Landis: Firsthand's Top Techs

10/31/2003 12:00 am EST


Kevin Landis

Founder and Chief Investment Officer, Firsthand Funds

What are the bet technology plays out there? Few advisors are as knowledgeable about the high-tech arena as Kevin Landis, co-founder of the Firsthand Funds and manager of the fund family's Value, Leaders, and Innovators funds. Here are some of his top stock picks.

"In times like this, people get nervous very easily. For one thing, they have just been burned. Number two, the recent numbers look pretty scary. I can’t tell you how many times I have been asked whether tech stocks have come too far too fast, and if they are too expensive. If you look back at stock charts, and see how well stocks have done in the past months, yes, they have shown eye-popping returns. We have funds that are up 70% to 80% just this year. That’s a scary number viewed in isolation. But you have to remind yourself that this is the unwinding of a deeply oversold market. So when I look at a stock that was once trading at $100 and then went down to $2 bucks, and it’s now at $10–sure, it’s up a bunch from $2, but it’s down a lot from $100. You can make the number say anything you’d like. What you really have to do is look at the fundamentals, and ask yourself, where do you think the company is going. And based on that, you can determine if it is expensive. Is this a tech stock that is positioned to catch the next waves of growth? Is it in the right markets right now? Or is this a damaged story from yesteryear? That’s what we’re trying to figure out.

"One of our favorites is a well-known name–Cisco Systems (CSCO NASDAQ). The networking industry is finally showing some signs that it is getting back on its feet, and people could get excited once again about When investors get excited about technology, this is one of the first stocks they buy. Our other favorites are less well known:

"When the roof fell in on a lot of the dot coms, a lot of business evaporated. But UTStarcom (UTSI NASDAQ) grew revenues in 2000, 2001, 2002, and they are doing that again in 2003. How do you do that when you are selling telecom equipment and all the customers in that business seem to be going broke? They sell wireless loop technology. They sell it overseas, particularly in China. They are also now selling in India. It’s a great growth story and the stock is cheap on its fundamentals. We think this is one of the emerging winners as the telecom infrastructure gets back on its feet. It’s a great stock.

"Years ago, I got discouraged buying disk drive stocks; the industry kept having prices wars and beating each other up. We’re now down to a few main companies, including Western Digital (WDC NASDAQ). We think this is a great value play. They are profitable and this is a great way of betting on a rebound in PCs. This is also betting on the trend that disk drives are going into more than just personal computers today; they are going into game consoles, personal video recorders, set-top boxes, etc.

"There’s a bit of a duopoly going on in graphics chips right now. The two leaders are Nvidia (NVDA  NASDAQ) and  ATI Technologies (ATYT NASDAQ). For the last few years, Nvidia looked like they were taking over the world. ATI is fighting back, and we feel they are at a point where we think the pendulum is swinging back into their favor. We also think that the PC industry could show an uptick here, so we’re feeling pretty confident that this company is in the right place at the right time.

"We also like Electronic Arts (ERTS NASDAQ). The stock has run up quite a bit in anticipation of the fourth quarter–which is always the big quarter for the gaming manufacturers. But we’re happy owning this stock and think they are going to have a great fourth quarter. Money spent on video games this year has surpassed the money spent at the box office for movies. It is now a major, major business. And Electronic Arts has this industry by the throat. This is a great franchise. It may be a little expensive right now, but I have a suspicion that this company is here to stay and that it will become one of those next-generation blue chips that everyone has to own."

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