TCS Daily


Stocks on the A-List

By James K. Glassman - August 17, 2001 12:00 AM

Each year, the personal finance magazine Worth polls its readers on the products they use and enjoy. A lot of magazines conduct reader surveys, of course, but there are a few reasons why this one may be of particular interest to tech investors.

For starters, the average Worth subscriber maintains an investment portfolio amounting to $932,000 - yes, even after the NASDAQ meltdown. So we're talking about a fairly elite audience, one that has a lot of money to spend on the consumer side, and probably a disproportionately large influence on corporate purchasing decisions. In a word, they're players.

In addition, many of the product categories chosen by Worth involve technology, so the results of this year's survey may be interesting to consider as you look for the tech firms that will continue to grow and thrive in coming years. Worth calls it "The A-List," the group of products that are first in the hearts of the people who read the magazine. Worth ranks them in two ways -- those products that received the highest satisfaction rankings among subscribers who had used them, and a "Popular Choice" award for the products used by the largest number of readers.

In just three of the categories, the same product won both the top satisfaction ranking and the Popular Choice award. And all three involve tech products. Morningstar.com was the big winner among online financial research sites, so you might want to check it out for its world-class rating system and its abundant statistics on both stocks and mutual funds. But since Morningstar is not a publicly traded firm, this pick doesn't immediately suggest an investment opportunity.

The other two double winners represent intriguing investment options. In the category for personal digital assistants, the double winner was Palm, Inc. (symbol: PALM), maker of those convenient handheld computing devices (also called PDAs, or Personal Digital Assistants). The stock has been beaten up in the past year, falling from a high of $67 a share down to a recent $4. But Palm is still THE brand name in an industry that appears to have enormous potential. And the Worth survey represents a vote of confidence from a very influential group of consumers. Will Palm and its often-maligned management end up getting crushed by Microsoft in this space? Possibly, but if the whole world goes wireless, being a scrappy #2 in the PDA market might not be that bad. And if Palm can right itself and continue to lead the industry, this stock looks awfully cheap.

In the laptop category, Dell Computer Corp. (symbol: DELL) won on both counts. Dell just reported that it lost $101 million in the latest quarter (after a $700 million-plus write-off for costs related to job cuts and plant shutdowns), but it is a superbly managed company whose products and service are a continuing hit with customers.

While the rest of its industry suffers through a slump, the world leader in PC sales continues to grab market share and chase the lead in servers as well. According to a report from market research firm IDC on the second quarter of 2001: "Dell's aggressive pricing and ability to react quickly to changing market conditions allowed the market leader to further distance itself from competitors. The company was alone among the top vendors in growing shipments and market share as its rivals struggled to preserve volume and protect margins. Dell far outpaced growth in all regions, including 10% growth in its core U.S. market, and over 40% growth in the rapidly slowing Asian markets."

Dell is becoming the next IBM, and appears to be an outstanding part of a diversified portfolio. As full disclosure: I am a Dell shareholder. But don't let that influence you either way.

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