High-Tech Stocks Are Low On Newsletter Editor’s List
Don’t confuse Jim Stack’s relative bullishness on stocks with an endorsement for the technology sector.
The editor of the InvesTech market newsletter sees opportunity in the market today--just not among most tech stocks. He shunned those names in their heyday of the late 1990s, and he still thinks it’s a mistake to buy most of them, he says, because of the steep competition and excess production capacity in the industry.
“There’s still a lot of washout ahead for companies in this sector,” Stack says in his latest newsletter.
Instead, he is focusing subscribers on non-tech issues with “solid track records, positive earnings and sound financial statements,” with an eye specifically on the potential for strong revenue growth in an economic recovery.
Some of the ideas he highlights in his latest newsletter:
* Ross Stores (ticker symbol: ROST; Friday close: $30), which operates more than 400 discount clothing stores. The fast-growing company’s debt is low and the stock’s price-to-earnings ratio is 16.5 based on estimated earnings per share for the year ending in January 2002. That compares with the average blue-chip stock’s P/E of about 25 based on this year’s estimated earnings.
* Canadian National Railway (CNI, $45.80), operator of a railway system that spans Canada and the U.S. heartland. It’s a better idea than troubled airlines for investors who want to bet on a pickup for the transportation industry as the economy recovers, Stack says.
* Tyco International (TYC, $58.84), a conglomerate operating in such businesses as fire protection, underwater cables and medical supplies. The company has expanded dramatically through acquisitions in recent years, yet still boasts strong finances and a below-average P/E ratio, Stack says.
