's an absolute limited amount of waterfront land, but there's a growing demand of baby boomers buying vacation property. Q: How do you see tech stocks, other than the Net? Any you hold or see as buys? A: In general, tech stocks have held up better than the Dow, and that means the Nasdaq index. The larger tech companies such as Intel (INTC ) make components that most technology companies must buy. Every technology product has chips. Consequently, we think chip stocks as a group will have a tremendous move with the economic recovery. You can buy shares of index funds or exchange-traded funds that focus on either technology or the chip companies themselves. It's a good bet with minimal risk because a group of technology companies will never go bankrupt -- as might one individual company. Q: Are you bullish on small stocks, vs. large stocks? Are there any in your fund that stand to gain from any particular trend? A: The small stocks that are profitable are always good bets, in my opinion. Marvell Technology (MRVL ) is a semiconductor manufacturer that's growing sales and profits by 60% per year. They're a good example of a profitable chip company that should do well in the economic recovery. Q: What are you holding in your new defensive fund? A: We have Qualcomm (QCOM ), Best Buy (BBY ), eBay, and we just bought some Sirius Satellite Radio (SIRI ), after the Howard Stern announcement. That's a long-term play on the success of cable TV. We think subscription radio looks like a cheap investment now, without much downside risk. Q: How about the financial sector? A: The financial companies such as Citigroup (C ) and Merrill Lynch (MER ) are good bets in a recovering economy, which must have money to grow. However, they need time to recover from this bad year, and I wouldn't rush into them until we get the Dow back above 11,000. Q: How long do you think it will take for the Dow to get back above 11,000? A: I expect it by the first of the year, and that's based on the ability of this market to hold up in the face of $50 oil prices. Getting the election out of the way, I expect, will give strength and a jolt upward to the entire market. Q: If the market is going to do so well by the first of the year, should we be buying in anticipation? And what? A: Timing the market is difficult for the short term. However, long-term buying is a good idea with quality stocks. Symantec is a software-security company, and the demand for its products will go hand-in-hand with an economic recovery. Johnson & Johnson...is a large-cap blue-chip that you can just buy and tuck away. Q: What do you think of Coca-Cola (KO )? A: Coca-Cola has recently lowered its earnings estimate for 2004 and 2005, so they're telling us they don't expect things to improve quickly. The stock does pay a $1-a-share dividend, however, I wouldn't look for the stock value to recover very quickly. In the short term, I would look at other blue-chips such as 3M (MMM ) instead of Coke. Q: What might be a good buy at this time? You've already given us quite a few! A: I think Symantec, which I mentioned before, is a great buy. And I expect the stock to gain 30% in the next 12 months. Another e-commerce-related stock is eTrade (ET ). They continue to expand profits and have been buying up some of the online-trading companies. As the economy recovers, the stock-trading business will improve again, and eTrade is selling at a reasonable p-e of 14 right now. The other area I would look at would be Internet advertising, and in that case, Juniper Networks (JNPR ) is a good bet. Look for that stock to gain 30% in the next year. Q: Going back to one you mentioned earlier -- eBay -- how can it continue to grow so fast? A: Remember that e-commerce is still in its infancy, and the magic that Meg Whitman is working as she runs eBay is showing up in their quarter-to-quarter results. They've had an increase in sales of at least 50% per quarter for the last four years. We still have a large number of people who have not begun to trade on eBay yet, and I think the stock will continue to grow as the number of users continues to grow.
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