I asked readers for their questions on various stocks, and they responded -- in a big way. Here are a few questions and answers on stocks you're interested in. For more technology-stock analysis, check out my regular tech column, my tech diary that runs Tuesdays on TheStreet.com, and my newsletter, TheStreet.com Technology Report, a special alert-based service that also includes a weekly summary and monthly wrap-up.
As you know I am positive on technology stocks in the second half of the year for several big-picture fundamental reasons:
First of all, recent economic data have been solid enough to keep GDP growth in the 3.5% to 4% range for the foreseeable future.
Second, semiconductors are back in a leadership role following last month's report from The Semiconductor Industry Association (SIA), which showed that chipmakers had made a solid start in 2005. The semiconductor industry is quickly working off excess inventory. The trade group predicted 6% sales growth this year, and investors didn't have to wait long for confirmation of that outlook. Soon after
raised its second-quarter revenue guidance, citing strong demand for its notebook products.
Third, a major upgrade is needed in the Internet protocol (IP) segment. As of mid-June, this industry grew by a projected rate of 50% year over year, according to industry sources. There will be increased demand for upgrades from the major wired and wireless carriers around the globe. The call for IP capacity for video, voice and data is strongest in Asia, while Europe needs more broadband.
Finally, last week's terrorist attack in London should increase demand for IT spending for companies need to secure networks, files and storage. The London bombings last week should jolt IT managers, who had delayed protective deployments, to spend their budgets in the realization that terrorism remains a corporate hazard both physically and in cyberspace.
Here are your questions, and my answers. My answers are heavy on readings I'm seeing in technical analysis and in my models, with some fundamental analysis in stocks I'm following more closely.
I'd like to know your opinion of ticker symbol ZHNE when applied to your model. Thanks, Ryan
is 59.7% undervalued, but the upside appears limited. The weekly chart is positive, but this name is highly speculative.
Hi Richard, Hopefully you can take a look at Novatel Wireless (NVTL) . Seems to me it's emerging as the leader in its field. Thanks, Ed
Novatel Wireless is 45.3% undervalued with a neutral weekly chart profile. A close this week below its five-week modified moving average at $12.02 indicates a correction to the 200-week simple moving average at $10.31.
Richard,Please, can you screen Linear Technology (LLTC) LTTC Thanks in advance. Mayda
LLTC is 21.7% undervalued with a neutral weekly chart profile. It would be a plus if the stock can stay above my weekly pivot at $36.77 this morning. The upside appears limited this month to the $37.38 to $37.86 range.
Richard,We have been accumulating Dot Hill (HILL) , which is a low-end storage business. I would appreciate a response as to what your model says about Hill. Thanks for your time and patience. Derek
HILL -- only 9.4% undervalued, but the weekly chart stays positive on a weekly close above its five-week modified moving average at $5.22. The upside is to the 200-week simple moving average just above $7.
SYNC -- 73.3% undervalued, but needs a close this week above its five-week modified moving average at 2.70. Otherwise, risk to its 200-week simple moving average at 2.43.
Richard,Please try Lucent (LU) .Jim T.
LU has been around 75% undervalued for months. The stock needs to take out its five-week modified moving average at $2.89 and its 200-week simple moving average at $3.05 to signal another leg up. I would buy on weakness to this month's support at $2.64.
INOD -- Highly speculative as the fundamental profile shows the stock 71.6% overvalued, which questions the firm's survival. The chart pattern is favorable, however. This means that there could be a trade up to the $4.50 area, but don't be greedy. To the downside, decide whether you wish to risk it all.
Hi Richard,I'd be interested in your valuation modeling for ADI and BRCM.Thanks,Ed
ADI is 19.2% undervalued with a positive weekly chart. This month's support is $36.11, and this quarter's resistance is $42.99.
BRCM is 53.2% undervalued with a positive, but overbought weekly chart. This month's pivot is $36.44 with this week's resistance at $38.35.
Let me know if you understand how to use this risk/reward profile?
Richard, I'm not much of a technical trader, so I'm indeed a bit naive on some of the terms you have used. When you say that ADI is 19.2% undervalued, is that a snapshot for this quarter? Or are you looking at forward four quarters of earnings growth? Regards,Ed
In a perfect world, with all factors considered, ADIs' Fair Value right now is 19.2% higher.
AAPL: 7.1% undervalued, which is cheap for Apple, a stock in my model portfolio in the Technology Report. It closed just below first support. Longer-term support is $34.22. According to a source of mine who evaluates channel checks, Apple is showing improvements vs. similar checks made in March. Also, Apple stores are buzzing again with increased traffic and sales, and resellers are enthusiastic about the "halo effect," which simply refers to first-time buyers opting for an Apple PC because they've had good experiences with the iPod.
All three are around 75% undervalued, but with a speculative rating, as you say. Speculate with only dollars you can afford to lose.
Richard,Can you please look at CSCO?Thanks in advance. Mrinal
Undervalued: CSCO 38%.
TheStreet.com Technology Report
model portfolio. I like Cisco as a leader in its field, and it supplements that growth with smart purchases of other companies.
Richard,I think that AMAT is not keeping up with the rest of tech. What do you think?Thanks for your Help!Robin W.
