Recap of Saturday, August 25

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The Informer

Scott Woolley, associate editor: Despite recent gains, MCI (MCIT) is doomed.  It's stock is up 25% but his was based on news that their revenues were flat for the quarter.  This is what passes for good news these days.  There's huge competition that's coming from 5 states.  Cellphones are also providing more competition.

Elizabeth MacDonald, senior editor:  World Comm has no confidence in MCI.  They just took a huge write down for their property and equipment.  It went from $14 billion to $11 billion.

Bruce Upbin, senior editor:  Motorola (MOT) is the top 5 semi-conductor company in the world.  Analysts are screaming for it to open up its chip group just to raise some cash.  I think that's idiotic.  We're at the bottom of a chip cycle.  Don't sell now when it's low.  Wait a couple of years after the company recovers.

Elizabeth MacDonald:  But isn't history repeating itself?

Bruce Upbin:  Well, everytime the bankers tell you to do something, you should be very careful.

Elizabeth MacDonald:  Don't bank on Bank of America (BAC).  It just took a $1.25 billion charge.  People like this stock. It's running at 15 times earnings at $63.  But Bank of America has some accounting problems.  It's losing an increasing amount pension gains.  They're monkeying around with their tax rates.  It's not illegal but if you see these kinds of nickel and dime moves you have to watch out.  This could be masking earning quality. 

Scott Woolley:  They've also got a lot of questionable loans.

Pete Newcomb, senior editor:  SONY (SNE) is out with a new product, the super audio CD, but it won't replace the current CD's.  It's just not going to happen. It's like Sony's "Betamax" back in the 80's -- couldn't play those tapes on a VHS, and you can't play these CD's in a regular CD player -- you have to buy the super CD PLAYER too!

Bruce Upbin:  DVD audio is going to wipe super audio off the map.  You can buy a DVD audio player for one tenth the price that SONY is selling it for. 

Pete Newcomb:  Sony's a $40 billion company.  They don't have too much at stake with this product. If it fails, it won't hurt the stock.   

Makers & Breakers


Alan Ackerman, Fahnestock & Co.: Maker
Citigroup is a world class leader in finance.  It's got a great management team.  I think this company will grow as the economy grows. 

Jim Clash, associate editor: Maker
Not a lot of people realize that financials are the second best performer in the sector.  The only thing that beat it is tech.  Trading at just 18 times earnings, that's a good buy.

Bruce Upbin, senior editor: Maker
I worry about execution issues, among their cross selling in different groups.  I also worry about succession issues.  But all in all, I'm a maker.

Ocean Energy , Inc. (OEI)

Alan Ackerman: Maker
Ocean Energy is one for my favorite companies.  Their rich in prospects.  They drill off shore.  I think they're a candidate for consolidation.  This stock has doubled last year.  I think it's a good buy.

Bruce Upbin: Maker
I think two things will happen with this stock.  Someone could buy it who knows the value that's hidden especially off the coast of Africa.  Or they're gonna realize the value of it and someone's gonna take it out.

Jim Clash: Maker
They've got proven reserves of over ten years.  They're trading at 11 times earnings.  They're a great take-over candidate or their undervalued.

Home Depot (HD)

Alan Ackerman: Maker
Only two thirds of the population in the United States are homeowners but I think whether the housing economy slows down or not, people are going to do home decorating and improvements.  I've used Home Depot's facilities for a long time now.  I think this stock is selling a little more realistically now. 

Jim Clash: Breaker
This is not a buy.  This market is just too shaky to support a 43 P. E. stock.  I might buy it when it got back to 40. 

Bruce Upbin: Breaker
Yes, it is too expensive.  I think there are also management issues that might create execution problems. 

Alan Ackerman:  Their quarterly earnings were up this quarter.  I think they're a strong horse.