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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (36302)	7/20/1999 10:34:00 PM
From: T L Comiskey	Respond to of 152472

Jim..ot...you aint no stooge...:)..tim

To: Jim Willie CB who wrote (36302)	7/20/1999 11:23:00 PM
From: Ruffian	Read Replies (1) \| Respond to of 152472

Timing was good> July 20, 1999 Electronic Q&A Putting a Premium on Mid-Cap Growth Investment Philosophy By LAWRENCE STRAUSS Jandrain's Favorite Stocks \| Performance Snapshot \| Top Holdings For Richard R. Jandrain, who manages One Group Mid Cap Growth Fund, based in Columbus, Ohio, mid-cap stocks are where the opportunities are. Often less volatile and more liquid than small caps, mid caps -- stocks that have market values from $1 billion to $7 billion -- also find it easier to sustain earnings growth than would, say, big-cap behemoths like Pfizer, he says. After a stellar 1998, in which the fund racked up a total return of 37.34% (compared with 28.58% for the S&P 500), it's trailing the broader index by about five percentage points so far this year. Its annualized return of 33.44% over the last three years is slightly ahead of the S&P. Jandrain holds a BS/BA in finance from Creighton University in Omaha, and an MBA from the University of Nebraska. Barron's Online: How would you sum up your investment philosophy? Jandrain: We try to diversify by industry and pick a lot of good medium-cap companies that we think are going to grow substantially faster than the economy over the next three to five years. We want to find companies that are going to have internal growth rates substantially higher than GDP. And in doing that we should end up also with companies that are producing substantially higher earnings growth than the S&P 500. Q: How much is enough of a premium to pay these days? A: That is a harder one to answer. A number of our stocks are 40 times or [even] 50 times forward earnings. But if you look at the growth rates of some of these companies, there are a lot of companies in the communications technology area that we think are going to be able to grow 25% or 30% [annually] -- some of them even more than that over the short term. What we are trying to do is look at where earnings are going to be, say, two or three years out. And then on that, we will put a multiple that is in line with the growth rate. Q: What else do you look at? A: We analyze stocks both on the fundamental side and then also on the valuation side. And for tech, we also try and buy strong fundamental stocks. But again, we are trying to buy them at what we consider a reasonable valuation. And typically what we will do here is get the P/E-to-growth (PEG) ratio. Performance Snapshot (Total Return as of July 16, 1999) Yr to Date 1998 1 Yr 3 Yr (Annualized) One Group Mid Cap Growth Fund 11.12% 37.34% 24.81% 33.44% S&P 500 16.17% 28.58% 21.25% 32.68% Source: Morningstar Q: What would be a reasonable PEG ratio these days -- 1.5 times, two times growth -- for stocks in your portfolio? A: It is going to be north of one times growth -- let's say 1.25 [times the growth rate]. Sometimes we will look out two to three years down the road. In technology it is dangerous to forecast much beyond, say, two years. It is so dynamic, and you know that the leader today sometimes can be displaced 18 to 24 months down the road. What we look at is what we think the company will be able to grow at, say, on a three-year to five-year basis. Based on that growth rate, [we assign] some sort of a multiple that we think is reasonable. I think that overall price-to-earnings ratio right now on the fund is going to put us at about 33 times [1999 estimated earnings and] about 27 times [expected 2000 earnings]. Q: At least when you compare it to the overall market, you are not paying huge premiums. The S&P is about in line with that, I think. A: Right. Relative to the market, we are in the ballpark. People can make the argument about the level of P/Es, that [some people think] the overall market is overvalued. We think inflation is going to stay low here. We don't think we are going to be in for any big rise in interest rates. And as a result, if you can get a company that you think is going to be able to knock out earnings of 30% a year for the next three to five years, you are going to pay a pretty hefty premium. Q: Growth at a reasonable price probably isn't quite the correct description for your investing style? A: No, [but] we do look at valuations. We are not trying to buy just the cheapest, especially in technology or communications technology or even in the biotechnology area. If you buy stuff that is cheap, there is usually a reason for it. Q: Isn't assessing these technology companies very tricky? A: Yes, I would agree. What we try to do is focus on companies that continue to at least meet and hopefully beat the expectations out there. I think the market is a fairly efficient discounting mechanism. And what we are trying to do is buy companies that have improving fundamentals, where we think the news is going to get better and [where it] typically will also lead to numbers being revised on the up side. Q: You have a lot of mid-cap names in the fund. What's the benefit of mid caps these days? A: [With] a lot of these mid-cap companies, you are going to be able to grow faster, I think, over the long term than [with] the big-cap names. For Pfizer to sustain its growth rate, it gets to be the law of large numbers; it gets to be very difficult. So we think that if you have got some of these mid-cap companies, the probability of hitting on products that can have more of an impact will be higher. One Group Mid Cap Growth Fund (Top Holdings as of July 19, 1999) Company Ticker 1.QUALCOMM QCOM 2.Linear Tech LLTC 3.Biogen BGEN 4.Lexmark LXK 5.Xilinx XLNX 6.Harley-Davidson HDI 7.Maxim Integrated Products MXIM 8.E*Trade EGRP 9.Altera ALTR 10.Analog Devices ADI Jandrain's Favorite Stocks