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November 16, 1999 It's been almost a year since I listed the top tech stocks as rated by Buffettology. Here is a tabulation of how they have done. Stock 1998 Est. 1999 Ticker Price 5yr RR Price Comments DELL $33 86.0% $41 Adjusted for 2:1 split AMGN $40 35.8% $90 Adjusted for 2:1 split ORCL $24 34.2% $64 Adjusted for 3:2 split PMTC $16 32.3% $20 MSFT $64 30.0% $87 Adjusted for 2:1 split (top five up 71% as a group) IBM $82 29.3% $94 Adjusted for 2:1 split BMCS $47 29.0% $69 CPWR $31 28.6% $31 Adjusted for 2:1 split PFE $37 28.2% $35 Adjusted for 3:1 split GTW $26 27.2% $83 Adjusted for 2:1 split LLY $86 26.2% $74 ABT $49 25.6% $38 INTC $58 25.1% $76 Adjusted for 2:1 split BMY $63 25.1% $78 Adjusted for 2:1 split VSIO $36 25.1% $35 PSFT $20 24.8% $18 CSCO $39 21.7% $84 Adjusted for 2:1 split SUNW $38 20.6% $123 Adjusted for 2:1 split MRK $79 20.6% $76 Adjusted for 2:1 split SBC $50 19.8% $50 BGEN $40 19.3% $74 Adjusted for 2:1 split ASND $57 19.2% $63 Bought by Lucent for 0.825 LU share CA $44 19.1% $62 HBOC $24 18.4% $8 Bought by McKesson for 0.37 MCK share SYMC $20 14.4% $48 (bottom five up 280% as a group) HWP $64 13.7% $75 ADBE $23 12.5% $76 Adjusted for 2:1 split MUEI $20 11.7% $10 AOL $44 11.4% $155 Adjusted for 2:1 split QCOM $27 11.0% $361 Adjusted for 2:1 split The first thing I notice about this is that it was a good year to invest in tech stocks! Almost all these stocks went up strongly. The second thing I notice is that the stocks at the bottom of the list, AOL and QCOM, both skyrocketed upwards, AOL tripling and QCOM more than 12 times higher. So did Buffettology really tell us anything here? Despite the apparently contradictory results, I think it did. If we regard AOL and QCOM as special cases caught up in the tech mania, the rest of the list makes sense. The stocks that did better tend to be higher on the list. Perhaps another way of saying this is that the basis of the success of AOL and QCOM is not found in their current finances, but in their bright prospects. Basing one's investments on good financial results seems like a safer bet to me. I've come up with a new list of tech stocks for the coming year. I've limited it to American companies (because it's hard for me to get good financial data on foreign stocks), with market capitalization of $1 billion or more, revenue growth of 10% or more, and positive earnings (required by Buffettology). Ticker Price Earn Div Book 5yr Price Divs After tax 5yr RR CPWR $31 $1.02 $0 $2.38 $267.21 $0. $188.62 47.6% DELL $41 $0.64 $0 $1.33 $337.94 $0. $237.70 46.8% CMGI $103 $4.09 $0 $11.12 $673.68 $0. $456.65 40.3% IBM $94 $4.22 $0.48 $10.34 $599.67 $9.71 $410.41 39.9% AMGN $90 $1.96 $0. $5.87 $505.56 $0. $332.65 36.3% ORCL $64 $0.90 $0. $2.46 $292.17 $0. $182.49 30.9% ADBE $76 $1.49 $0.10 $4.77 $345.57 $1.61 $216.54 30.9% SYMC $48 $1.71 $0. $6.37 $200.45 $0. $121.86 28.7% CTXS $81 $1.45 $0. $5.04 $330.54 $0. $199.58 28.2% VSIO $35 $1.23 $0. $4.79 $138.41 $0. $82.63 27.4% CA $62 $1.27 $0.08 $4.97 $223.18 $1.09 $129.96 25.5% INTU $33 $1.92 $0. $8.05 $120.23 $0. $69.53 25.3% GTW $83 $1.34 $0. $4.78 $295.13 $0. $170.11 25.1% MRK $76 $2.37 $1.16 $5.50 $249.15 $14.78 $147.89 24.2% INTC $76 $2.09 $0.12 $8.73 $258.50 $1.56 $146.75 23.9% MSFT $87 $1.50 $0. $5.90 $291.97 $0. $164.13 23.7% BMY $78 $1.74 $0.86 $4.25 $239.90 $10.49 $136.27 22.5% LU $76 $1.17 $0.08 $4.07 $242.93 $1.19 $134.03 22.5% BGEN $74 $1.23 $0. $5.77 $196.07 $0. $97.56 18.3% BMCS $69 $1.16 $0. $5.69 $176.56 $0. $86.10 17.6% ERTS $90 $1.81 $0. $11.74 $213.78 $0. $98.68 15.9% PFE $35 $0.65 $0.32 $2.23 $74.39 $3.20 $33.46 14.4% EMC $82 $0.99 $0. $4.19 $176.73 $0. $75.58 13.9% SUNW $123 $1.44 $0. $6.56 $236.84 $0. $90.82 11.7% NOVL $22 $0.45 $0. $4.65 $37.42 $0. $12.74 9.8% CPQ $21 $0.58 $0.08 $6.79 $32.74 $0.62 $9.47 7.6% CSCO $84 $0.59 $0. $3.57 $73.85 $0. -$7.77 -1.9% AOL $155 $0.69 $0. $3.45 $103.02 $0. -$41.34 -6.0% QCOM $361 $1.11 $0. $8.78 $113.37 $0. -$197.85 -14.7% EBAY $146 $0.06 $0. $6.39 $3.17 $0. -$114.21 -26.3% One thing you have to do in Buffettology is estimate the future PE ratio. Last year I took it be equal to the current PE. This year I limited it to 50 in the case there the current PE is above 50. This causes the bottom four stocks in the table to show losses, because they currently are supported by sky high PE ratios, which I'm not willing to assume are going to stay up there. It's interesting to note that Microsoft and Intel now fall in the middle of the table. It seems like they are maturing. Now that they're in the Dow, we'll have to think of them as blue chips rather than as hot growth stocks. Another interesting thing is the appearance of Internet stock CMGI near the top of the list. CMGI is an odd company that invests in other companies and sometimes buys them outright. In fact, it's very similar to Warren Buffett's Berkshire Hathaway in that respect. © Copyright 1999 by Richard Gillmann. All Rights Reserved. |