With Our Y2K Problems Over,
The Start Of The Real New Millennium,
2001, Should Be A Less Spacey Odyssey.

by Randy Barker

It almost defies words. The Year 2000 was a major-league (Expletive Deleted). Big Time! But it didn't start that that way immediately. Disappointing doomsayers who now have a lot of Spam on their hands, nothing bad really happened on January l, 2000. The Bad Stuff started three days later.

January 4th - Bill Clinton nominates Alan Greenspan for another 4-year term, paying Alan back once more for shafting George H.W. Bush back in 1991.

February 2nd - Given free rein by Clinton to destroy "irrational exuberance" in our time, Greenspan raises interest rates an addition ¼ %, starting the ball rolling downhill.

March 13th - Bill Clinton and Tony Blair threaten to socialize genomic medicine, causing a biotech slaughter on Wall Street.

March 21st - Greenspan has a "senior moment" and for no rational reason batters the economy by raising interest rates an additional ¼ %.

April 3rd - Clinton gets a liberal judge to dictate that Microsoft violated antitrust laws, putting the fear of governmental retribution for success into all tech companies.

May 16th - Greenspan goes absolutely nuts and raises interest rates a whopping ½ %.

June 7th - Clinton's liberal judge dictates that Microsoft split up for not contributing enough to the Democrat National Committee.

September 12th - Reflecting the damage Greenspan has done to the economy, Intel starts an avalanche of sales and earnings warnings for the third quarter.

September 20th - Clinton's non-existent energy policy comes home to roost as West Texas crude hits a 10-year high. Two days later, he robs the Strategic Oil Reserve.

December 22nd - In a fit of despair, the Nasdaq hits a new low for the year, down 44%.

December 29th - Due to bonehead moves by Clinton and Greenspan, Nasdaq finishes its worst year in history.

What's in store for 2001? I think there's a real chance for a turnaround. Maybe even a meltup, reversing 2000's meltdown. And it may start with a real January Effect, the tendency of stocks (especially small caps under $15) to go up in January, which didn't happen last year. This would be fueled by an influx of 401-K money, a reversal of massive tax-loss selling in the fourth quarter, the promise (and probable reality) of an interest rate cut by January 26 that could reach ½ %, the potential of needed tax cuts being passed, and amazement by the media at how well George Bush is doing. Given this scenario, bargain hunters would start nibbling on tech stocks again in preparation for a big 4Q 2001 tech rally. Communications stocks might move up slightly, but questions about 2G and 3G wireless will hold things down until the fourth quarter. European stocks should be the place to be for at least the first six months, if not the whole year. Financial stocks, which probably won't gain the 24.5% they did last year, will still gain with interest rate cuts that might reach a total of 1 ¼ %. Drug stocks will still be good since Bush will not be oppressing them. Same goes for natural gas and oil exploration stocks. Apache has a good PEG ratio. Utilities, a - 12.5 % dog in 1999 and a +54.6 % high-flier in 2000, will still do OK in 2001. Overall, there's probably a good chance for 15% to 20% gains. And that would be an (expletive deleted) major-league change. Big-time.

Portfolio Performance: Down - 15 % in 2000, up +2.97 for the week. This lowers the 11½ year performance to an average of 25.142 % per year. By comparison, the Nasdaq (the index closest to the portfolio) was down - 39.25 % in 2000, the S&P 500 was down - 11.26%, and the Dow Jones was down - 6.16 % The large cap Nasdaq 100 was down - 36.84 %

If you look at declines from 52-week highs in 2000, the picture is much worse. The average decline of a stock from its high on the Nasdaq was - 55.6 % , - 28.9% on the NYSE and - 27.3 % on the S&P 500.

