The market slump of the last month has created an opportunity for investors with cash on hand to put that money to work snatching up stocks at some of the lowest prices of the year.
In a bull market that is being fueled by the influence of online investors and day traders, buying on the dips has become the preferred mode of picking up stocks at “relative'' bargains. Relative applies to the many technology and Internet-related stocks to which standard valuations do not yet apply.
The buying on the dips premise implies that these stocks will bounce back soon. This has been the trend in the wildly gyrating Internet sector but fears of inflation and rising interest rates could spoil any short-term rebound. ABN Amro analyst Kevin Silverman predicts that direct marketers that use the Net to cut costs like Lands End and other high-volume catalog mailers stand to gain regardless of the direction of the Internet sector while ones like Amazon that pay a premium to gain customers and market share face a tougher climb back.
For those willing to bet that the market has neared a trough, here are some bargains in the DM News Portfolio:
Among big cap stocks, Amazon has led the fall in the Internet sector by shedding nearly half its value in just over a month to close near 100 for the first time since February. America Online has given up 30 percent of its value in a month and is well off its 52-week high of 175. Dell Computer is down 26 percent in a month and over 40 percent from its early February high of 55.
A few marketing services companies and catalogers have also seen significant dips of late. MSGI has cooled from its April runup, falling 26 percent since then and over 58 percent from its 52-week high of 60. Snyder Communications is hovering around its 52-week low of 23 after declining 22 percent in the last month.
Snyder has announced that it will issue a tracking stock for its subsidiary circle.com, a provider of online marketing programs, in the second half of the year. Plans call for the stock to be issued to Snyder shareholders as a dividend. A cutoff date for to qualify for the dividend has not been established.
Among catalogers, Delia's and DM Management have fallen by 44 and 27 percent, respectively, but for entirely different reasons. Delia's, which is transitioning itself from a cataloger to an Internet company and owns 72 percent of the online teen community iTurf.com, has born the brunt of market conditions.
“Delia's ran up on the Internet and now they are running down,'' said Silverman, who also attributed the 16 percent drop of the Sharper Image to its online connections. “The bigger the Internet impact on the way up the bigger on the way down.''
DM Management, which last week was renamed the J. Jill Group and will change its ticker to JILL, is suffering from heightened growth and profit expectations that management has said are a bit too optimistic at the moment. But with its evolving niche of business casual apparel, strong sales growth and ambitious retail and online expansion plans, Silverman said the stock at its current price presents a buying opportunity.
“They just had the first drop of a home book and then cancelled the program, that shook a lot of people up,'' he said. “They have a lot on the plate right now and the stock has overreacted to some short term hiccups.''
Global Direct Mail (GML) has changed its name and ticker symbol to Systemax, Inc. (SYX)
Portfolio Value: If $1,000 had been invested in each of these companies at the beginning of the year – for newly public companies when the stock first closed – the value would be $111,591, an increase of 11.59 percent.