Untainted and Untapped Small-Caps
Lost in the great accounting panic of 2002 is the plain fact that the shares of small, cheap, blue-collar companies are beating the pinstriped pants off their bigger, more expensive brethren.
Indices produced by the financial consultants at Russell Co. tell the story best:
Through Feb. 4, the Russell 1000 Growth Index -- representing the most expensive half of 1,000 U.S. stocks, with an average market capitalization of $13 billion -- lost 5.04%.
|Small Caps: Fast, Cheap Starters
|Company Name||Market Cap||% Chg 2002||Price/Sales Ratio|
|Koala (KARE)||$20.3 million||228.9||0.34|
|Rowe (ROW)||47.4 million||200.8||0.14|
|Overland Data (OVRL)||176.8 million||103.8||1.11|
|SimpleTech (STEC)||218.0 million||93.2||1.33|
|SmartDisk (SMDK)||39.2 million||92.2||0.55|
|EZCorp (EZPW)||38.2 million||79.0||0.21|
|Cutter & Buck (CBUK)||69.5 million||75.0||0.42|
|Autobytel (ABTL)||90.1 million||68.2||1.27|
|RDO Equipment (RDO)||53.9 million||64.0||0.09|
|MarineMax (HZO)||182.7 million||59.2||0.35|
|Note: Minimum price $2, minimum 12-month revenue $50 million|
Bush Disappoints Broadband PushersLike a comic-book superhero flourishing a star-spangled cape and a menacing wink, President Bush warned at length in his State of the Union speech on Jan. 29 of an "axis of evil" that threatens our nation with weapons of mass destruction. But the Defender of Kandahar failed to find even a moment to speak of the danger that lurks in the shadows of a nation beset with slow, lousy, expensive Internet service. The omission irked a great many technologists who had lobbied the White House for months in an effort to get State of the Union support for the high-speed Internet service known as "broadband." Distressed but defiant, they blamed the antideregulation pall cast by the Enron debacle, and vowed to press the fight in the months ahead. Trey Thomas, a Boston hedge-fund group chairman and captain of the battle, said he learned that the industry would gain administration support only once they stop attempting to "myopically" push their own technological solution. All technologies -- DSL, cable and wireless -- must have a seat at the table, he insisted. Thomas said it also became clear that White House support is not enough. Congress must admit that the once-promising Telecommunications Act of 1996 was a time-wasting fiasco, and repeal it. The bill's list of problems is longer than a fiber-optic line stretching around the earth, but the bottom line is that it ultimately ended up being an act of anticapitalism that required regional telephone monopolies to surrender their broadband infrastructure to competitors at a discount. Something they refused to do. Go figure. The law helped neither consumers nor businesses. From 1996 to 2002, the Telecom Act encouraged the number of competitive local-exchange carriers, or CLECs, to multiply, until at the peak there were about 600 of them. Most were never viable enterprises, depending for their livelihood on easy access to capital through offering of shares to the public or bond issuance -- and for their future on the notion that Baby Bells would build infrastructure and rent it to them cheap. Stonewalled at every turn, the CLECs withered and died. The massive bankruptcies in the past two weeks of Global Crossing (GBLXQ) and McLeodUSA (MCLDQ) were the latest two examples. I hope that Thomas and his pals don't give up on pressing their case to the White House and Congress. The Silicon Valley-based organization TechNet, made up of many leading industry executives, at least has vowed to keep pushing for a public-sector-supported plan to connect 100 million homes and businesses to a next-generation Internet that would be 50 to 100 times faster than today's broadband. This sort of capacity already exists in an initiative called Internet2, which connects research universities and laboratories at 100-megabit speeds. Benefits would not only be science-fiction applications, such as telemedicine and streaming video that rival the quality of high-definition television, but also the heads-down science required to make such speeds ubiquitous as well as a big boost to the economy as thousands more routers, software bits and fiber-optic lines would be manufactured, sold and lit. In this scenario, companies such as Cisco (CSCO) and Lucent (LU) would fulfill the promises they made to investors long ago.
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