Subject: [NEXTEL-1] Nextwave- Risk Takers Curb Their Enthusiasm

From: Marcelrf <[email-masked]>
Date: Tue, 02 Mar 2004 06:25:11 -0500

February 29, 2004
Risk Takers Curb Their Enthusiasm
By GREGORY ZUCKERMAN

Is the stock market's appetite for risk finally tapering off?
For more than a year, investors have been rushing to risky stocks like
bees to honey. Heady gains in the most speculative shares have fed on
themselves, making stock-market winners out of many companies with scant
earnings but vast profit potential.

Suddenly, though, there are signs
that attitudes may be changing. The
Nasdaq Composite Index, home of
some of the technology and
telecom shares that continue to
trade at lofty levels in relation to
their earnings, has fallen for six
weeks in a row.

The index, which shed 0.4% last
week, now is barely ahead for the
year to date -- up 1.3%. As of Jan.
26, it was up 7.5%, underscoring
the reversal of fortune.

Change of Tone

An indication of the market's shift in tone can be seen in the
once-raging market for stocks of companies that are racing to develop
nanotechnology, which uses tiny particles to create and improve all
kinds of products.

Nanotechnology is a way to develop a substance, like Teflon coating, or
a component, like a computer chip, with building blocks as small as 10
nanometers (a nanometer is one-billionth of a meter). The idea is that
once the substances are this small, they can be manipulated more
effectively and sometimes aren't as affected by forces such as gravity,
giving them a range of new uses. In coming years, companies will use
nanotechnology to improve everything from computer hard drives and chips
to drugs and even suit pants.

"We believe nanotechnology could be the next great growth innovation,"
says John Roy, a Merrill Lynch analyst, who says nanotechnology
companies will begin generating revenue and even profits during the next
few years.
Nanotechnology favorites such as Harris & Harris Group, Nanogen,
Nanophase Technologies and Veeco Instruments all have doubled, tripled
or more in the past year, even though the companies have no earnings
and, for the most part, minimal revenue. This has reminded some of the
early days of the dot-com bubble.

"Companies that double or triple
without earnings and barely any
revenue one has to be a bit
suspect about," says John Romero,
who runs Aptus Partners LP, a
small hedge fund in Birmingham,
Ala., that invested in
nanotechnology companies but has
sold its stakes.

Still, there are reasons to focus on
the sector. In some ways,
companies getting a head start on
nanotechnology have a leg up on
Internet entrepreneurs because
there are actual barriers to entry in
this world. Three guys with a
garage and a business plan could
lure investors back in the '90s.
True expertise, however, is needed
to fuel a nanotechnology company.
That means investors have been
eager to scoop up shares out of
a belief that companies increasingly
will turn to nanotechnology to
improve many products.

Back to Reality

But lately, after a nice run-up, these stocks have been coming back down
to earth. Harris & Harris, a New York-based venture-capital fund that
counts nanotech companies among its holdings, has seen its shares slip
to $16.49 from $18.45 in recent weeks. A year ago it traded at $2.50.
Nanogen has fallen to $8.45 from $11.80 in the past few weeks. The stock
was as low as $1 a year ago.

So, does the cooling of nanotechnology shares mean that it's time to
dump small, riskier stocks and shift into more dependable shares? Not so
fast.

Sure, safer stocks have done better lately. But a reduced appetite for
risk doesn't mean dicier shares are off the menu completely. Conditions
for a Nasdaq bull market appear to be still intact, and riskier stocks
-- even though they may not outperform like they did in the past year --
still deserve consideration.

One example: NextWave Telecom, which has been operating under
bankruptcy-court protection for almost six years and owes the Federal
Communications Commission more than $4 billion related to licenses the
company bought in an auction in 1996 but never paid for. The company has
seen its shares soar in just the past few weeks.

Shares of NextWave, quoted on the Pink Sheets market (where companies
don't even have to file earnings or other reports with the Securities
and Exchange Commission) have soared to $4.70, up from just over $3 late
last year. Trading volume has been very heavy recently as investors bet
that the company's wireless-phone spectrum is more valuable than
previously thought.

The upshot: The stock market's changing tone suggests it will be harder
to crank out the huge gains achieved in the past year. That's largely
because shares are so high relative to their expected earnings, thanks
to the gains already on the books since the market's lows in late 2002.
But at the same time, the economy continues to expand. And if the
unemployment rate can be nudged a bit lower, the good times can
continue, both for corporate profits and stocks.

Stay Focused

Given the shifting tides, the best advice for investors is to focus on
stocks that won't fall hard, but still have room to rise if the bull
market presses on.
One stock outside the tech sector that some investors like: Dollar
General, a Goodlettsville, Tenn.,-based general-merchandise discounter.
The company remains under investigation over past accounting issues, but
a group of stouthearted investors is wagering that Dollar General
resolves a continuing SEC probe in the next month or so. At the same
time, Dollar General is inexpensive relative to its competition and has
impressive growth prospects.

"I believe there will be near-term resolution" of the accounting issue,
says Mark Miller, an analyst at William Blair & Co. in Chicago, who has
an "outperform" rating on the stock, the firm's highest rating. "It's a
fabulous business model and the company is executing," says Mr. Miller,
citing a push into selling more food.

Others say investors should stick to solid companies likely to benefit
from some of the hot trends. Veeco and FEI Co., which sell the tools
that enable others to use nanotechnology, are among the safer nanotech
plays.

Also worth a look are tech giants such as Intel, Hewlett-Packard and
International Business Machines, which are shifting resources to
nanotech and should show profits from their efforts, at least down the
line.

Write to Gregory Zuckerman at [email-masked]

http://216.239.41.104/search?q=cache:oBLpuZL3xYEJ:sunday.wsj.com/articles/SB107802717403342064.html+NextWave+has+been+operating+under+bankruptcy-court+protection+for+almost+six+years+&hl=en&ie=UTF-8

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