Investing For Growth - Tuesday, November 19, 1996

Investing For Growth

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Tuesday, November 19, 1996

The Daily IFG Report

FOOL GLOBAL WIRE
by Robert Sheard (MF DowMan)
LEXINGTON, KY. (November 19): After lower October Housing Starts numbers came out this morning (the second monthly decline in a row), stocks picked up where they left off on Friday. Yesterday's 1-point blip was soon forgotten and the Dow burned rubber toward the next century mark -- 6400.

Technology stocks also enjoyed a rally today after Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:HWP)") else Response.Write("(NYSE:HWP)") end if %> posted quarterly numbers. Even though HP's earnings were off slightly (which they had already warned the market about), the order growth, especially for personal computers, was stronger than analysts expected, so the stock and many of its peers rose on the day.

As for the Investing for Growth holdings, 3Com announced today that it will be investing $98 million (Singapore) in the first-phase development of a manufacturing site in the Asian-Pacific country. The facility is scheduled to open in the first half of 1998 and represents 3Com's first site in the region. When completed, the facility will contain two production lines, a logistics center, regional support center, and a regional data center.

SCI Systems also gathered a little steam today as Needham & Co. initiated coverage of the stock with a buy rating. Needham described SCI Systems as "the largest global supplier of full-service contract manufacturing to the electronics industry." Needham's fiscal 1997 estimate for the company is $3.15 per share. First Call's consensus estimate is $3.16.

And finally, Tellabs regained some of yesterday's losses from the Prudential downgrade. Tellabs has been a tough case to PEG (pun intended) all year. For whatever reason, the YPEG price target on the telecom equipment maker has pointed to it as being over-valued for as long as it has been in the IFG holdings. And yet the stock is up some 75% in the sixteen months since it was added to the portfolio.

There may be something peculiar about the telecom equipment industry, or this size stock in general, about which the YPEG doesn't work as well as the PEG does on small-cap stocks. But this year has been strange regarding the YPEG and the growth stocks pointed to by the IFG screening techniques. Two of the best performers (Tellabs and Paychex) looked the most over-valued according to their YPEGs, and two of the heart-ache stories (Micron Technology and Applied Materials) looked the most under-valued. I'm not sure if there's a lesson here or not. But I tend to proceed with caution in applying the YPEG test to these larger stocks. The PEG might best be reserved for the small caps pointed to by the Foolish criteria David and Tom outline in The Motley Fool Investment Guide.

The Current IFG Stocks

Nike
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:NKE)") else Response.Write("(NYSE:NKE)") end if %>
Green Tree Financial
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GNT)") else Response.Write("(NYSE:GNT)") end if %>
Nautica Enterprises
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:NAUT)") else Response.Write("(NASDAQ:NAUT)") end if %>
Three Com
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:COMS)") else Response.Write("(NASDAQ:COMS)") end if %>
Western Digital
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:WDC)") else Response.Write("(NYSE:WDC)") end if %>
Sun Microsystems
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:SUNW)") else Response.Write("(NYSE:SUNW)") end if %>
Compaq Computer
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CPQ)") else Response.Write("(NYSE:CPQ)") end if %>
Tellabs
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:TLAB)") else Response.Write("(NASDAQ:TLAB)") end if %>
ADC Telecom
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ADCT)") else Response.Write("(NASDAQ:ADCT)") end if %>
Claire's Stores
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CLE)") else Response.Write("(NYSE:CLE)") end if %>
Last Update: 11/18/96

Today's IFG Numbers

INVESTING FOR GROWTH MODEL (11/19/96) Day Week Quarter Year History IFG 0.09% -0.95% 1.93% 13.32% 4510.61% DJIA 0.80% 0.78% 8.76% 25.02% 671.87% S&P 500 0.70% 0.61% 7.98% 20.49% 596.73% NASDAQ 0.64% 0.06% 2.91% 20.00% 753.01% Bought # Stock In At Now Change 7/8/95 7732 TLAB 24.00 42.13 75.52% 7/5/96 4562 COMS 44.38 72.00 62.25% 7/5/96 5077 SCIS 39.88 57.50 44.20% 10/4/96 6250 ADCT 32.00 37.25 16.41% 10/4/96 4001 KO 50.00 51.75 3.50% 7/5/96 8756 MIR 23.13 22.88 -1.08% 10/4/96 4879 GNT 41.00 39.38 -3.96% 10/4/96 6063 NAUT 33.00 31.50 -4.55% 10/4/96 3218 NKE 62.13 54.75 -11.87% 10/4/96 9642 CLE 20.75 16.50 -20.48% Bought # Stock Cost Value Change 7/8/95 7732 TLAB $185,568.00 $325,710.50 $140,142.50 7/5/96 4562 COMS $202,438.75 $328,464.00 $126,025.25 7/5/96 5077 SCIS $202,445.38 $291,927.50 $89,482.13 10/4/96 6250 ADCT $200,000.00 $232,812.50 $32,812.50 10/4/96 4001 KO $200,050.00 $207,051.75 $7,001.75 7/5/96 8756 MIR $202,482.50 $200,293.50 $(2,189.00) 10/4/96 4879 GNT $200,039.00 $192,110.63 $(7,928.38) 10/4/96 6063 NAUT $200,079.00 $190,984.50 $(9,094.50) 10/4/96 3218 NKE $199,918.25 $176,185.50 $(23,732.75) 10/4/96 9642 CLE $200,071.50 $159,093.00 $(40,978.50) CASH $672.07 TOTAL $2,305,305.45 Transmitted: 11/19/96

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