GS'Gunnar Miller has tgt $130 on TER as his No.1 pick
fortune.com
Fortune Vol. 142, No. 3, All-Stars Analyst
July 24, 2000
Gunnar Miller
Industry: Semiconductor Equipment
Company: Goldman Sachs
His 1999 picks sailed 204%. He's still betting on the global leaders.
"Look, I'm going to have to take the gloves off with you," Gunnar Miller declares with impatience. "A lot of people are involved in making a decision at this firm. You journalists always want the dramatic moment. Some things just aren't that simple."
Perhaps. But it was Miller, 35, who hastily arranged a conference call from Singapore last September--after a massive earthquake in Taiwan precipitated a deep selloff in semiconductor-equipment stocks. He then calmly told more than 100 bigwig investors listening in that despite rumors to the contrary, the quake was not causing major production delays. He knew this because he'd been traveling in the region for days, talking with local company managers. So he told his clients to buck the trend and load up the wagon with Applied Materials, KLA-Tencor, and Teradyne. Those who listened were up 70% in three months. "Who's in a better position to know what's going on," says Miller, "some clown on the West Coast who has to get up at 3:30 in the morning and watch CNN, or someone who has analysts on the ground in Asia?"
Miller, whose 1999 stock picks gained a remarkable 204%, has a flair for being direct, if not downright brusque. When he says that equipment makers, still recovering from the 1997 Asian economic meltdown, will see a surge in purchasing that propels stocks through 2001, his tone implies that any nitwit could have seen that a long time ago. This cycle, he explains, will be more robust than ever because of the ferocious need for silicon chips in everything from cell phones to clock radios.
He calls the trend the "consumerization of semiconductors" and asserts that demand for new chips will be driven not by PCs but by moderately priced electronic devices that were unthinkable only a few years ago. This will allow the equipment sector to post 20% annual revenue growth for years to come, Miller says.
To capitalize on this trend, he suggests putting money into Applied Materials (AMAT), the undisputed global chip-equipment leader, which he sees rising more than 50% to a share price of $130 in the next year or so. Miller also has a $130 target on Teradyne (TER), which makes test equipment for electronics and communications. Hit by the overall market's woes, both are trading 30% or more off their old highs.
At the same time, he says it's time to discard the conventional wisdom that the sub-$1,000 PC will hurt semiconductor equipment makers; rather the PC market, like the overall universe for chips, is now broader than ever. "For the first time," Miller growls, "this industry is not dependent on a bunch of FORTUNE 500 executives deciding whether or not they're going to buy mainframes." |
