Update and New Recommendations

Coming in July from McGraw--Hill:
The Streetsmart Guide to Timing the Stock Market, by Colin Alexander.
Price: $29.95

No, the world is not coming to an end for stocks generally, but it probably has come to an end for many Internet stocks. But there are still many wonderful stocks to own. Many financial stocks could decline much further as well as many other stocks that have become extremely high-priced in recent years, stocks like Disney and Coca-Cola. But that does not make a general bear market. Yes, interest rates are up a bit, but not enough to induce a major bear market, or even much more of a correction in the indexes than we have already seen. Many, many major stocks are down by 20 percent or more from their highs and that should soon be enough.

If you have been looking at the stock market closely in recent weeks, action will seem to have been vicious. Once a stock started falling, it often fell like a rock, as happened to just a few of our selections. On the whole, however, our stocks have not only held up well but have generally advanced even as the major indexes were declining. Some of them have gone up very significantly, making successive new 52-week highs frequently in the process. Current market conditions favor the investor using market-timing techniques, ideally in conduction with fundamentals, but certainly not using fundamentals alone. We thought we loved AT&T on the basis of the story. Then we looked at the chart and saw there were many better stocks to own. Then we read that perhaps Telephone is generating all its big cash flow from installations that are rapidly becoming obsolete. Then we heard they bought a bunch of cable TV subscribers for $4000 apiece. With indifferent chart action, we know we have to stay away from this stock, at least for now. If you own Internet stocks, then it is almost certainly not worth staying with them. Many net stocks look strongly as if they have their back well and truly broken. We think that Ubid, for example, is a harbinger of things to come, with the stock down 80 percent or so from the high. How can you justify a price for America Online that values a subscriber at $5000?
The thing about our high tech age is that almost anything can be done better and cheaper. We pay just $7 per month for all the Internet
connections we need. No matter what goodies AOL delivers, we know that our $84 per year is not worth any $5000 to our ISP.

Many brokerage stocks like Merrill don't look much better than net stocks. But it's a market of stocks and not a homogeneous mass that moves all in one direction. We want to make the point very clear that we see many wonderful stocks to own and many stocks worth buying now. They just happen not to be in such areas as the Internet or finance.

We have reviewed some of our losers on the basis of whether they are likely to increase by 50 percent or more from their current level within a reasonable length of time, or whether the money could be invested better elsewhere. Generally, it is relatively easy to find stocks likely to advance significantly even in the current gloomy environment. Many of the stocks that we currently own are either very attractive or moderately attractive for new money. These stocks are marked with an asterisk. We mention LSI Logic and Tyco as two stocks that have chart patterns suggesting that they could move start making a further move up any time now. We like almost all the Asian closed-end funds. They are coming out of a wonderful base and look as if they could go up a long way, and eventually to their all-time highs and beyond. Don't load the wagon with too much of this stuff but think of buying some.

Our view is that the recent decline will soon run its course, if it has not already done so. It was remarkable how stocks came back during the final hour on Friday despite the low close inasury Bonds. What has been happening in many markets is that the big hedge funds have been pushing prices to extremes far beyond what the economic fundamentals dictate. When they finally run out of firepower, then markets can reverse violently in the opposite direction. It is worth mentioning the most recent Commitments of Traders report. It shows who is buying or selling what in the futures market. At the last count, the large speculators had a near-record short position in the S&P futures contract. Contrary opinion suggests that they have been resoundingly wrong, and that a major summer rally should begin soon.

New Recommendations

In addition to our current recommendations, we have four new ones in the general area of high tech. They are:

Corning Glass (GLW) at $59.95
This company is a prime maker of the glass for fiber optics used in data transmission. It looks as if it could be coming to like smartly.

Phillips Electronics (PHG) at $94.63
This Dutch company could be a powerhouse. After years of stagnation, it could come to life as IBM did when it came out of its low a few years ago.

Erickson (ERICY) at $31.19
Much the same for this Swedish company as for PHG.

Scientific Atlanta (SFA) at $34.91
This out-source supply company looks as if is ending a significant correction and is ready to go again.