PORTFOLIO NEWS:

Aventis (AVE-$84.25), Carreker (CANI-$34.75), SEI Investments (SEIC-$112) and Taro Pharmaceuticals (TARO-$31.06) all hit new 52-week highs last week.
Keithley Instrument (KEI-$43.06) reiterated after the market closed last Friday that it is comfortable with projections of +25 % sales in 2001 and a 25%+ increase in profits.
Finisar (FSNR-$29) says it sees no slowdown for its fiber optical products. FNSR's clients include 3Com, Alcatel, Intel and IBM.
AstroPower (APWR-$ 31.38) will be added to the S&P Small Cap 600, probably stimulating added buying by mutual funds.
Convergys (CVG-$45.31) is expected to have earnings up 27% in 2001 and 23.6% in 2002. Earnings over the last 7 quarters have been up an average of 30%, year-over-year.
Ericsson (ERICY-$11.19) is one of three companies who won a $93 million contract to establish a wireless network in Portugal and one of three to win a $73 million contract for the same in Thailand. Siemens was involved in Portugal and Thailand, Alcatel in Portugal.
WorldCom (WCOM-$14.06) reiterated it will buy Intermedia (ICIX) for $4 billion to gain control of web host Digex (DIGX), which Intermedia owns a chunk of.
TTI Telecom (TTIL-$15.00) said Friday that it will spin off its Call Data Records Operation to shareholders pending Israeli government approval.
Orchid Biosciences (ORCH-$14) which was up 77.8% last week, has a $35 price target from First Union Securities. Analysts there expect ORCH to pick up business in the first part of the year including 2 added partnerships, 3 added platform propagations and 6 added SNP scoring service contracts.
SuperGen (SUPG-$13.88) says it will file for FDA approval of its cancer drug Rubitecan in the third quarter of 2001.
Invitrogen (IVGN-$86.38) is expected to have earnings up 100% for the next two quarters. The maker of genetic research tools has had sales growth up 17% or higher for the last 13 quarters, with last quarter's sales up 102%.
Sequential earnings have gone from +13% to 58% to 100%.

Not All Portfolio Stocks Were Downers

It's true that the portfolio as a whole was down 15% in 2000. But that's the average. There were several portfolio stocks that were decidedly above average. Listed below are stocks that increased in value 20% or more since January 1, 2000, those owned all year marked with an asterisk. Many may have more to go on the upside:

Keithley Instruments (KEI-$43.06) + 320.1 % in 2000 *
Immunogen (IMGN-$21.44) + 289.8 % *
Carreker (CANI-$34.75) + 283.4 %
Matrix Pharmaceuticals (MATX-$17.13) + 260.5 % *
SEI Investments (SEIC-$112) + 182.6 % *
Teledyne Tech (TDY-$23.63) + 150.3 %
AstroPower (APWR-$31.38) + 124 % *
Ivax Pharmaceuticals (IVX-$38.30) + 123.6 % *
Federated Investment (FII-$29.13) + 117.8 %
Taro Pharmaceuticals (TARO-$31.06) + 114.2 % *
AXT Corp (AXTI-$ 33.06) + 89.6 % *
Icos Pharmaceuticals (ICOS-$51.94) + 77.6 % *
Quanta Services (PWR-$32.19) + 70.5 %
Targeted Genetics (TGEN-$ 6.69) + 69.8 %*
Ariad Pharmaceuticals (ARIA-$4.75) + 68.9 %
Elan Pharmaceuticals (ELN-$46.81) + 58.7 %
Aventis Pharmaceuticals (AVE-$84.25) + 48.1 % *
Convergys (CVG-$45.31) + 47.4 % *
Invitrogen (IVGN-$86.38) + 44 %
Pericom Semiconductor (PSEM-$18.50) + 40.6 % *
Nycomed Amersham (NYE-$41.19) + 39.9 %
Silicon Valley Bancshares (SIVB-$34.56) + 39.6 %
BCE Group (Bell Canada) (BCE-$28.94) + 35.4 % *
Expeditors Intl. (EXPD-$53.69) + 22.5 % *
Citigroup (C-$51.06) + 22.3 % *
ICN Pharmaceuticals (ICN-$30.69) + 21.2 %

You may be wondering how one can be down 15 % with performers like these. That's easy. Stocks like WorldCom (down 73.5%), AT&T (minus 66.1%) and Ericsson (down 31.7 %) are also in the portfolio. One mutual fund bears mentioning. The Dresdner RCM Biotech Fund was up 81.9 %.

A 2000 Regret

One stock I should have bought after it came public this year was Krispy Kreme (KREM-$83). This turned out to be the most successful IPO in 2000, up 294% for the year, and up 5 times its $21 opening price at one time. But something about paying over 100 times earnings for a stock gives me pause. Even if the company is headquartered in my old hometown of Winston-Salem. Of course, the PE today is only 93.

Have A Profitable New Year!
randybarker@aol.com