Next Year's Opportunities

10/06/2006 12:00 am EST


Tobin Smith

Founder and Chief Research Analyst, Transformity Research LLC

Always looking to the future for investment opportunities, Tobin Smith is constantly analyzing new trends and the industries poised to benefit from them. Here he identifies several that hold plenty of promise for investors ready to look forward.

"VIDEO GAME WAVE: About every five years like clockwork, this industry goes through an upgrade cycle when new platforms are introduced and game players replace their old machines. This cycle started last fall with the introduction of the Microsoft Xbox 360 and will really take off as Sony's PlayStation 3 and Nintendo's Wii arrive in stores around the globe. We started with our recommendation of Activision (ATVI : NASDAQ) a few weeks back. I'm raising the Buy Under for ATVI to $16 and adding THQ (THQI : NASDAQ GS). THQ is another great player in this space with great licenses that will not only benefit from the next generation, but also the tens of millions of consoles that will remain in use until the supply of the new Sony and Nintendo machines meet demand. Start building your THQ position at $30 or under.

"WHITE-LIGHT LED WAVE:Cree (CREE : NASDAQ GS) has really come back, and as more and more of its commodity LED sales for cell phones are replaced by much higher margin white-light LEDs, its numbers will ramp. I'm moving the Buy Under to $22. I'm also introducing another play on this wave - Color Kinetics (CLRK : NASDAQ GM), the leading player in installing white- and color-LED applications throughout North America. Add Color Kinetics to your portfolio under $18.50.

"MOBILE CONTENT/COMMERCE WAVE:VeriSign (VRSN : NASDAQ GS) has taken News Corp. as a partner in its mobile content distribution business, and that's a good thing. When you add in its mobile e-commerce and other Internet commerce services, they are VERY cheap here, so I'm raising the Buy Under for VRSN to $22 with $32 target.

"Silicon Motion (SIMO : NASDAQ GM) is another beneficiary of the ramp in NAND storage for mobile digital content, and it sells key components to all the players competing for your digital dollar. Raise the Buy Under to $17.50 with a $28 target.

"APPLE MAC WAVE:Apple (AAPL : NASDAQ GS) is a stock that just won't stop for us. As the news of new Mac sales start to hit, we will continue on the road to our $100 target. If you didn't get in earlier, I'm raising my target to $105 and our Buy Under one final time to $78 - buy it on a down day! Related to the Mobile Content Wave, too - new iPods mean new sales for Silicon Motion."

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