Fred Hickey, High-Tech Strategist
- KLR
- Kirk
- Kirk
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» KLR - Hickey came out on top of a list of more than 600 fund managers,
Fred Hickey deserves more respect around here. Much like Brinker he is a life long bull, but sees a continuing degree of unwarranted risk in the market. He is beating everyone in sight and like Kirk at age 44, he works from his house, doesn't advertise, declines to be interviewed by CNBC and is up 32% in 2001. His newsletter; however, is slightly less expensive at $95 a year.This pundit "bears" watching and while Brinker is apparently no longer waiting for MOABO. Fred Hickey is still waiting for GBOL (Greatest Buying Opportunity of my Lifetime).
Underdog guru is tops on Street
Top stock wizard warns of more market mayhem
By Mike Tarsala, CBS.MarketWatch.com
Last Update: 1:17 AM ET May 23, 2001
SAN FRANCISCO (CBS.MW) -- You'd think Fred Hickey would be pulling down a bigger paycheck, since he's flat-out the top financial sorcerer making predictions about technology stocks.
Without the backing of a global investment bank or a seven-figure income, Hickey is the most accurate financial wizard on the street so far this year.
Investors would have increased their portfolios by 32 percent in 2001, if they'd followed the stock picks Hickey's made in the financial media. Hickey's picks averaged double the return of the 10 best-performing market commentators, according to data collected for CBS.MarketWatch.com by pundit-tracking service Validea.com.
By the same measure, two of the most closely watched financial analysts, Goldman Sachs' Abby Joseph Cohen and Merrill Lynch's Henry Blodget, are both down for the year. Morgan Stanley's Mary Meeker, another guru who gets lots of face time, is up 5.1 percent, or just slightly better than the S&P 500 (SPX: news, msgs, alerts) .
"Since I'm not a celebrity, I'm shocked that my name shows up on any kind of list," Hickey says. The 44-year-old investor, and one-time number-cruncher at the former GTE Corp., has been publishing his newsletter, "The High-Tech Strategist," for 15 years. "I turn down the interview requests from CNBC, I don't promote at all. I don't send any advertising to anyone."
Hickey came out on top of a list of more than 600 fund managers, analysts and commentators that regularly make stock predictions that are picked up by the financial media, according to year-to-date research. Pundits that made fewer than three predictions were excluded from the study.
Bear's lair
Known for being a bear in recent years, Hickey toils in relative obscurity from his home in Nashua, N.H, a former industrial mill town that touts its internationally ranked barbershop chorus, and promotes itself as a tax-free shopping haven. He's a world away from the New York financial crowd, making his fortune $95 at a time -- the price of an annual subscription to the newsletter.
Perhaps his confines are part of the reason why he has time to do more, and better, research than his competitors.
Hickey made 16 winning technology stock picks early in the year that defined his portfolio. Three of them, print-server company Electronics for Imaging (EFII: news, msgs, alerts) , development software company Borland (BORL: news, msgs, alerts) , and network-management specialist BMC Software (BMC: news, msgs, alerts) , nearly doubled since he recommended them in January.
This week, Hickey is issuing more stock picks, this time especially for CBS.MarketWatch.com. But the bad news for bulls is that all his picks are shorts.
High stakes
Hickey says he's looking hard for stock picks. He says he wants to be bullish about tech stocks, as he has been for most of his career.
But due to decreased revenue, earnings and cash levels for many companies -- not to mention uncertain economic conditions -- he can't find a single stock he thinks is a bargain. He says stock values are now more excessive than at any point he's seen in 20 years.
That includes the height of last year's dot-com craze.
"I've never seen a period like this before, when insanity still reigned," Hickey said. "People don't care about valuation. They just haven't learned anything."
Despite, or perhaps because of a recent tech stock rebound, the market's total valuation, as a percentage of GDP, is more than two-times higher than that of its all-time peak in 1929, according to Hickey's research. It's nearly two times higher than it was in 1987.
If long-term tech stock gains are to continue, the market must come down, he says.
Hickey points out that one of the greatest rallies on the Dow Industrials was in 1931 -- in the middle of the market's greatest slaughter. He sees a similar pattern with what's happening now on the Nasdaq.
In short, it's a sucker's rally.
No shelter
Stocks values are way too high, Hickey says, and the ones that are most out-of-kilter are in the volatile semiconductor market, a niche many tech investors are now betting will be the biggest beneficiary of a market rebound.
