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Back From the Dead

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But, again, courtesy of low interest rates, Conexant bought back debt, spun off Mindspeed, and has now become the single best way to play the broadband revolution that I know. It’s up from 53 cents, but it also is about to start making money, something that wasn’t clear when it was a penny stock. I own a boatload; I wish I owned more. Like many of its zombie brethren, it was abandoned at the bottom by the research analysts. It has no champions yet. But just wait until it reports that first good quarter.

4. E-Trade
I missed the first four points of this comeback-of-the-year play, perhaps because I was too busy owning Schwab. But I have shifted out of the latter and into E-Trade in a big way because the management of E-Trade has a pretty fantastic balance sheet and growing businesses in both mortgages and stockbroking. In fact, the latter’s on fire—the company just reported a whopping good quarter. There are a lotta ways to win with E-Trade, either on earnings, on which it is worth twice what it is selling for, or perhaps on a takeout, as it is perfectly complementary to what Barry Diller has built at InterActiveCorp. If Barry buys E-Trade, I hope he keeps Mitch Caplan, the man who runs the joint; the guy’s a miracle worker after the havoc that the previous E-Trade management caused.

“While these stocks are no longer playing dead, not one is expensive. I’ve been building a basket of them.”

5. ValueClick
When you read that the online advertising market is booming, you should think of ValueClick, which has consolidated the space and has its fingers in everything from affiliate marketing to direct e-mail (to replace telemarketing). It has a great balance sheet with virtually no debt and oodles of cash, so it could be taken over if it doesn’t keep growing. I didn’t own any of it, hoping for it to come down, but I decided it was a fool’s game to wait, and just bought it.

Look, I don’t know which of these stocks will be the big winners from here and which will languish, regroup, and then take off later. I don’t know which ones could get hammered and go back to penny status—although it would take an awful lot of bad management from here to make that happen.

My suggestion, as I said earlier, is to buy a basket. Own them all. There was a time when Alan Greenspan called stocks like this lottery tickets and laughed at buying them. They were laughable back then, and hideously overvalued.

Now, while these stocks are no longer playing dead, not one is expensive. And it only takes one or two of them to go back to where it was—and that can happen (consider eBay and InterActiveCorp)—to make you more money than you ever thought possible in the new post-Nazz-crash stock market of 2003.


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