With the turbulent Nasdaq composite index 19% off its peak, Boston money manager and Bloomberg financial columnist John Dorfman says bargains can be found in the tech sector--but not among the established leaders.
Most of the famous names among computer-related stocks are "still selling for elevated multiples, even after suffering the pummeling of the past 3 1/2 weeks," he said.
The lesser-known names he likes:
* Ansys Inc. (ticker symbol: ANSS; Wednesday close: $10.81), which makes software for design engineers. The Canonsburg, Pa., company has reported 12 consecutive quarterly profits. Few analysts cover the company, which leaves room for people to "discover" the stock, he said.
* Avant Corp. (AVNT; $11.38), which makes software used to design microprocessors. The Fremont, Calif., company has reported 20 profitable quarters in a row. One thing holding Avant back has been litigation brought against it by Cadence Design Systems Inc. (CDN), the No. 1 provider of electronic design automation software. Cadence has charged that Avant illegally copied some of its software designs. Some of the issues have been resolved in court, but some have not.
* Thousand Oaks-based Xircom Inc. (XIRC; $34.94), a hot stock last year and a cold one this year. The company, which makes communications cards to connect laptop computers to networks and cell phones, saw its stock zoom from about $25 in March 1999 to $75 at year's end before tumbling. Xircom issued a profit warning March 24, and the technology for mobile computer communications changes rapidly. But Dorfman expects the wireless market to grow substantially over the next five years, which should work to Xircom's benefit.
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West Los Angeles-based investment firm B. Riley & Co. on Wednesday added Charlotte Russe Holding Inc., the San Diego retailer whose clothes are aimed at young women, to its "SOCAL" stock list, with a share-price target of $23. The list features what B. Riley analysts consider "small overlooked companies at attractive levels." Because of their distance from Wall Street, these Southern California companies are "essentially undiscovered and therefore trade at a significant discount" to the value of their underlying businesses, according to B. Riley.
Ticker Wed. Mkt. cap. Company symbol Type of business close (millions) Ashworth ASHW Apparel/accessories $4.56 $62 BNC Mortgage BNCM Mortgage lender 8.81 44 Ceradyne CRDN Ceramic products 7.31 59 Charlotte Russe CHIC Apparel/shoes 15.44 311 PBOC Holdings PBOC Savings bank 9.38 186 Quality Systems QSII Medical info 12.38 77 S&P 500 SPX 1,487.37
YTD % Est. Company chg. PE* Ashworth +10.6% 9 BNC Mortgage +35.6 16 Ceradyne +60.3 38 Charlotte Russe -26.5 21 PBOC Holdings -0.7 5 Quality Systems +59.7 31 S&P 500 +1.2 26
Sources: Bloomberg News; B. Riley & Co.
*Projected price-to-earnings ratio for current fiscal year.