25 for 2000: Not Just Winners, but Stocks That Define Markets

You asked for it, in hundreds if not thousands of emails over the past couple of months. So here it is: a Y2K follow-up to my 25 Winners for 1999 column, which ran last year at this time. As I noted in my year-end review last week, that list of stocks -- never intended as a portfolio -- was up 110% for the year, a remarkable performance.

But not necessarily, please remember, a remarkable performance by me. This was a great year to be in tech stocks, and though the so-called Seymour Portfolio beat all the indices, luck played a part in the selection of those stocks.

Before I start with the 25 for 2000 list, let me repeat that this is intended mainly as a list to watch and learn from, not as a literal portfolio. It isn't adjusted during the year, with Company A replacing Company B; it isn't weighted by segments or sectors; and in any case, we at TheStreet.com don't see our role as being stock-pickers for robot investors, but rather as people who provide the information you need to make your own decisions.

One other caveat: Many of these stocks are sharply higher than their year-ago prices, which makes buying them now painful. I think some should be seen as "buy on dips" candidates; running out and buying the whole list tomorrow morning could be a costly mistake -- especially if we have a serious January sag.

I don't expect a big correction this month, mind you -- once we catch our breath from Y2K worries, money is going to start flowing again, and in a big way, both in purchases of goods and services by corporations, and into the hands of the same money managers who drove these stocks up during 1999. (Simply put, the latter don't have much choice about investing in these companies: They have to deploy that money fast, and they have to look smart to their investors when their quarterly reports of holdings appear.)

Pay up now or wait? I still think these stocks will be up, and up substantially, by the end of 2000 over today's prices, so here we're getting into market timing. Peter Lynch fans would say get in and stay in if you believe in a company; the timers would say watch closely and build positions in nibbles.

Your money, your choice.

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This year I've divided my picks among six categories: Computers, Wireless, Consumer Web, Broadband, Net Infrastructure and B2B. You could certainly argue with my slotting of companies in one or another of those categories, and I wouldn't complain. This kind of categorization is always coarse and invidious, and I'm not interested in spending time arguing about labels. So if you disagree with where I've placed some of these companies, fine with me.

'25 for 2000': Join the discussion on TSC Message Boards.

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Computers:There are only two computer companies I'd own in 2000: Sun (SUNW) and Dell (DELL). Sun has a corner on the market for high-performance, high-capacity servers for the Web, and that market is going to continue exploding throughout 2000. I see nothing stopping or even slowing Sun's growth and profitability.

My belief in Dell (which I said here in mid-October looked to me like a good bet for a double over its then-current price around 38) is based mainly on its booming server business, too -- not so much Intel-based servers for the Web, but in network servers for corporate consumption. Dell's cranking up market share steadily in that profitable business, hurting leaders Compaq (CPQ), IBM (IBM) and Hewlett-Packard (HWP).

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Wireless: Read these columns often and you know I'm a big, big believer in wireless in almost all its forms: mobile, fixed, etc. But it's hard to make money at this point in wireless.

During 2000, I see two good plays: Nokia (NOK), the Finnish giant, which continues to dominate the handset market; and Phone.com (PHCM), which has licensed its phone-size browser to almost all the players in the Wireless Application Protocol group. Which is to say, to nearly everyone who counts. More than half the wireless handsets that ship in 2000 will have a browser embedded in them ... and for now, at least, Phone.com owns that business.

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Consumer Web: Sure, the momentum has swung to the B2B side of the equation -- and as you'll see shortly, I'm very high on the prospects for B2B companies during 2000 -- but three consumer-focused Web operations just can't be ignored.

Stocks for 2000
Computers
Sun (SUNW:Nasdaq)
Dell (DELL:Nasdaq)
Wireless
Nokia (NOK:NYSE)
Phone.com (PHCM:Nasdaq)
Consumer Web
America Online (AOL:NYSE)
Yahoo! (YHOO:Nasdaq)
CMGI (CMGI:Nasdaq)
Broadband
Broadcom (BRCM:Nasdaq)
Texas Instruments (TXN:NYSE)
PMC-Sierra (PMCS:Nasdaq)
Corning (GLW:NYSE)
Global Crossing (GBLX:Nasdaq)
JDS-Uniphase (JDSU:Nasdaq)

America Online (AOL) has now hit 20 million subscribers -- not just the largest ISP in the world, but one deep in e-commerce as well. AOL's doing the right things, if mainly behind the scenes, to reposition itself for the broadband world, and I think it's going to continue to soar in 2000.

Yahoo! (YHOO) also smells like a big winner this year. It dominates almost every corner of the consumer Web business, and it's hard to see anyone slowing that growth. Smart moves overseas will pay off in 2000 as well.

Finally, CMGI (CMGI) looks likely to continue its run. An odd grab bag, CMGI has bought into the right companies, early, and is hatching its own start-ups, too, with its @Ventures wing. Its AltaVista IPO early in 2000 will get the company even more attention from the press -- if that's possible -- and will crank up CMGI's valuation even higher than its recent, near-stratospheric price just under 300. (Yes, I know some CMGI business is business-focused, not really consumer-oriented. But I didn't have a better pigeonhole for it on this list.)

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Broadband: Like wireless (with which it will soon conceptually merge), broadband is going to go sky high in 2000, but there are traps a-plenty for investors.

Three strong broadband chip-maker plays -- Broadcom (BRCM), DSP king Texas Instruments (TXN) and PMC-Sierra (PMCS) -- look to me like smart ways to play the broadband boom this year. All are up significantly, but look like they have a lot further to go.

The more obvious plays look a lot riskier. I think 2000 is going to be more A Year of Wireless than The Year of Wireless, with the emphasis in 2000 still on building out the infrastructure. That makes the chip makers strong and safer bets. In 2001, we'll start buying the wireless providers themselves.

Three more companies seem likely to enjoy success in broadband in 2000: Corning (GLW), the dominant provider of glass-fiber cable, Global Crossing (GBLX), and JDS-Uniphase (JDSU), whose state-of-the-art fiber-optic products are key for broadband and cable-TV network builders. Corning and JDS are pretty obvious; Global Crossing isn't. I'm betting on Global not just because I think its undersea cable business is going to continue to grow -- though it is, and fast -- but because its new GlobalCenter high-performance Web hosting business, run by former AT&T (T) exec Leo Hindery, is getting ready for what promises to be a hot IPO early in 2000. Global shareholders are likely to benefit from that both through a run-up in its price and through some distribution of GlobalCenter equity.

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Tomorrow we'll go on to the second half of the list: the Net Infrastructure and B2B stars of 2000.

Then on Wednesday I'll discuss some of the also-rans and almost-rans -- the obvious and sometimes not-obvious-at-all candidates for this list that got dropped in the final rounds.

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