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) (JNPR:Nasdaq)	36,757	91	450	$115.75
Brocade Communications(BRCD) (BRCD: Nasdaq)	16,978	57	277	153.75
Applied Micro Circuits(AMCC) (AMCC: Nasdaq)	15,079	48	221	51
IDEC Pharmaceuticals(IDPH) (IDPH: Nasdaq)	8,449	71	238	185.75
Trend Micro(TMIC) (TMIC: Nasdaq)	7,376	48	223	11.38
Autonomy(AUTN) (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) (JNPR:Nasdaq)	49023	122	601	$154.38
Ciena(CIEN) (CIEN: Nasdaq)	29682	43	515	104.44
Brocade Communications(BRCD) (BRCD: Nasdaq)	24315	116	600	220.19
Applied Micro Circuits(AMCC) (AMCC: Nasdaq)	16239	53	241	55.69
ARM Holdings(ARMHY) (ARMHY: Nasdaq)	8677	73	214	27.38
Trend Micro(TMIC) (TMIC: Nasdaq)	7781	49	226	12.00
IDEC Pharmaceuticals(IDPH) (IDPH: Nasdaq)	7756	65	218	170.50
Research In Motion(RIMM) (RIMM: Nasdaq)	6438	53	1125	90.00
Autonomy(AUTN) (AUTN: Nasdaq)	5325	107	634	42.50
Finisar(FNSR) (FNSR: Nasdaq)	4083	45	911	25.50
Macrovision(MVSN) (MVSN: Nasdaq)	2928	42	226	59.00
Ulticom(ULCM) (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) (ULCM: Nasdaq)	-40 %
Research In Motion(RIMM) (RIMM: Nasdaq)	-35
Macrovision(MVSN) (MVSN: Nasdaq)	-34
Ciena(CIEN) (CIEN: Nasdaq)	-30
Brocade Communications(BRCD) (BRCD: Nasdaq)	-30
ARM Holdings(ARMHY) (ARMHY: Nasdaq)	-29
Juniper Networks (JNPR) (JNPR:Nasdaq)	-25
Autonomy(AUTN) (AUTN: Nasdaq)	-16
Applied Micro Circuits(AMCC) (AMCC: Nasdaq)	-8.4
Trend Micro(TMIC) (TMIC: Nasdaq)	-5.2
IDEC Pharmaceuticals(IDPH) (IDPH: Nasdaq)	8.9
Finisar(FNSR) (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), 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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