Cash is King
08/13/2007 12:00 am EST
Kevin Kennedy, editor of the Coolcat Technology Plus Report, sees opportunities in short-term bounces.
Tech stocks have held up extremely well during the recent market sell off and have actually assumed a leadership role. My focus is still on raising cash in these portfolios, with any buying interest to be cautious, while emphasizing strong stocks that have pulled back sharply and are due for a bounce. The action by the Federal Reserve last week to add billions in fresh liquidity to the financial system may stabilize markets a little early this week and create a mini-rally to sell into, but we probably will continue to see volatility as new mortgage banking blowups continue to be announced. Raising cash is the prudent thing to do here.
F5 Networks (NASDAQ: FFIV), which provides networking products to optimize the performance of software applications, is a hyper stock that is subject to swings. It made its last new high at 93.87 on July 27, about a week after the NASDAQ topped out. It’s gotten clobbered since then, falling as low as 62.84 Wednesday—a 33% haircut in eight trading sessions—before rebounding at the end of the week. The stock lost 26% in three days, with most of the damage coming after the company announced the purchase of Acopia Networks in a $210-million cash transaction. I am looking for a pullback near its recent lows and a short-term bounce from there to 77. The stock is set for a 2-1 split Aug. 20.
Joy Global (NASDAQ: JOYG) is almost 27% off its July 16 high of 65.50. The maker of mining equipment fell 22% in three sessions while lowering its full-year outlook July 25. Third-quarter earnings will be released Aug. 29. I am looking for a pullback near its recent lows and a short-term bounce from there to 53.
Millicomm International Cellular SA (NASDAQ: MICC), a provider of wireless services in emerging markets, has fallen 20% off its July 12 high after reporting strong second-quarter earnings July 24 that did not meet lofty expectations. Revenues jumped 80% to $613 million, while earnings per share surged 197% to $0.98 per share, or $102 million. The number of subscribers in the 17 countries it serves grew 84% to almost 18 million. I am looking for a pullback near its recent lows and a short-term bounce from there to 87.”