Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Victoria, the PC war is going on, right?
Victoria Murphy, senior reporter: It is. And who is winning? Dell (DELL) is winning, and I think they stand to win more. They’ve had a great quarter.
David Asman: Winning against Gateway (GTW)?
Victoria Murphy: Yes, and also Hewlett-Packard (HPQ), but I think Gateway is really weak right now, and this week announced that the U.S. Attorney’s office is investigating their accounting. And this comes on top of SEC (search) investigations. I think Gateway is really hurting and that Dell can just eat their lunch, right now especially.
David Asman: So is Dell a buy?
Victoria Murphy: I think it is. It’s definitely pricey, but you would have thought that two months ago and the price has gone up considerably.
Dennis Kneale, managing editor: Well, here’s the thing about Gateway, Victoria. Gateway clearly is a company on the decline, it ended all foreign sales a couple of years ago. Now, you know, it’s selling flat-screen TV’s. This company doesn’t know what it’s doing. But it is such an also-ran in PC’s that I doubt that Dell can gain that much when Dell stock is at a 52-week high. Rather pricey as Matt Schifrin was pointing out.
Matt Schifrin, senior editor: Absolutely. I mean Dell is a great company, but it’s in a lousy, low-margin business. I wouldn’t be putting my money in that business.
Victoria Murphy: I see your points, but Gateway sales could be 12 percent to Dell’s top line, so I think there’s something there.
David Asman: All right. Matt, do you think there’s a buy in Internet stocks?
Matt Schifrin: Actually, we track investment letters, and there’s one letter called Fund X, which has the best record over 20 years.
David Asman: So once again, this is a fund that has all those Internet stocks in it?
Matt Schifrin: Right. It’s an investment letter that tracks the funds. This letter has recently been recommending Internet funds this letter has done extremely well over a long period of time. Two funds they like are the Kinetics Internet Fund (WWWFX) and the RS Information Age (RSIFX).
David Asman: How many stocks are in each one of these funds?
Matt Schifrin: These are diversified mutual funds so they’ve got lots of stocks in them, but as I say, this is in a momentum system, these funds have done extremely well, and this fund letter has done extremely well.
David Asman: Victoria, Barry Diller is back in the Internet. Are you ready to get back in?
Victoria Murphy: Well, I like what Barry Diller is doing, but I don’t think that an Internet fund is the right approach. I think it’s kind of a stock picker’s market, and if you go with a fund you’re going to get dragged down by the laggers.
Dennis Kneale: Matt is awfully sharp on numbers. I think about psychology. I think investors want nothing to do with anything called “Internet fund.” Change the name of it to a “network fund.”
Matt Schifrin: Well, the proof is in the results. This thing has gone up 12.6 percent over 20 years, on average.
David Asman: All right, Matt. The Forbes website has more on these funds. Find out more at forbes.com/fundx. And now let’s give a plug to The Matrix.
Dennis Kneale: A week ago, I said “stay away from AOL Time Warner (AOL), it’s too much of a mess.” Then, something happened last week. I went to the premiere of The Matrix Reloaded (search), on Tuesday. It is a rip-roaring, sequel. This is the most amazing film I have ever seen. And then, on Thursday, my neighbor told me that 100 people were on line to see the 10 o’clock show. This movie, and its sequel, could bring over $1 billion to Time Warner. Now that’s not going to change a $25 billion company with revenues, but it’s going to change the psychology of how the market feels about Time Warner. AOL Time Warner finally has a great story to tell. You’ve got to see this movie. It’s unbelievable.
Victoria Murphy: I haven’t seen the movie, but the premise scares me. The machines want the power of our brains and the brain they pick Keanu Reeves? Dennis, use your head. This movie is an over-hyped dud. It’s not going to win.
Dennis Kneale: Victoria, here’s the thing. Some people get The Matrix. And then other people don’t. That’s what it’s all about.
Victoria Murphy: The production costs are huge. Last year they had two billion dollar movies and it didn’t do much for their stock price. I’m still scared of AOL.
Makers & Breakers
David Asman: Usually in this segment a guest money manager comes on with stocks he or she likes and the Forbes folks give them the third degree. Well, it’s time for a change. We're going to look at stocks in the news and find out if that news makes them a buy or a sell.
New York Times (NYT)
David Asman: The so-called "paper of record" was under fire after firing one of their reporters for basically making up facts for articles that made the paper's front page. Bob Sullivan, is this scandal going to hurt the stock?
Bob Sullivan, chief investment officer at Satuit Capital Management: BREAKER
I think it’s not going to help the stock. The question is “how do you make money at this point in time?” I think the easiest way to answer that is to just simply stay away from it for a while. There’s way too much of this credibility issue hanging over the company right now. I also think that if you look at the fundamentals of the story, I have a company that has a 21 multiple on this year’s earnings, 11 percent growth rate. Ad revenues are a little bit light this time.
Elizabeth MacDonald, senior editor: BREAKER
Well, I do think there is a serious credibility issue there. The joke now is that The Times is “All The News That’s Fit To Fake.” But 90 percent of the entire company’s revenues come from newspaper sales. That’s a huge problem at The Times with this credibility issue. There’s another stat that I would like to offer. Ad revenues are down. They’re being beaten by the Internet. That’s a problem for this company.
Jim Michaels, editorial vice president: BREAKER
I’ve got a proposal for The New York Times. They’ve been doing all this soul-searching about this reporter who faked things. If something like this happened in the Bush Administration, The New York Times would demand a special counsel be appointed from outside to investigate. Now I propose The New York Times accept an outside counsel to come in and investigate what happened. And I also propose that the special counsel be Neil Cavuto, of this network. If Neil gives them a clean bill, I might like the stock.
Martha Stewart Living Omnimedia (MSO)
David Asman: Martha Stewart may be making a deal with the Justice Department to settle that Imclone (IMCLE) insider trading mess she's in. The stock popped when that rumor spread. Bob, is this stock on the rebound for good?
Bob Sullivan: BREAKER
I think that Martha Stewart falls into that category that I have of that “I’m a better buyer, higher on a catalyst.” Again, there’s a lot of controversy swirling around Martha Stewart, and it really goes back to her credibility as well. But if I do take a look at the fundamentals, I kind of see the same thing. I see lack of revenues, lack of earnings. I have a whole bunch of things happening inside of the income statement that I’m just not quite sure I want to get involved right now.
Jim Michaels: BREAKER
Her image is tarnished, she’s basically a disagreeable woman. She’s not worth all this attention. I just don’t see any appeal in that stock.
Elizabeth MacDonald: MAKER
Stop beating up on Martha Stewart. She showed a lost and confused world how to spruce up ho-hum soufflés. If the government had a material case they would have presented it by now. She is a powerhouse. The stock has already doubled off its October low.