A "New World" for Wi-Max
10/28/2005 12:00 am EST
Michael Murphy is certainly no newcomer to the advisory world. Indeed, I have followed his work for over two decades. He has, however, taken a new turn, unveiling the New World Investor. Here, the leading tech guru discusses his favorite stock for the coming year.
"I think that we could tip into a recession next year, just because what would normally be just a slowdown is going to hit an economy that has a lot of imbalances in it in terms of consumer debt levels, housing prices, and energy costs. So while I see a great 2007, I am worried that next year we could get an economic downturn and a significant adjustment in stock prices. Therefore, I am cautious, particularly about stocks with cyclical exposure. Thus, we are mostly looking for companies that can power on through a slowdown because of the niche they are in or because they are not as exposed to the US markets.
"If I had to cut my list of favorite stocks down to just one, it would be Alvarion (ALVR NASDAQ). This is one of the two leading providers of Wi-Max equipment. Any many people know, Wi-Fi is a system that allows you to sit in a Starbucks and fire up your laptop and you are connected to the Internet. Wi-Max is just Wi-Fi on steroids. With Wi-Max, you can sit on your porch and pick up the signal from Starbucks, ten miles away and be connected. Wi-Max is going to be a really big deal. People have already shown that they love to connect wirelessly and wander around with their laptops and connect from anywhere.
"With Wi-Max, instead of being limited to 300 feet, you can be connected within 3 to 30 miles, depending on how many buildings are in the way. Alvarion partnered with Intel in the technology side of this business. They are partnered with Alcatel and Seimens on the distribution side. Alvarion already has systems in 80 countries, including China. The industry is still undergoing the development of standards, and part of the weakness in the stock has been disappointing earnings as customers wait for these standards to be set and for Wi-Max equipment to be formalized.
"However, the first round of equipment for Wi-Max has just recently begun to undergo formal certification and we expect to see certified equipment before the end of this year. Some Wi-Max networks are already being deployed with uncertified equipment, but the big increases will come next year. Intel is already pushing this technology and once the networks are out there, Intel will introduce Wi-Max enabled laptops and other devices. This is a situation that really won’t depend on the economy, as this is the very beginning of a major new technology trend. This is an Israeli stock, so there is some political risk. However, we would buy this stock up to $9. Next year, as people get enthusiastic about Wi-Max, we think it’s an easy $18 stock."