Dear Mr. Berko: In mid-July you wrote a column in response to a reader who wanted to "roll the dice" with $50,000 and speculate with 15 low-priced stocks. I wanted to roll the dice also but not with that amount of money, so I bought just 200 shares of each of the 15 stocks.
Considering what the stock market has been doing since that time, my speculative portfolio isn't doing badly. Eight of the issues are higher than my purchase price, one went bankrupt (WCOM) and the remaining six are lower than my purchase price. I realize that these issues are long-term (18-month) plays, so I'm not disturbed that seven of these picks are lower in price.
I still have about $10,000 to speculate with, and I hope you will recommend eight to 10 more that are similar to the 15 you mentioned in July. Like the writer from Kankakee, Ill., I will not hold you responsible if they crash.
D.K.
Fort Walton Beach, Fla.
Dear D.K.: You've got to have the metabolism of a snake and the emotional range of a cigar-store Indian to purchase July's minatory issues. You must have a very high level of masochistic molecules in your bloodstream because you're coming back for more. So if you like skydiving without a parachute, if you get kinky thrills walking a tightrope without a net and if you get jollies from kissing cobras, then the following issues may give you that "high" you seem to enjoy.
Tellabs (TLAB-$6.56) traded in the high $70s a few years ago. TLAB makes, markets and services optical networking, broadband access and voice quality-enhancement products. This $2 billion revenue company has no debt, a bundle of bucks in the bank and trades a few pennies under book value. TLAB should be profitable this year. Its huge cash position might be attractive to a larger competitor.
Cirrus Logic (CRUS-$4.93) is a $425 million revenue company that makes integrated circuits for the personal computer, consumer and industrial markets. CRUS has no debt, a very strong cash position, traded in the high $40s two years ago, has a $2 book value and should return to profitability next year.
Interdigital Communications (IDCC-$9.25) develops advanced technology solutions (third generation) for the wireless and Internet industry. IDCC, with revenues of $52 million, traded in the $80s two years ago, has tons of cash, negligible debt and could be smartly profitable next year. IDCC's large cash position may tempt others in the industry.
Sycamore Networks (SCMR-$2.94) develops products that transport voice and data traffic over wavelengths of light. This $375 million revenue company traded over $200 a share a couple years ago and won't earn a profit till late next year. Meanwhile, SCMR has no debt, trades at 60 percent of its $5 book value
and has a scandalously large cash horde. SCMR may be appealing to its more aggressive industry colleagues.
Rambus (RMBS-$6) designs and develops high-speed chip connection technology that enhances the performance of computers. This $117 million revenue company has zero debt, will earn a quarter a share this year, owns a mighty impressive cash position and traded over $135 a share two years ago.
Igate Corp. (IGTE-$3.62) provides cross-enterprise integration, network consulting, information management, Internet trading and e-procurement solutions, customer care services, Web-based business processing, plus offshore services to companies around the world. This $420 million revenue company traded in the high $70s a short while ago, has a lovely cash position, negligible debt, a $2 book value and expects to be in the black this year and next.
Legato Systems (LGTO-$3.41) is a $240 million revenue company that develops and sells network-storage software products, which are used to safeguard and manage information assets. LGTO has zero debt, a very clean balance sheet, traded in the $80s a couple of years ago and today the shares trade less than its$2.75 book value . LGTO expects to be profitable next year.
And finally, Palm Inc. (PALM-95 cents) develops and sells hand-held personal computer products and derives its $1 billion in revenues from both consumer and business customers. PALM, which expects to turn a profit next year, traded over $160 a share two years ago, has no debt and a very comfortable cash position.
I believe that in the next 18 months some of these issues may be bought out by larger competitors, others could triple or quadruple in value and some may just fold their tents while their corporate umbrellas go tulips in the rain. In my opinion, in an 18-month time frame, this investment has a low risk and high reward potential. All it takes is guts to do it.
As you know, the best time to own stocks is when the streets are covered and the gutters are running with blood. That's when no one wants these stocks and that's right now. Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or visit his Web site at berkoradio.com. Distributed by Copley News Service.
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