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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (5293)	2/3/2003 9:30:24 AM
From: Jeffrey D	Respond to of 25522

No capitulation at Gabelli. Jeff << By Dwight Oestricher Of DOW JONES NEWSWIRES (This report was first published Friday afternoon.) NEW YORK (Dow Jones)--Trying to run a growth fund in a market going the other way wasn't an easy job in 2002. But Gabelli Growth Fund portfolio manager Howard Ward said investors should take advantage of stock price weakness in the more cyclical growth industries. "Stocks and industries whose growth is influenced by the level of economic activity" will move when the market improves, Ward said. That would include semiconductor capital equipment companies like Applied Materials Inc. (AMAT) and KLA-Tencor Corp. (KLA) and the chip makers themselves, such as Analog Devices Inc. (ADI) and Linear Technology Corp. (LLTC), Ward said. "The next generation of products needing chips can't be delayed forever," Ward said. "And semiconductor equipment manufacturers will have to provide machines that can make chips with more power and less heat." There was evidence near the end of 2002 that downtrodden technology and telecommunications stocks were back in favor, he said. "Just like in the fourth quarter of 2001, investors began rewarding companies for cyclical exposure," Ward said. Vodafone Group (VOD) was a top performer for the fund in the fourth quarter, with the American depositary shares rising 41%, followed by Qualcomm Inc. (QCOM) with a 32% rise in the quarter. For the year, Vodafone and Qualcomm lost more than 25% of their value each. In 2003, Ward said Federal Communications Commission Chairman Michael Powell's ideas for giving regulatory relief to Baby Bells like BellSouth Corp. (BLS), up 41% in the quarter, could benefit the telecommunications group. Shares of BellSouth fell more than 30% in 2002 to close at $25.87. The fourth-quarter upswing in telecomm and technology wasn't enough to put the fund in positive territory. The Gabelli Growth Fund saw a 33.8% decline for the year, compared with 22.1% drop for the S&P 500. That followed a 24.1% decline in 2001, compared with an 11.9% drop in the S&P 500. The fund has about $1.9 billion in assets, according to Morningstar. In 2003, the fund is sticking with media stocks such as publisher McGraw-Hill Cos. (MHP), entertainment powerhouse Viacom Inc. (VIA, VIAB) and Clear Channel Communications Inc. (CCU), which are all benefiting from a strong advertising market, Ward said. It made sense to have energy stocks like Murphy Oil Corp. (MUR) in the portfolio because much of the mid-size oil and gas company's supplies are domestic, "safe and secure," in light of the threat of war with Iraq. Also, it's easier for Murphy to replace reserves than it is for its larger competitors, Ward said, adding that the company should also benefit from rising crude prices. The current environment highlights the need for defense and that means General Dynamics Corp. (GD) is in a good position to capture defense spending by the U.S. government, Ward said. He added that health-care concerns such as Johnson & Johnson (JNJ), Eli Lilly & Co. (LLY), Amgen Inc. (AMGN) should continue to be defensive investments in this struggling market. Although Johnson & Johnson met the firm's expectations, Ward explained that the fund trimmed its position in the company because it seems "pretty full valued in the near term." Companies with low or declining earnings visibility, or where competitive pressure were unlikely to lessen inside a healthier economy, were sold, Ward said. That group included Motorola Inc. (MOT), Cablevision Systems Corp. (CVC) and Comcast Corp. (CMCSA). He added that Wyeth (WYE) and Abbott Laboratories (ABT) were disappointments last year and his confidence in both has waned. With interest rates outside of the sub-prime area at 40-year lows, those companies with rapidly growing earnings should be more attractive since the present value of future earnings would be worth more, Ward said. He added that he expects most of the companies in his portfolio to report higher earnings growth rates than the consensus for low double-digit growth in 2003. Given that the performance of fund was in line with the broader market in the second half of 2002, Ward said the tide might be turning for large-cap growth stocks. He was quick to add that he couldn't say with authority that a new bull market has started. However, he couldn't see a scenario that would cause stock prices to stay below current levels for several years out. - By Dwight Oestricher; Dow Jones Newswires; 201-938-5266; dwight.oestricher@dowjones.com (END) Dow Jones Newswires 02-03-03 0730ET