Turns out the Ohio woman who claimed to have purchased and lost a winning Mega Millions lottery ticket was stretching the truth after all. Imagine, somebody telling a fib for a measly $150 million and change. And this, just as Bill Mann wonders whether plea bargains by former Enron CFO Andrew Fastow and wife have brought us a step closer to Kenneth Lay. Think about that while you're watching the Pete Rose interview tonight.
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In today's Motley Fool Take:
- Nokia Connects
- Quote of Note
- Nortel's VoIP Money Call
- Discussion Board of the Day: Verizon
- Beware of Hot Funds
- Shameless Plug: Stocks 2004
- More Fool News
- And Finally...
The magic words spoken by Nokia included, "stronger than expected year-end operator investments." These words alone increased hopes around the globe that capital expenditures for telecommunications equipment is on the rebound.
Seasonality played a factor in the spending increase, however, as did purchasing managers using up budgets at year end; given this, the best stance to take regarding a turnaround is still one of cautious optimism. Also, keep in mind that rather than a bona fide equipment spending turnaround, recent strength could merely represent a bounce. Follow-through is not always a given.
This said, there appears to be relative value in beaten-down telecom and networking-related stocks. Consider foremost the companies with strong capital structures and balance sheets, healthy free cash flow, and uncheckered operating histories. Nokia fits the bill.
In the recent quarter, the company logged network sales of $2.13 billion, easily topping the $1.75 billion forecast. Mobile phone sales rose 4% to $8.75 billion. Overall, revenue edged out 2002's fourth-quarter sales of $10.27 billion. Also on the plus side, pro forma operating margins jumped to 12% due to a favorable product mix and strong average selling prices.
Nokia now expects $0.35 to $0.36 in pro forma earnings per share for the fourth quarter, well above the $0.26 consensus.
Currently, the stock trades at 24 times trailing free cash flow, which is below the market average. It's at 22 times 2003's likely earnings, and 20 times 2004 estimates, which will be raised. Two-year earnings growth estimates range from 3% to 25%. Even taking the lower-middle of the range as the safe assumption, Nokia could offer decent upside.
Quote of Note
"The man in the street does not know a star in the sky." -- Ralph Waldo Emerson
Nortel's VoIP Money Call
It looks like Nortel
VoIP allows for voice communications over the Internet, and is finally hitting critical mass. But the technology needed a big time player to really commit before it truly became the "next big thing." Verizon, the No.1 U.S. phone company, helps the cause and also provides a boon for Nortel. Under the deal, Nortel will be the exclusive supplier of softswitches in this move towards VoIP.
For Verizon, VoIP should reduce expenses, as well as allow for more premium services, such instant video calling, sharing of electronic documents, unified messaging, and so on.
For Nortel, the deal could be worth up to $400 million. This is no fluke, either. Nortel has VoIP deals with such heavies as Sprint
After the telecom depression, executives have become much more sober. However, in the deal's announcement, Nortel's president declared that: "We are on the edge of a new era in telecommunications."
So, it appears 2004 will be the year of VoIP. And, yes, there has already been a surge in the small-cap VoIP stocks, such as Z-Tel Technologies
But, there seems little doubt that it is the big players, such as Nortel, that will get the top-tier deals -- and Verizon is as big as they get.
Discussion Board of the Day: Verizon
Boy, is this VoIP thing getting huge or what? What do you think: Is Verizon's new deal in VoIP going to be the next big thing, or the next big bust? Hash out the prospects with other Fools on the Verizon discussion board.
Beware of Hot Funds
This is the time of year you're likely to run across lists of last year's best-performing mutual funds. Be careful, though. They're not all outstanding funds; so don't fall for a fluke.
Consider, for example, a list of 2003's best performers from USA Today. The top-ranked fund is Apex Midcap Growth (FUND: BMCGX), with a total gain of 165.3% and 14.4% in the fourth quarter. Sounds impressive, eh? Well, a quick look at the fund's snapshot on Morningstar.com reveals that though it gained 165% in 2003, it lost 42% in 2002, lost 7% in 2001, lost a whopping 76% in 2000, and gained 42% in 1999. Those gains are big, but so are the losses.
Making matters worse, the fund sports a 5.75% front-end load, meaning that $10,000 invested in the fund immediately becomes just $9,425.
True, lists of best funds will contain some real gems. But they're also very likely to contain a bunch of funds that simply had an unusually outstanding year -- funds that are not likely to turn in similar performances in the coming years.
Even lists of the best funds over multi-year periods can be misleading. If a fund has four mediocre years and one outstanding one, that single large number will end up boosting the fund's total average performance. Dig through a fund's past performance in detail, looking at how it did in each of the past five or 10 years. Ideally, results won't be all over the place.
Shameless Plug: Stocks 2004
Don't even imagine that it's too late to get in on Stocks 2004. Heck, it's still January. And where else but in our annual investment guide are you going to find 10 great stock ideas from the very best Motley Fool writers and analysts? Nowhere, that's where. Your best bet: Click here, scroll down, and get the book for free by subscribing to Motley Fool Hidden Gems or Motley Fool Income Investor.
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- Men's Wearhouse Dressed Down
- P&G Ups Guidance, Again
For all today's stories, see Today's Headlines.
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