On Wednesday, October 16 at 8 P.M. EDT, Michael Murphy joined Worth OnLine for our live chat show, "Conference Call." Murphy, is the editor of the "California Technology Stock Letter," focusing on medical and technology stocks, and the "Overpriced Stock Service," a short-selling investment advisory newsletter. Following is a transcript of the live event, edited for clarity. The opinions expressed are those of Michael Murphy, and do not represent the views of Worth, Worth OnLine, or Capital Publishing.
WorthEdit1 : Welcome to "Conference Call," Worth OnLine's live chat show series. Our guest tonight is Michael Murphy, who will talk about third quarter earnings reports and big news from the American Electronics Association's Fall financial conference. His screen name is JMurphy477. First we'll start with a question posted on our message boards for you.
WorthEdit1 : FBARONE asks if GNTA is still a buy or should he "head for the hills before you do."
JMurphy477 : Genta Inc. (NASD:GNTA) is a strong buy. They should announce their restructuring by the end of this month. Two investment groups ready to finance the two halves of the company. Stock is at $1. I think it goes straight to 3 when the deal is announced.
WMair : Wmair wants opinions on IDTI and CRUS.
JMurphy477 : Integrated Device Tech. (NASD:IDTI) a very strong buy. Announced Sept Q loss yesterday, took stock down only $5/8 today. Up and away from here. Cirrus Logic (NASD:CRUS) has moved up sharply but can be bought under $27 for a further move to $45.
WorthEdit1 : Do you still feel like Genus could go to the high teens this year?
JMurphy477 : Genus Inc. (NASD:GGNS) should hit high teens within 12 months. The semi-equip stocks probably won't do much until December. Quarter EPS are out of the way -- late January -- but we think 1997 will be up, not down as Wall Street expects.
CAnd34 : Thanks for being here, is the most money going to be made in cell altering or DNA studies?
JMurphy477 : That's a tough one. Both are going to be very lucrative. The gene sequencing companies collect royalties and have no drug development risk. The gene therapy companies will have successful drugs and with only 2 drugs, Amgen (NASD:AMGN) has a $16 billion market cap. We own them all.
Gilliatt : Thoughts on CSCC ?
JMurphy477 : Cascade Communications (NASD:CSCC) is in a wonderful business but competiton is increasing rapidly. My guess is they can continue to grow rapidly, but at a lower profit margin. The stock is 127 times earnings (116 times the estimate) so I'd rather wait until the deteriorating profit margins are in the stock.
Gilliatt : CSCC is also about 30 times sales. Iomega (NASD:IOMG) was only about 8 times sales at 55.
BradT45527 : What's going on with Shiva?
JMurphy477 : Shiva (NASD:SHVA) is going to be a big player in remote access, but that area (mobile devices) has been slow to take off. Although the stock is down from $87, I'd rather see it under $30 before buying.
CAnd34 : If President Clinton wins again, will bio tech and meds tank again?
JMurphy477 : Reelection of Clinton should be no problem, because there will be a Republican Congress and no way will they reintroduce the health care bill. That was the cause of the fear last time.
TILT96 : What are your thoughts regarding Novell?
JMurphy477 : Novell (NASD:NOVL) is a sell. Don't get in a fight with Microsoft (NASD:MSFT).
Wall441043 : Does MU have a future...have DRAM prices turned around?
JMurphy477 : DRAM prices have stopped plunging and bounced a bit. But they should resume their 28%/year normal decline. I think Micron Technology (NYSE:MU) will lose money in a couple of quarters, so would sell the stock here.
Tipman : When is he going to tell us what he is recommending now?
JMurphy477 : Tipman We are recommedning semi stocks (IDTI, CRUS, Cyprus Semiconductor (NYSE:CY), LSI Logic (NYSE:LSI), SEEQ Technology (NASD:SEEQ). Also semi equipment... Applied Material Tech. (NASD:AMAT), GGNS, Mattson Technology (NASD:MTSN), Plasma & Materials Tech. (NASD:PMAT) and Ontrak Systems Inc. (NASD:ONTK). Also some things that haven't moved: Ross Systems (NASD:ROSS), Euphonix Inc (NASD:EUPH), Exabyte Corp. (NASD:EXBT), Sonic Solutions (NASD:SNIC) and lots of biotechs. Half our money is in biotech.
