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It could be a year of limited upside ahead for big-cap tech.
For those readers unfamiliar with my screening methods, I like stocks that are rated strong buy or buy according to ValuEngine, with strong buys at least 10% undervalued and buys at least 20% undervalued. This usually occurs when a stock is trading lower toward a value level from my model. When stocks rise and become fundamentally overvalued and technically overbought, I look for risky levels at which to book profits on strength, or suggest protective strategies such as sell-stops, given a weekly close below the stock's five-week modified moving average. So let's take a look at some individual names in big-cap tech. Apple (AAPL - commentary - Cramer's Take): Despite the holiday sales hype surrounding iPods and iMacs, this stock can't climb to my quarterly risky level at $93.98. It declined 40% in the first seven months of 2006, and a similar decline looks likely over the next three years. Cisco (CSCO - commentary - Cramer's Take): This stock is trying to return to its January 2004 high of $29.39. If it does, it will be on pure technical momentum. Even with this strength, Cisco's downside risk is 30% over the next three years. Dell (DELL - commentary - Cramer's Take): It tested my quarterly risky level at the end of November, and it should have a tough time reaching its fair value at $31.60. A laggard in 2006, Dell's downside is 15% over the next three years.
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At time of publication, Suttmeier had no positions in any of the stocks mentioned in this column, although positions may change at any time. Richard Suttmeier is the chief market strategist for RightSide.com, where he writes the Small Stocks and Sector Report. Early in his career, he became the first long bond trader for Bache and later began the government bond department at LF Rothschild. Suttmeier went on to form Global Market Consultants as an independent third-party research provider, producing reports covering the U.S. capital markets. He has also been the U.S. Treasury strategist for Smith Barney and chief financial strategist for William R. Hough. Suttmeier holds a bachelor's degree from the Georgia Institute of Technology and a master's degree from Polytechnic University. He appreciates your feedback; click here to email him.
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