I will have a column for later this week that will cover
Hello Richard,I was wondering if you have looked into the fuel cell sector at all. Although it's years out from being a huge commercial success, there are companies gaining ground and defining themselves as leaders in this segment. One company I follow is Millennium Cell (MCEL) . They have been heavily involved in defining specifications for fuel cells and promoting their use (coupled with larger, more recognized companies). Do you bother looking into companies that may see growth years down the road? Or are you more concentrated in the next one to two years out? In any manner, I was curious as to how MCEL looked against your model. Looking forward to your response,Scott M.
MCEL is 71% undervalued, but risk only what you can afford to lose. My models tend to cover a rolling six-month horizon, but I can stretch to three years. The odds of making money over a three-year period is 65%, but it may not be a double.
Richard,Do you have a screening for SWKS?Ryan M.Richard Suttmeier:
-- 62.2% undervalued, with a positive weekly chart. Should do fine, if the market does fine.
Hi Mr. Suttmeier,I liked your article on technology stocks being undervalued. I have a large part of my portfolio in EMC (EMC) . Could you evaluate the stock based on your model?Thanks,Bill J.
EMC is 59.4% undervalued with a positive weekly chart profile. The stock is in my model portfolio presented in
TheStreet.com Technology Report.
EMC should benefit from an expected steady growth in data storage.
NOVL does not have a positive profile, SUNW does. Sun is in my model portfolio presented in
TheStreet.com Technology Report
, and its recent deal wins -- for example, with the Union Bank of the Philipines -- shows that it's making strides into major data centers around the world.
Richard,Please do SY; BGC; ORCL; PGI; SUNW; CSCO; TALK; andMOT. I appreciate your analysis. Thank you. Paul H.
SY 6.7%, BGC 26.8%, PGI 41.0% and TALK 14.6% are overvalued.
MOT is 16.5% undervalued, but too close to its 52-week high.
ORCL is 24% undervalued.
SUNW and CSCO screen best and are in my model portfolio, presented in
TheStreet.com Technology Report
Richard,What do you think of these stocks: sell or hold down 50% in ATML, down 12% in CSCO?Paul
ATML is 52.9% undervalued, but needs a close above its five-week modified moving average at 2.66 to shift to positive.
CSCO is 37.9% undervalued and is in my model portfolio presented in
TheStreet.com Technology Report
IBM is 26.4% undervalued with a close this week above the five-week modified moving average at 76.28 a positive.
NOK is 48.7% undervalued, one of the best screens for a big named stock. The weekly chart profile is overbought, so there could be a correction given a close below its 200-week simple moving average at $16.66.
Dear Mr. Suttmeier,I have followed your technical analysis on CNBC. I was pleased to find your article on the Web. I would greatly appreciate your comments on Nokia at $16.84.Sincerely, Dara
NOK is 48.7% undervalued, one of the best screens for a big named stock. The weekly chart profile is overbought, so there could be a correction given a close below its 200-week simple moving average at $16.66. Nokia continues to grow in this hot segment, and it's predicting a 15% growth rate for 2005.
Richard, Please screen MEMC Electronic (WFR) using your tech analysis model. Randy
WFR -- Very interesting. My model shows the stock 34.2% overvalued with today's test of a new 52-week high. This makes it a pure momentum play. I would not add new money, and would use a sell stop to preserve gains. If this stock continues to move higher, I will be looking for a level at which to go short.
Richard,Please apply your model to JBL and tell me how it stacks up with tech in general.Thanks,Edward
was rewarded following its better-than-expected earnings report and positive guidance. The stock is now only 8.3% undervalued with a positive, but overbought, weekly chart profile. Tested a new 52-week high July 5, but I am not a buyer of this breakout, as I show a quarterly resistance at $32.91. Since they make stuff for Cisco, I would shift into Cisco.
Richard,Please screen JDSU, DCEL, CLS and MACE.Sri
JDSU is 75% undervalued. DCEL is 51.5% undervalued. Not enough data for CLS and MACE. All four have favorable weekly chart profiles. These stocks are high risk in my judgment.
Richard,Looking at your valuation chart and taking basic industries as an example, I notice a swing from 24.50% overvalued to 3.73% undervalued in six months. Does that mean that the index of basic industries had an almost 30% decline in price in those six months (which, clearly, didn't happen) or am I not taking other variables (such as price swings in other sectors) into account, which prevent that kind of valuation swing from mirroring actual price-average swings in the stock market? Put differently, how does your valuation model track actual stock-price swings? Thanks,Mark
: The most important three of 20 variables is trailing 12-month EPS, forward 12-month analysts-forecasted EPS and the 30-year bond yield. Basic industries companies must have beaten estimates, which caused analysts to raise guidance, and as you know, the 30-year yield is lower year to date.
Richard Suttmeier is president of Global Market Consultants, Ltd., chief market strategist for Joseph Stevens & Co., a full service brokerage firm located in Lower Manhattan, and the author of
newsletter. At the time of publication, he had no positions in any of the securities mentioned in this column, but holdings can change at any time. Early in his career, Suttmeier became the first U.S. Treasury Bond Trader at Bache. He later began the government bond division at L. F. Rothschild. Suttmeier went on to form Global Market Consultants as an independent third-party research provider, producing reports covering the technicals of the U.S. capital markets. He also has been 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. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback --
to send him an email.