The Bull Is Back

From the charts, it looks like we'll see a five year high any day now from the NASDAQ - to top 2,375. Last week the market fell short twenty points of that benchmark, but with little resistance in the Dow Jones now, there's a strong chance that some of that industrial buying will pour over into technology.

For the second time in two days, Google has beaten its all-time high of $471.64 - on Tuesday the stock rallied to $484.64, closing at $480.78, and then yesterday the stock reached 488.50 before settling back on close at 486.60.

You don't have to be a genuis to work out that with this kind of momentum behind big tech, a straight leveraged bet on the index weaning out another 5% short-term is money lying on the table. The most interesting candidates in my opinion though are Yahoo!and Lucent.

Yahoo!'s earnings may be much, much weaker than Google's - it trades at a P/E in the low 30's on a market cap of about $30 billion against the latter's P/E of just over 60 valuing the search giant at nearly $150 billion - but the stock has taken a bit of a beating over comparisons with its  younger upstart.

This stock has split no less than 5 times, mostly 2 to 1 since inception - and one of those splits was way past the tech bubble. If big tech continues to plough forward with such mighty alacrity, it's only a matter of time before traders start looking in the bargain bin for P/E's under 40, and Yahoo! is a good contender. It's prescient that Yahoo! doesn't have all the acquisitions baggage that Google has too - even though market sentiment favours recent private equity buy-ups by Page and Brin, they are still one-way bets on unproven brands and semi-proven revenue models. Add to that that the revenue models are pure play with no hedge against the core business model. Also, say what you will, this is a company that's been public through the worst of it all, and there's still a lot of headroom in that chart.

Everyone hates Lucent, but getting in bed with Alcatel was smart - as telecoms markets become more standardised throughout Europe and the U.S.A., having one giant global reach makes sense. At a P/E of 20 and with a market cap of $11 billion, this stock is real bargain basement material right now. When tech picks up, telecoms tech is the next big driver and I think there's a lot of space for some creative earnings streams over the next few years if you're on the content and data side of the business.

Big tech is back, and so is the U.S. economy - it's one major reason the Republicans will storm home in the mid-terms.

Comments

[harris freedman]

lucent at one time sold for 80 dollars a
share, i purchased it at 50, will it come
back.