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txlaw
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I read an article yesterday noting that Lee Ainslie of Maverick Capital believes that many tech companies trade at very attractive valuations right now.  I tend to agree and own the following well-known tech cos:

 

GOOG

YHOO

INTC

DELL

 

Other people on this board own MSFT, NOK, and AAPL.  Some may own HPQ.  EBIX is popular here too.

 

Any other ideas?  Or do most people stay away from tech?

 

 

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You may want to look at WDC. Its the only tech I own. I think its much cheaper then the others. My major issue is I wouldnt pay much more then 10x earnings for many of those megacaps in this environment. I would pay 15x back in 2004 when the world was normal. I also question the capital allocation ability of all of those listed but Intel.

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... believes that many tech companies trade at very attractive valuations right now ... (I) own ...

GOOG, YHOO, INTC, DELL

Other people on this board own MSFT, NOK, and AAPL.  Some may own HPQ.  EBIX is popular here too.

Any other ideas?  Or do most people stay away from tech?

 

Tech doesn't fit in with the approach of many on this board, and few can be evaluated by the normal metrics used for companies that endure for 30-100 years.  But in terms of near-to-medium term, it is hard to ignore  techs with solid track records, no debt, large cash, and credible near-term market opportunities.  You can't buy and forget them - essentially all need constant re-evaluation - but for some of these, if the market were to crash near-term, I would not be upset being stuck holding them through a cycle.  I don't believe companies like GOOG or CSCO will disappear in the next few years.  MSFT and INTC (at present valuations) are tempting, though perhaps not long-term holds.  Some others (RIMM, NOK) have higher risk-return profiles, and people will look like fools or geniuses in hindsight but we don't yet know which, as this depends on the unpredictable future success of specific tech products.

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In YHOO's case, you don't need to depends on the unpredictable future success of specific tech products, the sum of its parts is more than the whole. You do need to have willingness and figure out most efficient way to unlock value. The catalyst is coming:

 

http://www.bloomberg.com/news/2010-10-14/yahoo-said-to-work-with-goldman-sachs-to-defend-against-possible-takeovers.html?cmpid=yhoo

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Did you guys read the below interview of Bartz from a few days ago? She's insane.

http://www.usatoday.com/tech/news/2010-10-08-bartz08_CV_N.htm

 

And remember when she told Techcrunch's Michael Arrington to "fuck off" a few months ago?

 

She has no business running this company and is embarrassing the herself and the company. I think she just wants to dump the company and take the big payday and run. I have no idea how shareholders wanted Jerry Yang out but are putting up with Bartz.

 

 

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I own:

AVX

CYMI

ACN

GIB

AVT

 

though today I think that only AVX and AVT are really cheap.  CSCO intrigues me.  Good market positions, loads of cash, reasonably priced, but it is such a hype machine.  And Chambers seems to be to be the Phil Knight (of NKE fame) of the the tech world.  The structure of the company is so unorthodox that I fear the thing could come apart when he retires.

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And Here's the video of Bartz telling off Arrington:

after she complained that people are expecting too much from Yahoo. She's crazy. It blows my mind that this lady is running a $21B company, and that any investors trust her making big decisions.
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Clearly, Apple and Google are the biggest winners as far as companies go (irrespective of share price). 

 

Apple will have $100B in cash before we know it.  Maybe they should hire WEB.

 

Google also generates tons of cash and they will reinvest it in some crazy ass projects.  But nevertheless, they are here to stay for a while. 

 

It is amazing to me to see all these companies with big names and tons of cash, and then someone comes in and blows up there model.  Google sneaking right past YHOO and MSFT.  Facebook coming in - destroying myspace.  Shouldn't Yahoo been building this kind of site? 

 

WEB doesn't invest in technology per se b/c they are not predictable businesses.  True.  But IMO Goog and Apple, Goog and apple, and goog and apple - they are best of breed.

 

Amazon is nice, but they don't generate cash until the 4th quarter (ala sears).  Cisco is a great company that may be a $20 stock 10 years from now.  MSFT also generates tons of cash, but who wants to spend more than $25 a share on a CEO that acts like a buffoon. 

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Amazon is much more of a retailer than they are a tech company. Yeah, they make the Kindle, and have some software services and are web-based, but they are mainly a retailer. They're a great company, but a tough stock to get at a good price.

 

Regarding tech not fitting with the approach of the board, yes, tech companies can be harder to predict than some other industries, but it's also an aspect of buying what you know and understand. I'm kindof a techie; I like using and playing with all the new gadgets, read numerous tech sites/blogs daily, have worked for a couple tech companies, and follow a lot of them closely, so I do sometimes invest in them.

 

That said, tech is a large field. I still have a hard time understanding what many tech companies out there do. I understand how companies like Apple and Google make money. While other tech companies like Cisco and IBM are very well known, their businesses are all over the place. No way can I follow and understand everything they do. They feel the need to be involved in pretty much every single aspect of IT in some form or another. I bring up those 2 companies specifically because I have friends who work at both of them and even they have a hard time understanding what the companies do outside of their departments/divisions. I have no desire to invest in companies like that.

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Just a passing comment: Amazon's culture is a purely tech company who happened to do retail. Not the other way around.

 

Fine, but they make almost all their revenue as a retailer, regardless of how many beanbag chairs and pingpong tables they may have in the office.

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Whatever the case, the market is valuing a lot of these companies (rightly or wrongly) with no regard for the gigantic war chests ($B in net cash) on which they sit.  In my opinion, many names across the "tech" complex are trading at discounts to mature, cyclical industrials even though the secular growth rates of "tech" are higher.

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You may want to look at WDC. Its the only tech I own. I think its much cheaper then the others. My major issue is I wouldnt pay much more then 10x earnings for many of those megacaps in this environment. I would pay 15x back in 2004 when the world was normal. I also question the capital allocation ability of all of those listed but Intel.

 

WDC is getting an afterhours bump on talk of STX going private.

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Just a passing comment: Amazon's culture is a purely tech company who happened to do retail. Not the other way around.

 

Fine, but they make almost all their revenue as a retailer, regardless of how many beanbag chairs and pingpong tables they may have in the office.

 

By which you should classify Google as an advertising company not a tech company too.

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Haha, didn't mean to start a debate over what is a "tech company", but interesting points that you guys make.  I mean, if you really think about it, Iscar is a "tech company" specializing in materials science as applied to the manufacturing of cutting tools.

 

Anyways, some interesting ideas have come up.  I will have to look into Micron, WDC, and AVX.

 

It will be interesting to see if some sort of transaction is proposed to YHOO.  I would agree with Jason that YHOO probably trades at less than the sum of the parts, especially after seeing the Ali Baba/MSFT story in the WSJ the other day.  I really like the downside protection of the investment given the price I paid.

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