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SIVY ON STOCKS from money.com
December 1, 2000

Updating the Sivy 100

Out goes Allstate, AMR, Bank One and Honeywell. The new members are
Comcast, EDS, MBNA and Motorola.

By Michael Sivy

I like to update the Sivy 100 [ www.money.com/money/sivy100/ ] at regular
intervals, and given the market turmoil of recent months, some changes are
surely in order. That said, readers shouldn't rush to buy new additions,
nor should they necessarily sell the stocks I'm replacing. The Sivy 100 is
intended to be a source for top-quality growth stocks that belong in a
well-balanced stock portfolio. But the decision to buy or sell should also
reflect price levels and the near-term market outlook.

Far and away the most important recent development for the overall market
is that analysts have become increasingly worried about the potential for a
serious economic slowdown next
year -- conceivably even a recession. As a result, earnings growth
projections have come down across the board and otherwise solid companies
in slower-growing industries have slipped below my 12 percent cutoff for
projected total return.

In a sense, the downward revisions by analysts are meaningless. The folks
in Bally tasseled loafers didn't cut their numbers until after many
companies had already warned that future earnings would fall short. So why
didn't they tell us that six months ago? Moreover, the long-term earnings
growth potential for some stocks has arguably gone up slightly, since
future profits will be compared with weak numbers for the current year.

As a result, I haven't kicked stocks off the list simply because analysts
have temporarily cut their projections to a little below 12 percent. The
ones I've replaced no longer have the long-term growth prospects I look for.

Allstate [ALL], for example, is cutting costs and broadening its business
in positive ways. But its growth prospects have fallen far below my cutoff,
largely because of weakness in insurance pricing and losses due to
unusually bad weather. (Though its growth prospects are sub-par, many
analysts still like Allstate as a value play with a price-to-earnings ratio
of14.)

AMR [AMR], the parent of American Airlines, faces an uncertain future. The
March spin-off of its SABRE reservation system muddies year-over-year
comparisons. High jet-fuel prices and the possibility of a
recession-induced drop in business traffic further cloud prospects.

Bank One [ONE] is suffering in a more difficult banking environment and
needs to complete a complicated restructuring and cost-reduction plan. As a
result, the company's growth prospects don't look as attractive as those of
some competitors.

Finally, Honeywell International [HON] will almost certainly be taken over
by General Electric within the next few months, so it will disappear from
our list in any event before too long.

I try to make sure that the Sivy 100 includes as diversified an assortment
of industries as possible. But obviously, some industries have better
long-term growth prospects than others. So as projections become less
generous overall, there's a natural shift away from old-line businesses to
higher-growth stocks.

Since I've written a lot about Comcast [CMCSK] and Motorola [MOT], they're
natural additions to the list. Among other stocks that passed our latest
screens, Electronic Data Systems [EDS] is the most attractive, with
projected growth of 15 percent a year and 21 P/E. And MBNA [KRB], a major
credit-card issuer, looks like a sound choice to replace Bank One.


================
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