Jpiper77 : Is MU a short sale here?
JMurphy477 : I wouldn't short MU because we should have a broad tech stock upswing through February/March. In that environment MU could hold flat or inch higher, but an IDTI would double.
BigRedd425 : What do you think about the "box" companies as opposed to the semi's?
JMurphy477 : Good question. The box companies spend less on R&D and benefit from low component prices. So right now, the box companies that sell to corporate America -- International Business Machines (NYSE:IBM), Compaq Computer (NYSE:CPQ), Dell Computer (NASD:DELL) -- should be in good shape. Long-term we think more value is added at the chip level; I'd rather own Intel than Compaq but nothing wrong with owning both right now.
Amobius : Both HOLX and LUNR have dropped, would you buy them here?
JMurphy477 : Hologic Inc. (NASD:HOLX) can be bought here. There is a big medtech conference January 6-8 that will focus attention on these stocks. Lunar Corp. (NASD:LUNR) I don't know.
JLund1609 : Any thoughts on NETC?
JMurphy477 : I just don't see how the ISPs sell anthing but commodity Internet time in the long run. AT&T (NYSE:T) is bound to offer $3 to $5 monthly flat fee access within a year or so. I would sell them all, even Netcom Online Communications Services (NASD:NETC).
Le Roy7 : Could you comment on your favorite shorts?
JMurphy477 : Favorite shorts? Not too many right now. We are short Qualcomm Inc. (NASD:QCOM), which has the wrong technology for digital cellular. We're short some development stage med tech -- Organogenesis (ASE:ORG) and Epitope Inc. (ASE:EPT). Also Thermolase (ASE:TLZ).
GSCA71268 : Michael, since the NASDAQ is heavy on technical stocks, would you short the entire NASDAQ?
JMurphy477 : This is the wrong time of year to short technology. Big AEA Financial Conference Oct 28-30 plus amny brokerage firm conferences right through next April. Analysts start to focus on how good things can be in 1997, instead of how disappointing 1996 is and the stocks move up. We are fully invested today.
MadSlav : Any thoughts on Calgene?
JMurphy477 : Calgene (NASD:CGNE) is not expensive but it will be a long time doing much. Turns out developing agbiotech is no easier than developing biotech drugs. We don't own it. Ask McCamant on 10/23 chat.
TopCat7529 : What's your favorite stock to buy tomorrow for short term gain?
JMurphy477 : Favorite stock in electronics is IDTI. In biotech is GNTA for next 4 weeks, Ligand Pharmaceuticals (NASD:LGND) for longer.
DohertyMA : Biotech comments? Cephalon? AGPH?
JMurphy477 : Cephalon is doing well in clinicals and the stock should move higher as they progress. Good hold. Agouron Pharmaceuticals (NASD:AGPH) I think is ahead of itself on interest in protease. I'd swap it for LGND, Ribozyme Pharmaceuticals (NASD:RZYM). Vical (NASD:VICL) etc.
PoliceHead : Mr. Murphy, do you read AOL's message boards for any reason whatsoever? For what reason?
JMurphy477 : Gulp! Yes, I do read Motley Fool, but mainly for potential short ideas. Stocks then to get total market capitalizations all out of proportion to their business opportunity, even when they are good companies like IOMG. We are short Diana (NYSE:DNA), Chesapeake Energy Corp. (NYSE:CHK) now. I read and post to Silicon Investor on the Web -- it is excellent.
Elmo 83 : What's your opinion on CSCO?
JMurphy477 : Cisco Systems (NASD:CSCO) is fully priced, Bay Networkds (NYSE:BAY) is cheap, both are a wonderful business -- building out the 'net. I spent the last 3 weeks in China -- lots of Internet access in the big cities -- everyone wants access.
