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Toby's Tech Trio
09/02/2005 12:00 am EST
"You need patience in tech investing; if you check your stock prices everyday you’ll be pulling your hair," cautions Toby Smith. "Don’t look out 3 or 6 months. You should be building positions in growing markets." Here are some of his long-term favorites.
"At the beginning of growth moves, nobody believes in them. Remember the Internet. In 1994-95, the Internet, according to all experts, was going to be like CB radio. Those same experts all of a sudden morphed from non-believers to believers and by 1999. Our basic philosophy in technology investing is to get in as a wave starts to build and get off when the wave is starting to end. We keep a panel of about 5,000 professionals throughout the world. We survey them on a weekly, monthly, and quarterly basis on their outlooks.
"Over time, we have asked our alliance panel if they would consider a hybrid car. Two years ago, they said no. But six months ago, we went from zero to 15% of people who said they would be buying a car in the next 9 to 12 months, said they were seriously considering a hybrid car. One of the ways we are playing this trend is with Energy Conversion Devices (ENER NASDAQ). Toyota is now planning on selling 240,000 hybrids and every one will have a battery made or licensed by this company. They also have a technology in solar voltaic cells, another area in which this company was 20 years ahead of its time.
"Verint Systems (VRNT NASDAQ) is involved in anti-terror technology. The firm is 81%-owned by Comverse Technology. The firm’s technology allows you to eavesdrop - with sound or vision – any digital sound or picture or communication. This is an Israeli-based company. If you want to talk about security, look at Israel. They are light years ahead. If you look at the deployment of their software, there is about a 40% annual cumulative growth rate. I’d buy below 35.
"Silicon Image (SIMG NASDAQ) has been testing our patience. The adoption rate of high def TV will be steep, but we haven’t gotten there yet. We’re not yet at the 2% level. But by 2007-2008, the transition from analog to digital TV will have happened. The HDMI connector is needed to take digital information and send it digitally to a receiver or the end user, such as from your hi-def DVD player to your hi-def TV screen. More importantly, we are getting to the stage where the computer is your TV and you will see HDMI connectors in computers. They are now in Apple computers. Probably half of the Dells that ship next year will have an HDMI connection. By 2008, probably all PCs will have them. Silicon Image owns most of the intellectual property behind this technology and will get a royalty on the sales of these products. Our time horizon is 18 to 24 months and we think the stock will be worth $25."
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