Here is one person who like several of my favorites, notably AMAT, EMC, INTC, and GLW.
biz.yahoo.com
INSIDE WALL STREET ONLINE -- True Believers in Tech Stocks
Daily Briefing: INSIDE WALL STREET ONLINE
By Gene Marcial
The allure of the bombed-out technology stocks got rekindled in the first quarter of 2001, but the onslaught of the recession took the steam out of the nascent rally. But guess what? Even some of the investors who had jumped into that once-fiery group early last year only to get burned are buying again. ``The economy is recovering, and technology is the place to be,'' asserts Tom Klingenstein, principal at the New York investment-management firm Cohen Klingenstein & Marks.
He acknowledges that his outfit was too early in recommitting to technology -- as it was when it bailed out of tech stocks in 1999, well before the group's ultimate swoon. Believing that the techs, which had dropped sharply from their March, 2000, highs, were again reasonably priced in 2001, ``we took our cash and built up our tech holdings,'' says Klingenstein. ``We believed that the economy was poised to recover then,'' he adds.
As it turned out, the tech group -- particularly the telecom-related stocks -- continued to decline for the remainder of 2001. As a result, Cohen Klingenstein & Marks' core portfolio tumbled 23.9% in 2001, vs. the 11.9% drop in the Standard & Poor's 500-stock index.
SOPPED-UP EXCESSES. But Klingenstein's firm is sticking to its long-term strategy: It's utterly convinced that at least over the next 10 years, the economy will continue to grow on average at somewhat higher than normal rates, say 3.5% to 4% a year. Klingenstein notes that economic growth in the 1990s was stable, with only small deviations from the 3.5% to 4% rate. True, growth in mid-1999 to mid-2000 was faster -- with gross domestic product expanding at about 6% -- which created some excesses. But that period was followed by slow-enough growth, says Klingenstein, to ``sop up most of the excesses.''
Now, manufacturing inventories are under control -- even in the telecom sector, he notes. The banking system is sound, and the unemployment rate is relatively low, as are interest rates. And inflation is still nowhere to be found, Klingenstein says. In sum, ``the conditions required for a recovery are in place,'' he adds.
This doesn't suggest that a rip-roaring rebound is coming, says Klingenstein, but the economy remains, ``in the midst of an extended period of faster-than-normal growth.''
OVERVALUED? HA! So Klingenstein and his crowd believe that tech stocks are ripe for the picking. They're far from overvalued, he asserts. People who claim otherwise base their conclusions on current price-earnings ratios, where price is compared to either 2001 or 2002 earnings. He thinks that's the wrong way to assess tech stocks.
Earnings, particularly for tech companies, are very depressed, he argues. So this makes p-e multiples that use current earnings appear high in relation to historical p-e ratios. On the other hand, p-e calculations that use average or ``normalized'' earnings support ``our contention that many tech stocks are attractively priced,'' explains Klingenstein. Because tech stocks are mostly cyclical, they're more likely to rebound higher during an economic recovery, he adds.
Aside from techs, Cohen Klingenstein & Marks' core portfolio also includes other stocks that it believes will benefit from low interest rates, such as the financials, and from a recovery, such as retailers.
LOTS OF PROSPECTS. Among the group's top tech picks: ALLTEL (AT), currently trading at 61; Applied Materials (AMAT), 40; Cisco Systems (CSCO), 18; Computer Associates (CA), 34; Corning (GLW), 8; EMC (EMC), 14; Intel (INTC), 32; Nextel Communications (NXTL), 8; Oracle (ORCL), 13; and WorldCom (WCOM), 8.
Among the financials: Citigroup (C), 50; Fannie Mae (FNM), 79; and Franklin Resources (BEN). 35. And in the retailers group are Home Depot (HD), 51; and Target (TGT), 41.
The emphasis in the portfolio, says George Cohen, also a principal in Cohen Klingenstein & Marks, is on high quality and relatively conservative leaders in the technology area. When confidence takes hold, he says, ``these will be the first places that investors will look to move assets.'' |
