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>> JUST ABOUT 40 MINUTES LEFT
OF TRADING ON THIS FRIDAY.
BENCHMARK STOCK INDEXES RIGHT
NOW ARE STILL LOWER ACROSS THE
BOARD.
THE DOW IS DOWN 24 POINTS.
S&P LOWER BY TWO AND THE NASDAQ
COMPOSITE INDEX DOWN TWO POINTS
AS WELL.
LET'S CHECK ON THE MOST
ACTIVELY TRADED STOCKS ON THE
BIG BOARD.
YOU HAVE SHARES OF EXXONMOBIL
DOWN 71 CENTS.
TEXAS INSTRUMENTS AMONG SOME OF
THE SEMICONDUCTORS WEAKER.
WE'LL TALK ABOUT THE
SEMICONDUCTORS IN A MOMENT.
ALSO CHEVRON SAYERS ARE DOWN.
OVER TO THE NASDAQ, GOOGLE
SHARES DOWN $5 AND APPLE
COMPUTER SHARES DOWN MORE THAN
$1.
TELECOM IS USUALLY ONE OF THE
LAST AREAS TO PROSPER WHEN THE
BULL MARKET IS AGING.
WITH A SELLOFF THAT'S BEEN
GOING ON ACROSS THE BOARD, OUR
TELECOM -- ARE TELECOM STOCKS
BECOMING A SAFE HAVEN AND SWEET
SPOT FOR INVESTORS?
TODD LOWENSTEIN HELPS MANAGE
ABOUT $20 MILLION FOR HIGHMARK
CAPITAL, INCLUDING THE HIGHMARK
VALUE MOMENTUM FUND.
ICE GOT TECH NAMES OR TELECOM
NAMES, I SHOULD SAY IN HIS
PORTFOLIO.
TODD, TALK ABOUT THIS.
IS THIS GROUP BECOMING A SAFE
HAVEN NOW, YOU THINK?
>> YES.
I APPEARS THAT WAY.
INVESTORS FLOCKED BACK TO
TELECOM SERVICES AFTER
UNDERPERFORMING IN 2005.
INVESTOR WERS VERY SKEPTICAL
ABOUT SOME OF THE MASSIVE
CAPITAL SPENDING PROGRAMS THAT
THESE COMPANIES HAD EMBARKED ON
IN 2005.
WITH THE ACCELERATED LINE
LOSSES OCCURRING IN THEIR CORE
BUSINESSES, THE STOCKS GOT SENT
DOWN TO LEVELS WE THOUGHT
ATTRACTIVE.
WE THOUGHT THEY WERE TROUGH
VALUATIONS AND WE SAW UPSIDE IN
TERMS OF OPTIONALITY TO THE
SUCCESSFUL ROLLOUT OF THEIR
FIBER STRATEGIES, AS WELL AS
SYNERGY SAVINGS FROM THE RECENT
M&A ACTIVITY IN THE GROUP.
WE HAVE DONE THE BIAS AND RISK
REWARD TO THE UPSIDE LATE LAST
YEAR.
>> LET ME TALK TO YOU ABOUT THE
S&P INTEGRATED TELECOM INDEX.
WHEN YOU LOOK AT IT, YOU TALK
ABOUT SORT OF BUYING LAST YEAR.
WE DID PEAK A COUPLE OF MONTHS
AGO AS WE DID SEE THE PEAK
AROUND MARCH IN THIS GROUP.
WE'VE BEEN CONSOLIDATING EVER
SINCE THEN WHAT YOU DO THINK IS
HAPPENING NOW?
>> WELL THERE WAS REVERSAL OF
THE TREND WE SAW IN 2005, YOU
ARE RIGHT AND PEAKED IN MARCH.
I THINK OVERALL, PEOPLE HAVE
GOTTEN SKIDDISH ABOUT THE
MARKET IN GENERAL AND THERE'S
BEEN INDISCRIMINANT SELLING
ACROSS THE BOARD.
BECAUSE THEY HAD OUTPERFORMED
SO MUCH, THERE WAS PROBABLY
PROFIT TAKING THERE.
BUT YEAR-TO-DATE, THEY ARE
STILL UP ABOUT 8% RELATIVE
MARKET.
I THINK THE BEST PERFORMING
SECTOR YEAR-TO-DATE.
>> LET ME ASK YOU ABOUT THE
TELECOM EQUIPMENT STOCKS.
BIGGER WINS THIS YEAR, BUT YOU
ARE CAUTIOUS ON THOSE.
>> WE DON'T FIND THOSE QUITE AS
ATTRACTIVE AS THE TELECOM
SERVICES COMPANIES, ALTHOUGH WE
ARE NIBBLING IN THE AREA A
LITTLE BIT.
THEY HAVE COME DOWN TO
VALUATION LEVELS WHERE THE
RISK-REWARD DOES APPEAR
FAVORABLE.
WE LIKE TELECOM SERVICES AND
FEEL BETTER BECAUSE WE FELT
THERE IS SUCH EXCESSIVE
PESSIMISM BAKED IN THOSE STOCKS
AND BETTING DRACONIAN
ASSUMPTIONS IN TERMS OF
GENERATING FREE CASH FLOW AND
REEMPLOY -- REDEPLOYING THAT
BACK TO SHAREHOLDERS AS FAR AS
DIVIDENDS AND BUYBACKS.
WE FOUND DOWNSIDE LIMITED RISK
AND OPTIONALITY THERE.
EQUIPMENT MAKERS FRANKLY, THEY
ARE IN THE PROCESS OF
CONSOLIDATING THEIR INDUSTRY ON
THE HEELS OF THE CONSOLIDATION
WE SAW IN THE SERVICES
INDUSTRY.
WE ARE SKIDDISH THERE.
>> LET ME ASK BUT VERIZON, ONE
OF THE LARGEST TELECOM HOLDINGS
FOR YOU IN THE PORTFOLIO.
HOW IS THAT FARING?
ESPECIALLY AGAINST COMPETITION,
NOT ONLY IN THE WIRELESS
BUSINESS BUT THIS VOICEOVER
I.P.?
BIG COMPETITION FROM THE CABLE
COMPANIES ON THIS FRONT.
>> YES, TRADITIONAL BABY BELLS,
THEIR BUSINESS MODEL IS UNDER
ASSAULT FROM EMERGING
TECHNOLOGIES, NEW ENTRANCE IN
THE FORM OF CABLE OPERATORS
ROLLING OUT, TRIPLE PLAY
OFFERINGS BUNDLED OFFERING OF
VIDEO, VOICE AND BROADBAND.
VERIZON HAS BEEN HIT HARD IN
THE NORTHEAST.
CABLEVISION HAS OPERATED $99
BUNDLE WHICH IS A COMPELING
VALUE PROCESS FOR THE
CUSTOMERS.
THE BELLS FIND THEMSELVES ONCE
THE DEFENSIVE HAVING TO
CONSOLIDATE THEIR INDUSTRY AND
OL OUT MASSIVE FIBER BUILD TO
ATTEMPT TO OFFER NEXT
GENERATION SERVICES COMPETITIVE
WITH THE CABLE COMPANIES.
>> WE HAVE TO LEAVE IT THERE.
THANK YOU.
TODD LOWENSTEIN, MANAGER OF THE
HIGHMARK VALUE MOMENTUM FUND,
LOOKING AT THE TELECOM STOCKS.
STILL AHEAD, CITIGROUP CUTS ITS
PROFIT ESTIMATE FOR TEXAS
INSTRUMENTS.
SOME CHIP STOCKS ARE SHRUGGING
OFF THE NEWS.
WE'LL TAKE A CLOSER LOOK.