In addition, we are recommending some oil and oil-related stocks. The industry has been beaten up for years. In the process it has had to become extremely efficient. So higher oil prices could dramatically lift profits and share prices far beyond current levels. Almost all oil service companies look like a buy with the expectation of a gain of 50 percent or more in the foreseeable future. Curiously, some stocks like Exxon and Chevron do not look as good as some of the internationals. In looking for an oil service company, we find a significantly stronger chart for Santa Fe International even than we do for Schlumberger, which we had expected to look best of all.

Here is our list of stocks in the petroleum industry.

Apache (APA) at $38.22
Alberta Energy (AOG) # $30.70
BP Amoco (BPA) $110.25
Canadian Occidental Pete # (CXY) $14.59
Santa Fe International (SDC) at $21.39

Current Recommendations to Hold or Sell:

Stocks marked ** are recommended at the time of writing as a strong buy as of this date. Stocks marked * are also recommended for new money at the time of writing, although timeliness is not as good as it was when first recommended. The stock may already be rather overextended and vulnerable to a correction or else it may not have started moving up as expected and its chart has weakened slightly.

Stocks marked # are eligible for Canadian RSP funds. Otherwise there is a 20pc restriction on foreign stocks held in these accounts.

Current Recommendations:
(Entry Date, Entry Price, Last Close, Code, Name)

SELL 99/05/14 3.88 3.31 ACNAF Air Canada Corp #
* 99/05/12 39.75 43.69 ADI Analog Devices
* 99/04/06 49.00 69.94 AMCC Applied Micro Circuits
99/04/06 92.13 96.44 ASCND Ascend Communications
SELL 99/05/14 5.50 3.63 BIOM Biomira #
* 99/05/12 94.38 113.00 BRCM Broadcom
* 99/05/14 40.69 40.94 CLS Celestica #
99/05/12 117.50 110.69 CSCO Cisco
SELL 99/05/12 88.00 66.00 CVC Cablevision Sys
* 99/05/12 46.91 44.91 DEO Diageo Plc
* 99/05/12 54.61 57.42 EDS Electronic Data System
99/04/06 132.13 51.37EMC EMC (split on 99/05/28 2:1)
99/04/06 51.50 53.75 FLEX Flextronics
99/05/14 84.52 87.89 HWP Hewlett-Packard
99/05/12 220.77 113.95 IBM IBM (split on 99/05/26 2:1)
99/05/14 58.13 58.13 IDPH Idec Pharma
99/04/06 60.83 57.88 LLTC Linear Tech Corp
** 99/04/06 32.75 44.00 LSI LSI Logic
** 99/05/12 85.39 83.13 MOT Motorola
99/05/12 25.06 23.19 NOVL Novell
* 99/04/06 163.19 80.75 NOK Nokia (split on 99/04/09 2:1)
99/04/06 65.66 83.80 NT Nortel Networks #
* 99/05/12 106.06 58.50 PMC PMC Sierra (split on 99/05/14 2:1)
* 99/05/12 49.88 50.00 QLTI QTLI Phototherapeutics #
* 99/04/06 41.09 44.88 QWST Quest Communications #
SELL 99/04/06 90.66 33.38 SONE S1 Corp (split on 99/05/07 2:1)
* 99/04/06 53.75 57.69 SLR Solectron
99/04/06 130.94 59.69 SUNW Sun Microsystems (split on 99/04/08 2:1)
* 99/04/06 109.48 129.08 TXN Texas Instruments
** 99/05/12 87.19 89.19 TYC Tyco

In addition we recommend the following Closed End Funds, based on the assumption that Third World economic downturns are not going to last forever and that their stocks are now showing superb technical strength

99/05/12 9.89 10.02 CHN China Fund
99/04/06 6.63 9.31 FAK Fidelity Adv Korea
99/04/06 8.88 9.00 IFN India Fund
99/04/06 8.05 9.23 JOF Japan OTC Equity Fund
99/04/06 11.00 13.31 KF Korea Fund

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