Ford

"Fundamentally speaking, F has issued pleasant surprises over the past year, matching or exceeding Wall Street's earnings expectations for the past five quarters. On the technical front, F shares have more than doubled in price since March, reaching a series of new 52-week highs along the way. Throughout this uptrend, the stock has benefited from consistent support from its ascending 10-week and 20-week moving averages. In addition, the shares have been outperforming the SPX since early March.

"What's intriguing about F heading into the new year is the overwhelming amount of bearish sentiment plaguing the shares, which I view bullishly from a contrarian standpoint, given the positive fundamental and technical backdrop. Options players are showing a preference for puts over calls; in fact, the put/call ratio is nearing an annual peak. Short interest is on the rise and currently sits near 90 million shares, which yields a short-interest ratio of 8.8 times the equity's average daily volume. This makes the equity a strong candidate for a short-squeeze induced rally. Sector mutual fund players have ignored the Fidelity Select Auto fund, which is up 28 percent this year. Finally, Wall Street has yet to commit to F. At press time, only two of the 14 analysts (or under 15 percent) following F have named it a "buy," leaving seven "hold" ratings and five outright "sells," according to Zacks Investment Research. With the stock situated in new-high territory, it is likely only a matter of time until upgrades transpire, which are likely to give the equity a boost.

'The pessimism toward F is especially noteworthy in the media, which has the company and the auto sector clearly in its crosshairs. Just in the past month, we've seen several articles in major magazines and newspapers bashing the carmaker (one was titled "Can Ford Fix This Flat?"), while a cover story from earlier this year proclaimed the "Extinction of the Car Giants." Recent articles have hammered away at the company with gloom and doom about overvaluation and an inflated reliance on the redesigned F-150, the flagship of F's truck fleet. There was even a book released in September, "The End of Detroit : How the Big Three Lost Their Grip on the American Car Market." Care to guess what the author thought of the auto sector?

"I love such hand-wringing and teeth-gnashing from naysayers, as it keeps expectations low. This combination of a strong technical trend with skeptical opinion from Wall Street and Main Street makes for an ideal bullish play from my contrarian viewpoint."

RIMM Research in Motion

"The BlackBerry manufacturer is doing all the right things, and this is showing up in improving operating performance. Enhancements such as color screens and built-in phones are beefing up sales, as are licensing agreements and a new consumer model. The company has bested earnings estimates for the past five quarters and this momentum should continue into 2004, as strong demand growth is expected in both the U.S. and Europe.

"Despite gaining more than 250 percent this year, the stock has recovered less than 25 percent of its decline since peaking in 2000 near 176. For the past two months, the shares have been consolidating into their 10-week moving average, a trendline they haven't clearly closed a week below since early March. I look for a bounce off the 10-week similar to that seen in September.

"The major driver from my perspective, however, is the substantial pessimism displayed toward the stock on several fronts. Less than half the analysts covering RIMM rate the stock a buy, leaving plenty of room for upgrades as 2004 progresses. Options players are nearing a pessimistic extreme compared to the past year, as put options (bearish bets) nearly double call options (bullish bets) among options set to expire within the next three months. Furthermore, short interest is robust at around 8.5 million shares, which adds a short squeeze as a potential source of demand for RIMM. With strong fundamental and technical underpinnings, look for this pessimism to unwind in 2004, creating added buying strength.

"Finally, RIMM's market cap of around $3.5 billion is modest compared to others such as Nokia with a market cap of more than $80 billion. This leaves RIMM with plenty of upside room to run. Look for the stock to reach the $60-$70 range next year."

NASDAQ 100

"I’m looking more at the index, in terms of a simple vehicle for (technology) investors to play in. Now with the exchange-traded funds, you’ve got the Nasdaq 100 index, the QQQs that are so liquid and so representative of the performance throughout the tech spectrum. I wouldn’t be too cute here in terms of picking individual names.

"We do a lot of work in terms of sentiment analysis. And there is a lot of work to be done on the QQQ in terms of covering big short positions, and also we have a record level right here and now, we have a record level of open interest in puts, which means that players in the options market are as heavy into puts on the Nasdaq 100 as they have ever been, actually are more into puts than they’ve ever been. This is ironic and kind of shocking given the strength in the market and the strength in techs in particular. And I think this short covering could lead to a melt up, so to speak, actually in technology in the first quarter."