Trey-I won't bite on your bear notices, I'll just say hold on to your shorts,as we go into the first of the year.
To all-HERE WAS AN INTERESTING INTERVIEW-YOU MIGHT SAY HE IS TALKING ABOUT TELLABS.
Business Day
Small-Cap Tech Stocks to Lead Rebound in '98
Aired December 30, 1997 - 6:25 a.m. ET
STUART VARNEY, CNN ANCHOR: Now, back to Wall
Street. And our next guest is predicting a banner year in 1998 for
those technology stocks. Here's Brian Finnerty. He's the managing
director of C.E. Unterberg Towbin in New York City.
Brian, welcome back.
BRIAN FINNERTY, MANAGING DIRECTOR, C.E.
UNTERBERG TOWBIN: thank you, Stuart. Nice to be here.
VARNEY: Make your case for a rally in tech stocks in '98,
please.
FINNERTY: Well, we started to see it yesterday, particularly in
the bigger tech stocks, which sort of have the limelight since the
October 27th debacle, the "Asian flu," began. But my case through
here is more for the sort of mid and actually small-cap tech stocks,
which actually -- if you look back -- we had our moment of glory
there for June, July and August and beginning of September, and
the stocks acted very, very well -- as they should because the
earnings growth was there.
When the October mess came in, these stocks got hit, got hit hard,
and have absolutely fallen asleep. They've laid down.
VARNEY: When you said they hit hard, what? Down 20 percent?
FINNERTY: Oh.
VARNEY: Down 25 percent? More than that sometimes?
FINNERTY: Some down 20, some down 40-45-50. I mean,
we've seen that with some of the big ones, but they've started to
bounce back. And my case is that some of the smaller cap tech
stocks will definitely start to bounce back and I think that's where
the growth lies for 1998.
VARNEY: They have no exposure to Asia's problems, I take it?
FINNERTY: Most of these -- some have small to limited Asian
exposure here and that's the key. The bigger growth -- the size --
allowing you to have the bigger percentage growth in earnings and
revenues and when you've got a good product going to really get
the oomph there and...
VARNEY: But your argument is surely conditional on American
corporations continuing to invest very, very heavily in the
technology sector.
FINNERTY: And I think that's going to continue. Not just for '98
-- I think that's something that is here to stay, Stuart. I mean, I just
think that we've seen this evolve and it's getting bigger and bigger,
not smaller and smaller.
VARNEY: Give me some names.
FINNERTY: Well, three of our favorite small-cap names would --
number one would be ECCS. It's a mass storage solutions for
small departments and companies. And these guys are a big-time
turnaround story. They've got good OEM agreements with a lot of
the big boys.
VARNEY: Computer software? Hardware company? That's...
FINNERTY: Yes. But their customers are the Compaqs of the
world and the Dells and the Oracles, et cetera.
VARNEY: When you say it's a small cap, what's its valuation?
FINNERTY: It's right now about $50 million company.
VARNEY: That's all?
FINNERTY: Yes.
VARNEY: You're really coming down the pile there.
FINNERTY: Yes. Market cap is actually about $60 million here in
ECCS.
VARNEY: OK. Next one.
FINNERTY: Next one would be a good software company that
we like and it's actually merged into a little bit of a bigger company.
We've got a market cap here of about $220 to $230 million --
MetaCreations -- a very sort of glamorous kind of software where
they market and design for the painting and art graphic industry
and a lot of really hot new products coming out of there. I look for
them to go a long way in 1998.
VARNEY: Now, hold on a second. You've got ECCS, MCRE --
MetaCreations...
FINNERTY: MCRE -- MetaCreations.
VARNEY: ... what kind of gain do you really think you're looking
at on those two stocks for the next six months?
FINNERTY: Well, I'll tell you what, Stuart. MetaCreations is
down from 19 down to 9. I mean, they've taken this stock and just
thrown it out. This is a darn good company.
ECCS is down from 9 3/4 down to 5 1/8.
VARNEY: So you're looking for them to go back to those highs?
FINNERTY: I'm looking for 100 percent -- close to 100 percent
gains in '98 for some of these small stocks, and I'm going to give
you one more.
VARNEY: OK.
FINNERTY: A satellite telecom company called ViaSat. And
ViaSat's another one -- down from 19. This one not down quite as
much -- down into the $11 range, but we look for that one to go
into the mid-20s.
VARNEY: Before we leave you, how about the Intels, the
Microsofts, the Compaqs, the others of this world? Will you touch
them?
FINNERTY: Absolutely touch them. These stocks are about --
Applied Materials has been knocked down 45 percent since the
beginning of October until yesterday morning. Now it bounced -- a
small -- and everybody's saying -- Oh, God, did I miss it. You've
got a long way to go on the upside of these.
VARNEY: Brian, you know as well as I do, they don't have to
bounce back again. There's no law says they do.
FINNERTY: Right. But the good companies will, and you just
happened to hit three pretty darn good ones in Intel, Microsoft and
Applied Materials.
VARNEY: Yes, I did.
FINNERTY: And the good ones are going to bounce back,
Stuart. They've got the proprietary technology, and they've got the
investment coming into them. They're going to bounce back.
VARNEY: Right. We'll watch them, and we thank you for joining
us. Brian Finnerty.
FINNERTY: Thanks, Stuart. Thanks for having me.
VARNEY: OK.
Let's crank up this string now that the new year is in sight. Any predictions on 4th 1/4 earnings?
DAVE DICKERSON |
