Highflying Stocks Have Been Grounded

 

And then there were six.

Last week we showcased 12 stocks whose prices were defying gravity despite the brutality in the stock market. These stocks boasted trailing price-to-earnings ratios of 200 or more, price-to-sales ratios of 40 or more, and market caps of $1 billion or more.

Today, using that same criteria, only six of those stocks remain. And no new ones turned up.

Six Stocks Still Boast High Valuations...For Now
Name Market Cap
(in millions)
Price To Sales Per Share P/E Stock price
Juniper Networks (JNPR Quote) (JNPR:Nasdaq) 36,757 91 450 $115.75
Brocade Communications(BRCD Quote) (BRCD: Nasdaq) 16,978 57 277 153.75
Applied Micro Circuits(AMCC Quote) (AMCC: Nasdaq) 15,079 48 221 51
IDEC Pharmaceuticals(IDPH Quote) (IDPH: Nasdaq) 8,449 71 238 185.75
Trend Micro(TMIC Quote) (TMIC: Nasdaq) 7,376 48 223 11.38
Autonomy(AUTN Quote) (AUTN: Nasdaq) 4,477 90 533 35.73
Source: Marketguide.com, data through November 29, 2000.

12 Stocks That Were Defying Gravity
Name Market Cap
(in millions)
Price To Sales Per Share P/E Stock price
Juniper Networks (JNPR Quote) (JNPR:Nasdaq) 49023 122 601 $154.38
Ciena(CIEN Quote) (CIEN: Nasdaq) 29682 43 515 104.44
Brocade Communications(BRCD Quote) (BRCD: Nasdaq) 24315 116 600 220.19
Applied Micro Circuits(AMCC Quote) (AMCC: Nasdaq) 16239 53 241 55.69
ARM Holdings(ARMHY Quote) (ARMHY: Nasdaq) 8677 73 214 27.38
Trend Micro(TMIC Quote) (TMIC: Nasdaq) 7781 49 226 12.00
IDEC Pharmaceuticals(IDPH Quote) (IDPH: Nasdaq) 7756 65 218 170.50
Research In Motion(RIMM Quote) (RIMM: Nasdaq) 6438 53 1125 90.00
Autonomy(AUTN Quote) (AUTN: Nasdaq) 5325 107 634 42.50
Finisar(FNSR Quote) (FNSR: Nasdaq) 4083 45 911 25.50
Macrovision(MVSN Quote) (MVSN: Nasdaq) 2928 42 226 59.00
Ulticom(ULCM Quote) (ULCM: Nasdaq) 2041 54 525 50.38
Source: Marketguide.com, data as of November 17, 2000.

The stocks on the original list have seen their valuations hammered. In most cases stock prices have been cut by 25% or more.

Stock Performance Since
November 17, 2000
Ulticom(ULCM Quote) (ULCM: Nasdaq) -40 %
Research In Motion(RIMM Quote) (RIMM: Nasdaq) -35
Macrovision(MVSN Quote) (MVSN: Nasdaq) -34
Ciena(CIEN Quote) (CIEN: Nasdaq) -30
Brocade Communications(BRCD Quote) (BRCD: Nasdaq) -30
ARM Holdings(ARMHY Quote) (ARMHY: Nasdaq) -29
Juniper Networks (JNPR Quote) (JNPR:Nasdaq) -25
Autonomy(AUTN Quote) (AUTN: Nasdaq) -16
Applied Micro Circuits(AMCC Quote) (AMCC: Nasdaq) -8.4
Trend Micro(TMIC Quote) (TMIC: Nasdaq) -5.2
IDEC Pharmaceuticals(IDPH Quote) (IDPH: Nasdaq) 8.9
Finisar(FNSR Quote) (FNSR: Nasdaq) 9.1

When our first story appeared, a hedge fund manager had this to say about our list: "There is still a ton of excess out there and this list is a representation of that. That doesn't mean these are bad companies; Brocade is a great company," he said. "But now that reality has begun to set in, you get this multiple compression."

Today, that manager thinks the excess is getting washed out. "It is overdone. Everything has come down." (The manager holds no positions in any of the stocks in the original dozen.)

As an example of a damaged quality company, he points to Brocade (BRCD Quote), which has fallen from $220 to $150 in about 10 days. Yet, last night Brocade reported fourth-quarter earnings and revenue projections ahead of analysts' expectations. "Brocade has clearly done a great job of growing revenues and earnings."

So is this hedgie calling a bottom? "No one can call a bottom," he says. But he adds: "At some point people are going to start taking these back up; People are going to come back to the market. There are some real good companies out there -- and the strong players will survive."

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