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Market Update

Our Take on the Quarter's Best-Performing Stocks

With the market in rally mode, it looks like 1999 all over again.

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Irrational exuberance is back in style.

With the powerful rally that began in mid-March, previously downtrodden stocks have enjoyed a dramatic surge. Biotech, telecom, and hardware stocks have led the market, with numerous stocks posting triple-digit gains.

But we'd caution investors not to get carried away by eye-catching short-term performance. Most of the biggest winners on Morningstar's coverage list are risky companies, and the stocks are trading well above our analysts' estimates of their fair value. To learn more about our take on 2003's standouts so far, Premium Members can click on the Analyst Report links below. 

 Top-Performing Stocks in 2003's Second Quarter*
 

Three-Month
Return ( % )

Fair Value
Estimate ($)
Morningstar
Rating
Assuming it can avoid bankruptcy or a massive balance-sheet restructuring, Charter (CHTR) is worth something. But the stock is up big since the start of the year, which eliminates any upside. Read the full  Analyst Report. 287.78 2.00
We consider Americredit (ACF) a highly risky and volatile stock. Investors who haven't experienced a significant loss, or are unsure of the impact such a loss would have on their portfolios, shouldn't consider investing in the stock. Read the full  Analyst Report. 173.97 8.00
Proprietary drug-release technology gives Andrx (ADRX) an edge over competitors, but the company just hasn't fulfilled its potential. We'd require a 50% discount to our fair value estimate to buy shares. Read the full  Analyst Report. 108.47 8.00
With Xolair and psoriasis treatment Raptiva awaiting FDA approval, Genentech (DNA) is about as well positioned as possible to succeed. But given the ever-present risks that the firm's drugs in late-stage testing could fail, we wouldn't be buyers unless the stock traded at a 20% discount to our fair value estimate. Read the full  Analyst Report. 106.39 35.00
New CEO Mitch Caplan is focused on profitability and has taken several steps toward making E*Trade (ET) a viable firm. We're still not recommending the shares until we see cold, hard cash being pumped out reliably. But the firm's future now looks several shades brighter. Read the full  Analyst Report. 98.81
4.00
While Protein Design Lab's (PDLI) technology could very well provide viable antibodies, we'd require a significant margin of safety that takes into account the possibility that it won't, as well as the odds that the firm's drugs simply might not succeed. Read the full  Analyst Report. 96.77
10.00
We've lowered our fair value estimate for PMC-Sierra (PMCS) by a dollar to reflect a higher cost of capital and toned-down sales estimates for 2003. We assume profitability will be restored in 2004 on the back of steadily improving margins, which are projected never to return to past peak levels. Read the full  Analyst Report. 84.04 5.00
We think the cable industry's maturity, together with the emergence of TVs with embedded digital tuners, will make this a very tough decade for Scientific-Atlanta (SFA). We would be interested in Scientific, a firm with no economic moat, only at a 50% discount to our fair value estimate. Read the full  Analyst Report. 81.03 14.00
Millennium Pharmaceutical's (MLNM) successful partnership and acquisition strategy has led to product revenue--something most genomic-based companies can't yet claim. But the company is still deep in the red and remains a speculative investment. Read the full  Analyst Report. 71.67 13.00
We are slightly more confident in Nvidia's (NVDA) outlook and, consequently, have increased our fair value estimate. However, the stock already trades well above our higher estimate, making it one to avoid. Read the full  Analyst Report. 67.57 13.00
* Table includes the top-performing stocks in Morningstar's coverage universe.
Three-month returns are through 06-23-03.

Morningstar Analysts does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.