INTERVIEW: Cycling Into a Big Year for Tech Stocks by Sandra Ward
Summary: Michael Cahill's Chilton Investment global technology, telecommunications and media fund has delivered 119% net since 2000, while the Nasdaq shed 45%. The stocks he likes for 2007:
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- Microsoft Corp. (MSFT) -- Vista is five years in the making and is hitting the PC-refresh cycle perfectly. Its Xbox 360 is also on the crest of a new game console cycle.
- Video on demand is another big trend: Google Inc. (GOOG) with its YouTube acquisition and Telefonaktiebolaget LM Ericsson ADR (ERIC) have positioned themselves to take advantage.
- ANADIGICS Inc. (ANAD) is positioned to capture the internet-going-mobile theme with highly regarded cell chips, and also make chips for video-over-internet infrastructure. From breakeven in 2006, Cahill sees EPS of $0.50 in 2007 and up to $1 in 2008: "they are on the verge of massive earnings acceleration." Chilton owns 11.5% of the company.
- EchoStar Communications Corp. (DISH) -- at 7.7x Ebitda and 16x free cash flow, DISH is a great play on a takeover. Subscriber numbers have been fantastic as have earnings. This is the year AT&T Inc. (T) buys EchoStar, in order to beef up their video shortfall and pick up their 13 million subscriber base.
- MEMC Electronic Materials Inc. (WFR) is a world-leading polysilicon maker; the material is used in semiconductor wafers and solar cells. The latter promises to be a huge growth industry for many years to come. At 17x '07 and 13x '08 earnings, its trading at a very significant discount to the semiconductor industry and its own unbelievable growth.
- Sify (SIFY) owns 3,500+ internet cafes in India. They have also began hosting data on their servers from some big companies, and have 208,000 broadband subscribers. They announced a deal with The Western Union Co. (WU) for money transfers, which is important in a county with so few credit card holders.