A Holiday Wish List

12/10/2004 12:00 am EST

Focus:

Bambi Francisco

Founder, Vator.tv

"This is the time of the year when I put together a Christmas wish list for investments, that is," notes Bambi Francisco, Internet analyst and columnist for CBSMarketwatch. While cautioning that her technology stock favorites are often "expensive," she offers her holiday favorites.

"I like the stocks associated with growth themes such as Web searching and demand for digital entertainment and electronic gadgets for the holidays. I suspect that much of this shopping for gadgets and other knickknacks will be done on the Web. So, let's begin with the search area. Before people shop offline or online, they tend to go to the Web to do research, in order to get information, compare prices, and compare products. Therefore this is the first place consumers will go to find their goods. So, here are my ‘search’ picks for December, and potentially beyond:

"Google (GOOG NASDAQ) is the dominant search engine with 40% market share, whose raison d'être is to search everything digital. It's expensive at $180, or 53 times next year's $3.39 profit forecast. But Google is estimated to generate sales of $2.8 billion in 2005, which, incidentally was the amount of sales that eBay back in October 2003 said it would generate in 2004. Looking back, eBay was too conservative, in its estimate. Today, eBay's expected to generate $3.2 billion in sales this year, about half a billion more than last year's estimates. So, too may Google. Ask Jeeves (ASKJ NASDAQ) has been a laggard during the fall run-up in stocks. Apparently, investors are concerned about Jeeves' ability to integrate its acquisition of other assets in the last year. Integration pains are something all acquiring companies go through, but Jeeves' is still a beneficiary of paid search. It's one I'd consider.

"Meanwhile, eBay (EBAY NASDAQ) is by far the best stock to own. It's been my favorite for the last three years. Once again, this stock is expensive. It always has been. Today, it's worth $74 billion in market cap. But if you believe in online commerce worldwide with a significant opportunity to get into online classified advertising, then eBay has more upside. Additionally, between 10% and 12% of eBay's gross merchandise valuethe value of goods exchanged on its marketplace is derived from cross-border transactions. eBay CEO Meg Whitman said the proliferation of transactions has much to do with lower shipping costs globally. For example, the cross-border trade in the Netherlands in the fall of last year was 4.5 times the size of the local trade in eBay Netherlands. Another region where cross-border trade is thriving is Asia. Cross-border trade in eBay Hong Kong was more than 40 times as large as the local trade.

"Also on my Christmas wish list from last year was Audible (ADBL NASDAQ), as a play on the booming iTunes and iPod business of Apple Computer (AAPL NASDAQ). Audible's technology allows people to listen to digital audio books, magazines, and the like on handheld devices. Once again, Audible will be a beneficiary of Apple's iTunes and iPods success, just like last year. Audible is trading at 72 times one estimate of 38 cents a share in 2005. That's expensive, but it's been going gangbusters all year. Apple is a stellar stock as well and I wouldn't mind seeing this in my Christmas stocking. Once again, it's very expensive. But, keep in mind that one reason people might not be selling Apple in December is that they may not want to pay taxes on the gains. While you don't want tax consequences to dictate your investments, this is a no-brainer. If you have gains, and you don't have losses to offset them, why pay capital gains taxes in April 2005, when you can pay in April 2006?

"Research In Motion (RIMM NASDAQ) recently came out with a great new consumer Blackberry. I've been testing it out, and I'm impressed. It's called the 7100t. The 't' stands for T-Mobile. The best part of this device, besides the fact that it is extremely lightweight, is that the Web browsing experience is tolerable. The keyboard, which is not the typical Qwerty keyboard on a Blackberry, takes time to get used to. But all in all, this device opens up a new consumer market for Research In Motion. There's also Adobe Systems (ADBE NASDAQ), even though this stock has had such a significant run. The reason I like this company is because it does benefit from the boom in digital video and digital pictures since its editing software helps manage those pictures or video. It's estimated that more camera phones will be sold this year than digital cameras and mobile phones combined. Now, that's a booming market! For this stock, it may be worth waiting for a modest hiccup in price.

"The following two picks, suggested by Brian Blair, an analyst at hedge fund Dorado Capital, may be worth looking at. According to Blair, Creative Technologies (CREAF NASDAQ) is one of the biggest hardware makers of MP3 players. Sales for MP3 Players are estimated to reach $58 billion by 2008, according to IDC. There is some negative news surrounding this stock, but it's always better to buy when you're the only interested party: You always get a better price. So, I'd check this one out just in case. Logitech (LOGI NASDAQ) is another one of Blair's picks. I have the wireless mouse on my desk, so, I do believe in Logitech's product. If you believe in the wireless trend, then you might like this company too. Blair believes consumers won't only buy full-on appliances this holiday, but they'll also buy upgrades and peripherals, like that wireless mouse.

"Finally, if you want to play a long-term trend that may also give you some upside in December consider the Indian technology stocks. Wipro (WIT NYSE) is one of the leading software-services companies in India. Infosys (INFY NASDAQ) is one of the largest software and outsourcing companies in India. And then there's Satyam Computers (SAY NYSE). They're expensive, but they also provide the opportunity for faster growth. Happy shopping and happy holidays."

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