One of the biggest dunderheaded stock picks is Intel, he says. The company's shares trade at a multiple that's 53 times its 2001 earnings; as much as five times its historic average. Intel's stock price to its sales is seven times -- an unprecedented level. The company also has inventory issues. Its pricing power for high-end chips is collapsing. The company is facing intense competitive pressure from Advanced Micro Devices (AMD: news, msgs, alerts) . It's recently suffered a series of product delays.
"It has it all," Hickey says.
He's betting the company will warn in June, and Wall Street analysts will cut immediately cut earnings estimates on the company.
Applied Materials (AMAT: news, msgs, alerts) shares have risen 48 percent so far this year, to nearly $57. But the company recently warned it's in the worst business environment in 20 years.
Investors have yet to fully account for Applied's third quarter, which will break even on a per-share basis, compared with initial expectations of 24 cents earnings, according to Hickey. The company could report revenue of about $1 billion in the third quarter, even less than the $1.2 billion to $1.3 billion executives predicted. Order volumes could continue to decline, and the company's customers are threatened with tight cash flows.
"What's it good for? Another big rally, of course," Hickey quipped.
Micron Technology (MU: news, msgs, alerts) shares are up 24 percent since early April, but they're likely on they're way down, as well, Hickey says. The cost of memory on the spot market is falling. The company faces a saturated market. PC sales in the first quarter, the biggest chunk of Micron's market, are at the worst levels ever. It's likely to be even worse in the second quarter, he says, as a PC market slowdown spreads to other parts of the world.
"In a few weeks the company's likely to report the worst quarter in the company's history," Hickey said.
A different species
Although his market advice is dire, Hickey insists that he shouldn't be labeled a "bear." He asserts that with few exceptions, he's been a life-long bull. He reminisces about the early days of the minicomputer industry, when he made a killing on companies such as Prime Computer and Wang Labs. His early investments helped him to leave his job at GTE with money in the bank at age 35.
He's also seen the second wave of computer companies come along, including Compaq (CPQ: news, msgs, alerts) and Dell (DELL: news, msgs, alerts) . Then he watched the networking industry boom, as Cisco (CSCO: news, msgs, alerts) shares blossomed, and later, JDS Uniphase (JDSU: news, msgs, alerts) .
But he says he won't invest now -- not during a stock "mania." Investors are paying more attention to stock patterns than they are to the deteriorating business that supports the stock prices.
It's why he says his best financial decision, other than his short positions, is keeping cash on hand.
"When this is over, it will probably be the greatest buying opportunity of my lifetime," Hickey said. "And I will be ready."
Mike Tarsala is a San Francisco-based reporter for CBS.MarketWatch.com.
-- posted by KLR
» Kirk - March 24, 2003
.Message #20492 from Michael Happel at 12/3/2004 12:41:22 PM
http://www.siliconinvestor.com/readmsg.a...
And here's what Mr. Hickey had to say on March 24, 2003!
SPRING 2003
INVESTING FOR GROWTH/Online Extra
Q&A with Fred Hickey
The tech-stock bear believes "we"re not there yet" -- pricey tech shares means Nasdaq has further to fall
Fred Hickey, editor of the influential High-Tech Strategist newsletter, toils a long way from Wall Street, in Nashua, N.H. That distance, plus an enviable Rolodex amassed over 20 years in techdom, enables the fiercely independent analyst to keep his pulse on the industry without getting caught up in the hype.
Even now, with Nasdaq stocks down 70% from their March, 2000, peak, Hickey remains sour on the tech sector. BusinessWeek Personal Finance Editor Susan Scherreik recently spoke to Hickey about his views. (A subscription to his newsletter costs $120 annually and can be ordered by writing to P.O. Box 3133, Nashua, N.H. 03061.) Following are edited excerpts of their conversation:
Q: You're still a tech-stock bear. Why?
A: The big technology companies -- Dell (DELL ), Cisco (CSCO ), Applied Materials (AMAT ), and Intel (INTC ), to name a few -- are still beloved, still overowned, still grossly overpriced.
Q: Which means?
A: At some point, they're going to come down a lot, and they'll take the whole tech sector with them.
Q: What will be the catalyst for a sell-off?
A: Many investors assume that the economy will improve, that business will stabilize, that the second half of 2003 will be better. But I don't think that will happen. So when there are disappointments relative to expectations -- and there have been for years now -- I think there's going to be another level down.
