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5 Tech Stocks Set to Soar
08/22/2003 12:00 am EST
The editors of Wall Street Winners recently issued a special report called Five Tech Stocks Set to Soar. The report says, "Our favorites are leveraged to attractive new markets with high-growth potential and are leaders in their fields." Here are the details on five top high-tech plays.
"Oracle (ORCL NASDAQ) is the leading database producer in the world and as such is leveraged to the capital spending cycle, which is quite subdued due to the slowdown in economic activity. The company has been hailed and hated throughout the years, but ultimately it has maintained its dominance in its core business and has managed to keep margins quite robust at 35% in the face the biggest slump in information technology (IT) spending in decades. The company is the No. 1 provider of large, secure databases to the federal government and big business. The new driver of growth at Oracle will be application server software that connects programs and Web sites to the databases behind them. Although IT spending may lag the turnaround in the economy until companies are clear that there’s only growth upside in their businesses, Oracle will remain a dominant player in its industry, making it worthwhile to hang on for the inevitable IT spending turn. Buy below 18.
"Telekomunikasi Indonesia (TLK NYSE), Indonesia’s provider of local and long-distance telephone service, is our top choice in the telecom arena. The company has outperformed US-based telecoms for some time and we feel that outperformance is set to continue. It’s hard not to like the fundamental story behind Indonesia. Like other countries in Asia, Indonesia is on the rise and has extremely powerful demographic trends behind it. And the nation isn’t simply relying on external demand to drive growth—even if Wall Street pulls back hard again and the US economy slows, Indonesia should keep on growing. We’re convinced that long term, money will be made by investors who are willing to take the risk and invest in the Asian domestic consumption story. The Indonesian market remains cheap and Indonesia has been cleaning up its macroeconomic act, resulting in falling interest rates, great reductions in corporate debt, and a steady appreciation of its currency. We like Telekom because it has demonstrated an ability to take advantage of its dominant position in the market, its low valuation, and its healthy, sustainable 5% dividend yield. It had a solid recent quarter, and we expect its strong fundamentals to remain intact for the rest of the year. Buy Telekom below 12.
"Terayon Communication Systems (TERN NASDAQ) provides broadband equipment and has secured major long-term contracts with big players in the cable and telecom industries in Asia and Europe. Although telecom equipment has been a horrible business during the past year, Terayon is a bright spot in a difficult industry. Its SCDMA technology just got the next generation DOCSIS (data over cable service interface specification) 2.0 cable modem standard, which will drive demand for its products and create royalty revenues for years to come—after the adoption of the technology goes industry wide in a couple of years. Canadian cable firms Shaw Communications and Rogers Communications, which together account for 35% of sales, are also shareholders in Terayon. The founding brothers, own 10% of the company, which is a great motivator to maintain shareholder-friendly policies. We see a good opportunity for investors who are willing to hold the shares for 12 to 18 months. Terayon is a very volatile stock, but one that has great potential as the industry recovers. Buy below 3.
"MATÁV (MTA NYSE) is the biggest integrated telecom services provider in Hungary. The company holds a monopoly in providing international and long distance public telephony services throughout the country. The Hungarian telecom market began to open up to competition last year, but MATÁV continues to be one of the leaders. The company also has a leading position in the Hungarian cellular market with a 51% market share. MATÁV is 60% owned by Deutsche Telekom. The company has a history of capital discipline and a strong cash flow outlook. MATÁV has been experiencing explosive growth, especially in its wireless business, where it controls more than 50% of the market. Growth in wireless subscribers in Hungary has been significantly faster than Western Europe. During an initial period of five years, the subscriber base has increased by more than six times. Its Internet service provider service offering is very competitive and it has a leading position in the Hungarian market. The company is expected to grow even bigger through expansion in other countries in the region. Buy below 20."
"United Microelectronics (UMC NYSE) is the world’s No. 2 semiconductor manufacturer. Semis are very cyclical and as such they move a lot. That makes it difficult to recommend buying and holding semi-conductor stocks for the long haul—they’re better used as trading vehicles. But there are exceptions to that rule and United Micro is one of them. Forty percent of revenues come from Asia, which is the only region in the world that has been producing steady and strong growth over the past few years—that should help keep demand for United Micro’s products more stable. Furthermore, the company is managing inventories better this time around, in an effort to avoid repeating last year’s problem of increased spending and slow demand. Going forward, management’s main focus is profitability rather than blind competition with its main archrival Taiwan Semiconductor. Buy United Microelectronics below 4."
The key risk-on and off drivers today are the same – U.S. politics, global growth, other centr...