Gempler : Seagate?
JMurphy477 : Seagate Technology (NYSE:SEG) is the best of the drive companies. We hold it. It's had quite a run, so our new buys are focused in semis/semi equipment, but we also like the SEG convertible bonds for income accounts, even at these levels.
Barbarczuk : AAPL??? Upcoming analysts conference -- usually a positive sign?
JMurphy477 : Today's Apple Computer (NASD:AAPL) positive earnings were very good news. Mostly from cost cutting. I'd still like to see a vision different from and better than Wintel. Stock traded to $30 in aftermarket, probably will trade in a $20 to $30 range into the spring.
DerekDeV1 : Do you follow HMTT, good earnings and great product! Also FRLN, network routers etc.
JMurphy477 : HMT Technology (NASD:HMTT) is a good little disk company, but I don't understand the valuation compared to Stormedia Inc. (NASD:STMD) or Komag (NASD:KMAG). Farallon Communications (NASD:FRLN) makes great products and the total market cap isn't gross. We're doing a lot of work on it now.
Ooop1 : USRX please.
JMurphy477 : US Robotics (NASD:USRX) is in great shape because they dominate the retail channel. Retailers love them. The modem biz has topped out (no higher speeds), so they have to make a tricky technical transition to ISDN and cable modems. But they can buy the technology. I call the stock a hold today, buy under $50, sell at new highs.
R0515 : Any thoughts on OAKT? Earnings on 10/22.
JMurphy477 : Oak Technology (NASD:OAKT) was a one-product idea. It worked, nothing has since. I think we should wait to see if they can get something else going and turn profitable. This is a difficult turnaround because every other choice has lots of comptetiton.
CAnd34 : Sybase buy or sell?
JMurphy477 : Sybase (NASD:SYBS) is a sell. Well behind Oracle (NASD:ORCL) in technology and far, far behind Informix (NASD:IFMX). Both ORCL and SYBS have to completely rewrite their RDBMS. At least ORCL has a large market share to carry them through.
Amobius : VISX came down with BEAM. Is VISX a good value? Excimer laser in review, exped??
JMurphy477 : Re: Summit Technology (NASD:BEAM) and VISX (NASD:VISX), be careful. The FDA data on these eye lasers was poor. 70 percent still need glasses. About 10 percent lost night driving vision permanently. Small percentage had really serious deteriorating vision. And it isn't reimbursed, it's cosmetic. I think this will be a slow go.
Elmo 83 : BAY a buy?
JMurphy477 : Re: BAY a buy. Favorite "very low" prices would be Genta $1, Adaptive Solutions (NASD:ADSO) $1 1/8.
Ormerod1D : What is your best long term pick?
JMurphy477 : Best long term pick is VICL, Vical, the leader in gene therapy. Sells today for $15 3/8. Should be 10 times that in 5 years.
JBShaw : Mr. Murphy, any comments on AOL?
JMurphy477 : America Online (NYSE:AOL) -- hope nobody's lurking -- we're short and holding. I don't think the current $300M ad spending will work. Longer term, constant profit margin pressures.
Elmo 83 : CUBE- buy sell or hold?
JMurphy477 : C-Cube Microsystems (NASD:CUBE) is a hold at best. Good people, good technology. But IBM is out with hot competitive chips at lower prices. CUBE will never see 65% growth margins again.
R0515 : Why do you like IDTI so well? Price range in one year?
JMurphy477 : IDTI is 50 percent SRAM, where prices have flattened. They are the low cost supplier. They own the next "SRAM" technology, fusion memory. The other 50 percent is value added logic chips. Stock down 70 percent. No one on Wall Street likes it. Analyst meeting November 1st.
Ty4545 : What are your thoughts on GENUS?
JMurphy477 : GGNS will have weak Sept and DEC q due to semi plant pushouts, but we expect pushouts to become pullins starting in March -- a fast turnaround -- Wall Street thinks 1997 will be down. Wrong! It will be nicely up.