Q: So tech stocks haven't bottomed?
A: No, we're not there yet. I'm patiently waiting for that to happen. When it does, I'll be buying tech stocks with great eagerness.
Q: How much further will tech stocks fall?
A: I think Nasdaq is going to have to be cut in half [from its level of 1,397 when Hickey spoke.]
Q: That's pretty drastic. What do you base your forecast on?
A: A rule of bear markets is that the old leadership from the prior bull market never leads the new bull market. By that measure, we still need to see the kind of capitulation in the big tech stocks that we saw in the last bear market in 1990.
Q: What were valuations back then?
A: Tech stocks were trading around 16 times earnings. Today, the big tech names still trade at 30 to 80 times earnings. We won't see bottom until the big tech names approach 1990 valuations.
Q: In the meantime, do buying opportunities exist?
A: A few medium-sized businesses are fairly cheap and, because they have virtually no debt, offer a margin of safety. One I like is Lawson Software (LWSN ), which sells mission-critical kinds of enterprise-software solutions to mid-tier companies. It recently traded at around $4.65 a share.
Q: Any others?
A: 3Com (COMS ) is interesting. They brought in a new CEO two years ago, Bruce Claflin, and he has been restructuring the company. He has taken the number of employees down from 12,000 to 4,000. Claflin has also slowed the cash burn so much so that the last couple of quarters have been cash-flow positive. The company also has $1.5 billion in cash, and its market capitalization is around $1.6 billion, so there's a nice margin of safety.
Q: Are these buy-and hold stocks?
A: No. There are occasional rallies in bear markets, and you could buy these stocks to play the rallies. You don't want to hold them long-term because when the big-name tech stocks tank, they'll bring everything else down with them.
MARCH 24, 2003
-- posted by Kirk
» Kirk - 2/3/2004: Chip Sector Stock Rally Prompts Valuation Worries
.http://www.siliconinvestor.com/readmsg.a...
Message #20488 from Donald Wennerstrom at 12/3/2004 11:51:02 AM
Chip Sector Stock Rally Prompts Valuation Worries
Fri Dec 3, 2004 11:31 AM ET
SAN FRANCISCO (Reuters) - A surprisingly strong revenue outlook from Intel Corp (INTC.O: Quote, Profile, Research) propelled semiconductor industry stocks to the highest levels in months on Friday, but some on Wall Street remain concerned the stocks might be overvalued.
Intel jumped more than 6 percent on Friday. Chip shares on the Philadelphia Stock Exchange semiconductor index are up 27 percent from September lows, with Intel up 23 percent from that point.
Fred Hickey, editor of the investment newsletter High-Tech Strategist, sees a bubble reminiscent of 2000.
"Today we're irrational again. It's almost like a nightmare," Hickey said. He pointed to weaker estimates for PC growth from research firm Gartner; a softer-than-expected U.S. job creation report; and a weaker outlook from auto makers. He predicted the semiconductor index will fall by more than half next year.
For Intel, the best performer on the Dow Jones industrial average last year, there are also questions from Wall Street about valuation. Despite cranking up its quarterly revenue target to an all-time high of about $9.4 billion, the Santa Clara, California-based company did not raise its profit margin forecast.
"We still worry about whether Intel will be able to grow margins in 2005," Rick Schafer, an analyst with CIBC World Markets, wrote in a note to clients on Friday. He said Intel's stock may not rise further unless there is "an acceleration in PC unit growth in 2005 beyond what we see now."
Schafer said Intel's stock, as measured relative to estimates for future earnings, is in line with its historical multiple, suggesting it has little room to grow. CIBC's "neutral" investment rating remains unchanged after Intel's latest revenue forecast.
Semiconductor stocks as a whole may face a tough period in the months ahead, as a cyclical growth period comes to a close, said Banc of America Securities analyst John Lau. But Intel remains positioned for growth and could see upside to its shares of another 10 percent or more, Lau said.
"We believe the strong positioning of Intel in the PC sector will allow them to maintain pricing power and operating leverage better than almost any other semiconductor device company well through the cyclical trough in 2005," Lau said in a research note. He raised his 52-week price target on Intel by a dollar to $27.
Intel shares were up $1.54, or 6.8 percent to $24.25 on Nasdaq, where it was the most actively traded issue.
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