Spear/Upside on Optics:
URL: upside.com
Dawn Patrol: One word: Optics
by Thomas Coyle
August 31, 2000
NEW YORK -- Summertime, at least as the market measures the length of its most torpid season, is almost a thing of the past. That makes this as good a time as any to discuss fall investment strategies.
Gregory Spear, editor of the Spear Report, an investment newsletter that provides high-performing stock picks based on a consensus of successful investment advisory services, can sum up his core strategy in a single word: optics.
Feel-good factor
"We feel very good about optical networking," he said. "Anything optical: semiconductors, switches. That seems to be the biggest growth sector right now."
Among the optical networkers foremost on Spear's list are fiber optics makers Corning (GLW), JDS Uniphase (JDSU) and logic chipmaker Xilinx (XLNX).
Other companies to watch for, Spear said, are established firms that are developing intelligent ways to jump on the optics bandwagon -- such as ADC Technologies (ADCT), which earlier this week unveiled a new photonics chip -- as well as "companies with the resources to buy what they can't develop themselves."
In the second category, Spear put Lucent Technologies (LU) -- with the proviso that Lucent's optical acquisitions haven't quite panned out yet -- and Cisco Systems (CSCO). Although, there again, he noted that, "Cisco is having a little problem these days in getting people to sell."
Loving wireless chips
Spear is also bullish about the prospects for semiconductors, a view that runs counter to yesterday's warning in Dawn Patrol about the possibility of a choppy ride for chips in September. (See "Rough summer for semis")
"We still think very highly of semiconductors," Spear said. "Semiconductors as a whole is a leadership sector for the next five years, not just the next quarter."
Spear said the driving force behind the coming silicon boom is the advent of mobile communications technology.
"Wireless is fundamentally a semiconductor industry," he said. "There isn't much more to the infrastructure than chips."
Not only are chips intrinsic to mobile communications, but the chips that go into wireless devices will probably evolve rapidly, Spear said.
"You've got to have a steady influx of smaller-sized solutions to keep up with the broader-band/decreasing-size ratio," he said. "The obsolescence rate is very high -- and we love that of course."
Spear also points out that chips are vital to products made by industries in every sector. "I really can't think of an industry that isn't run by chips," he said. "We've passed the old paradigm of the semiconductor cycle."
Economics watch
The market will have half an eye out for a couple of B-list economics reports this morning.
Last week's initial unemployment benefit claims are expected to come in at around 305,000.
Factory orders in July are expected to show a month-on-month decrease of 3.8 percent, although analysts at Briefing.com are calling for a decline of 7.0 percent. |