SIMMIR : Michael, why has INSITE VISION turned into such a bust since you said over a year ago that it would be worth $30 in 2 years?
JMurphy477 : Insite Vision (NASD:INSV) -- They are executing well and should announce 2 more corporate deals before year end, then file for first FDA approval early in 1997. Will have a strong presentation at H&Q Medtech Conference Jan 6-8. We are loaded up with the stock.
SSPARSONS : Any comment on NINE Visual? They are competitors with SIII in 3D graphics tech.
JMurphy477 : Number Nine Visual Tech (NASD:NINE) is a good focused company on graphics. S3 (NASD:SIII) seems to get chips out a little faster and skim the cream.
Elmo 83 : CRUS- buy sell or hold?
JMurphy477 : CRUS seems to get smaller chips out and get the volume. I'm not sure what NINE can do about that. I'd rather own S3 or CRUS.
Ficionado : Mr Murphy, any input on RDRT -- Read Rite Corp?
JMurphy477 : First Read Rite (NASD:RDRT) is not going to have a great quarter, but people are looking to 1997. RDRT did get qualified at a couple of major customers, and 1997 will be a strong disk drive year -- typical desktop system will have 2 gig at beginning of year and 4.3 gig by next Christmas. For new money I wouldn't chase RDRT, but it's a good hold.
RickGudorf : NVLS (Novellus)?
JMurphy477 : NVLS is caught in the pushout of semi plants. I think it and Lam Research Corp. (NASD:LRCX) are dirt cheap. We've recommended so many semi equipment stocks in CTSL I'm hesitant to add more, but those 2 are buys.
KRISTYVARN : What about LSI Logic? Good Investment?
JMurphy477 : LSI is a good buy still -- broad exposure to PC for upswing. Cable modem -- too early, but I'll bet USRX, FRLN and Global Village Communication (NASD:GVIL) get a big share of market.
Petroman2 : Mr. Murphy, Madge seems to be basing here... time to buy or avoid?
JMurphy477 : I don't follow Madge Networks (NASD:MADGF), although the business obviously is great.
SIMMIR : Michael I love SUUUUUUUUUUUUUUUUUUGEN!!!!!!!!!!!!!!!
JMurphy477 : AND I LOVE SUGEN (NASD:SUGN) MORE THAN YOU DO.
RBHMMM : Elaine Garazelli is selling ALL. Comments, Mr. Murphy, on her last letter that the BIG crash is coming?
JMurphy477 : Big Crash? Not likely unless inflation really explodes -- no sign, or the economy slows sharply -- no sign. We could have a bear market in 1997 just by going from 18 times DJIA eps to 13 times EPS. Use index uts. to protect your portfolio, but stay invested in technology. Many times DJIA goes down and tech holds flat or goes up.
Llau2828 : Is PRST a short?
JMurphy477 : Prestek (NASD:PRST) is a short, but put a stop loss in at $90.
GBernst23 : Mr. Murphy, your thoughts on USRX, short term.
JMurphy477 : USRX: a good short term buy.
KRISTYVARN : What about Intuit, Mr. Murphy?
JMurphy477: Intuit (NASD:INTU) is not quite there, but we'd love to own it under $25.
Garfi : Long and short-term outlook for biotech company -- Chiron?
JMurphy477 : Some repeats here. Chiron (NASD:CHIR) is a great core holding -- like a biotech mutual fund, they have so many things going on -- and it's cheap under $20.
Rev Shark : SNIC?
JMurphy477 : SNIC -- just listed it as a cheap stock a few minutes ago. Great play on DVD.
JimMAXED : Has anyone ever heard of CA?
JMurphy477 : Computer Associates International (NYSE:CA) is a broad-based software co, very exposed to mainframes. Solid, not exciting.
RBHMMM : What about Silicon Graphics?
JMurphy477 : Silicon Graphics (NYSE:SGI) -- look out for. MSFT competition. 900 of SGI 3000 engineers have quit this year! Thanks, everyone.
WorthEdit1 : Thanks for taking part in this evening's chat. Goodnight.
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