About Murray Cass Expertise I am eager to help investors find their way through the muddle of tech investing. I can answer questions concerning tech investing, financial reports, stocks, and options. Having worked in the computer industry for over 20 years I have a good general knowledge of computer technology. I have read over 100 investment books -- mostly the old ones. I spend my time doing investment research, attending annual shareholder meetings, and managing portfolios.
Experience Professional Engineer, MBA, over 20 years experience in computer industry, 9 years intensive investing experience.
Question Hey there! My name is Brad Tracy, but my friends call me Bradford. I am a 17 year old from St. Paul, Minnesota and I am going to go to college next year. As you know, college costs money and so in order for me to go to college, I will need money. Aside from applying for scholarships and grants and AID, I will need money to afford the U of Minnesota.
I am a huge Disney fan and go to websites everyday about Disney. I found out today that many analysts rate Disney a 'buy' or 'strong buy' and this prompted me to consult my dad's broker (who is his best friend and was at our house at the time). He told me that he personally would go into AOL-Time Warner ahead of Disney, but I cannot find any information on how they think AOL-Time Warner will do within the next year. I plan on having a stock for the area of 12 months.
The reason they feel Disney is a good buy is that AT&T will have a merger and they think Disney will shortly as well. They said that although chances are good the price will drop to 25 area (it's currently about 27 and has been bouncing 25-30 for a while), they think it will be at 35 within the next year to year and a half if Disney does merge with a strong company like Microsoft (which is a rumor as well).
My questions to you are: Which do you think I should buy into? Do you have any info that could help me about either stock (esp. AOL-Time Warner)? How much should I invest?
I have currently $1,200 in my savings account, I was thinking anywhere from $500-$1200.If you have another stock that you feel would be better I am open to other options as well. I am open to just about anything you think I should look into. I want to buy the stock (whichever it is) by next week, or the week after that at the latest.
Thank you for your time and if you do help me, thanks again. This may be alot I'm asking you to provide a high school kid for free, but I'm in a bind. Thanks, you rule!
-Bradford
Answer Hi Bradford,
It's nice to know that you think I rule. But I really think you should let my two little girls in on the secret as they have this strange idea that they are the ones who rule.
I'm not trying to be funny, but if you need money to go to school next year keep your fingers crossed for those scholarships and get to work -- on a job rather than the stock market. The market is a lousy -- really lousy -- place to make quick money. It seems that the more you need the money the more events conspire against you. (Read the book Reminiscences of a Stock Broker by Edwin Lefevre.) There are so many things that can go wrong when you have a deadline to cash-out. Imagine what a poorly timed earthquake in LA could do to Disney. How about a sudden illness for a key exec. I know all this is unlikely but school tuition is too important to rely on the flaky markets. Pls only use money you can afford to be without or money that you don't need for a long time.
I have not kept up on dis. I used to own it years ago but I got out. I do follow (and own some) aol but it is not one of my favourites. Some people think it is cheap and some think it is expensive. I think it is a great and important company but I don't like the price. I bought it long before the merger when it was a high growth company. I also don't like their focus on ebitda rather than earnings or cash-flow. Did you know that skinny margin Dell had 5x the free cash-flow of aol last year? I found that startling.
I agree that there will most likely be a lot of consolidation in the content and content delivery markets that will likely involve biggies like dis and yahoo and all the other players. But playing the acquisition picking game is not easy and is not always rewarding even when you call it right. Big mergers are difficult to pull off; they can be very expensive and risky.
My advice -- as boring and unpalatable as you might find it -- is to stay out of the market with your tuition money. But if you do have some other money that you can invest and don't rely on consider some other areas. The problem I have with the area you are looking at is that it is going thru a big transition and I am just not smart enough to be able to foresee who the winners will be and then figure out what they will be worth. These are very big and diversified companies. AOL/Time is involved in at least 6 major business segments: aol, cable, film, network, music, and publishing. That's a lot to understand.
I prefer focused companies like amat chkp dell ebay emc intc ntap nvda opwv orcl psft rimm rnwk rsas sunw. These companies are leaders in their businesses and they don't spread themselves into areas where they are only minor players. They are relatively simple to and understand and evaluate. You could even throw in aapl (volatile but great balance sheet) and csco (longer term recovery).
My favourites right now (4:36pm est jul 12/01) are amat chkp dell rimm rnwk. In a couple of weeks we will all have a better handle on how these companies are recovering (rimm excepted as they already reported).
Chkp is a real powerhouse that just got killed because they issued a revenue warning but everyone thought it was an earnings warning. The company is rock solid and cheap when you consider its growth, balance sheet and market dominance.
Dell is an unbelievably well managed company. Everyone thinks it is a pc company but its growth areas are servers and storage. Now back in december it was at 17 which was a joke but now it is more fairly priced. I would say that the upside is far greater than the downside.
There are many more great companies and investments. But you have to give them time.
I hope this helps and good luck,
Murray
PS. I quite enjoy the opp to give high school students free advice. Actually I never charge anyone for advice. I figure that if I had to do that my advice probably wouldn't be worth much.
