(MONEY Magazine) – Why Bill Gates Likes The View From Avista

When Microsoft's Bill Gates disclosed on Jan. 20 that he'd purchased 5% of hydroelectric and natural gas company Avista (AVA), the stock jolted 93%--to $62--in just two days. Yet by month's end, Avista had fallen more than 50% to $29. Did the Windows Wonder make a mistake?

We don't think so. Still up 150% for the year, Avista trades at $39 with a 37 P/E. Why so high? Because more than electricity powers this Washington State utility. It owns a local phone company. And it's a leader in developing fuel cells, which are a refrigerator-size innovation that someday could move power generation from the plant into the home. It also has an Internet unit that consolidates utility billing for far-flung energy consumers like Home Depot and Disney. Says Federated World Utility's Rich Lazarchic, who holds 50,000 shares: "Avista has not just one buzzword but three: telecom, fuel cells and Internet." --ADRIENNE CARTER

A B2B Value Play

Business-to-business Internet stocks may have a been-there, done-that quality, but consider Parametric Technology (PMTC). The old-world stock (incorporated back in the DOS days of 1985) has a young software application called Windchill that links the manufacturing departments of large companies with designers and engineers. Lucent, EMC and Siemens already use Windchill, and its sales should triple to $250 million this fiscal year. "It's Parametric's hidden gem," says Ascent Growth manager Laurence Fong.

Good thing, because Parametric's largest revenue generator (software called Pro Engineer) is seeing little growth, and the company's total earnings for the year ending Sept. 30 (estimated at $135 million on sales of $1.2 billion) are expected to be 20% below last year.

Parametric stock is at $27. With a 55 P/E, it's reasonably priced compared with the wildly overvalued B2B group, but that'll change if investors see better earnings coming. At Friess Associates, where Parametric is a top 10 holding, portfolio manager David Harrington suggests that you watch for the scheduled April 18 release of second-quarter earnings. If there's no bad news, he says, "we should see a new trading range of $40 to $50." --ERIC MOSKOWITZ

Here's The Satellite Dish On Murdoch

Wonder what--if anything--will be left of Rupert Murdoch's News Corp. after he spins off its substantial satellite holdings? So do we.

Anticipated by analysts, though still not officially comfirmed by Murdoch or his minions, the maneuver would follow the partial spin-off in 1998 of Fox Entertainment Group. With its movie, television and sports properties (including the Los Angeles Dodgers), Fox adds flash to a News Corp. portfolio weighed down by old reliables like publisher HarperCollins and newspapers in Australia, the U.K. and the U.S. In fact, News Corp. (NWS) is up 130% since last year, to $62, vs. the print industry's 3% gain.

Once those satellites are in stock orbit, however, will there be much growth left in the mothership? Not unless Murdoch makes some surprising acquisitions. Do note, however, that News Corp. remains the majority owner of Fox, and he'd likely do the same with the satellites, which means when TV syndication (The Simpsons, The X-Files) and Star TV soar, so will News Corp. Murdoch is also gaining ground online. An alliance with Singapore Telecom should enhance Australia-based News Corp. as a Web force in Asia. "It has the most upside of the media conglomerates in the developing world," says Matthew Harrigan, an analyst at Stifel Nicolaus Hanifen Imhoff. With a 78 P/E, News Corp. isn't cheap, but long-term media investors may want to buy on future dips. "This," Harrigan says, "is a company you have to own." --A.C.

A soft bank, indeed

CEO Masayoshi Son was $44 billion poorer at the end of March, after his Internet incubator Softbank lost nearly 60% of its value on the Tokyo Stock Exchange in just six weeks. Not so for Acorn Foreign Forty fund manager Marcel Houtzager. After paying the equivalent of $60 back in 1998 for Softbank (the then little-known stakeholder in Yahoo! and E*Trade Group), Houtzager sold just before it peaked in February at $1,860.

Now at $820 with a market cap of $90 billion (you can track its value in dollars with the ticker SFTBF), Softbank must beat back the market's Internet fears as well as investor jitters over its $2 billion debt, heavy for a Net company. There's also the specter of huge taxes in the U.S. and Japan if Softbank cashes in its investments here (its stake in Yahoo! is worth $24 billion).

Acorn analyst Michael King, whom Houtzager credits for the prescient sell call, thinks these problems are manageable--and he'd jump back in if the stock hits the lower end of his valuation of $470 to $960. "There are compelling arguments that its market cap is worth $10 billion or $50 billion or $150 billion," adds Houtzager. "And it has been at all of those valuations in the last 18 months!" --JEANNE LEE

Spring sale: These prices are insane

We asked some of our favorite cheapskates to identify stocks with low P/Es selling at or near book value and growing at healthy clips.

--Stuart Teach of Homestead Value has been snapping up Wendy's, which at $18.50 is some 40% below its recent high of $31.75. Here's some appetizing news: Wendy's has a new CEO, and there's good earnings potential (up 12% this year, 14% next) because its Tim Hortons restaurant chain in Canada is sizzling. "The growth is there," Teach says, "but the stock is overlooked."

--Teach also likes flatware maker Oneida. It already has surged 28% the past year, but he says it can carve out further earnings gains with cost cutting and buy-outs of glassware companies.

--Bell & Howell recently reported IPO plans for its fast-growing information and publishing services unit. There's been "significant" insider buying too, observes Chris Browne of Tweedy Browne American Value. (B&H's lack of a meaningful price-to-book-value ratio is common for info businesses.)

--Browne also sees insiders buying at Hollinger, publisher of the Chicago Sun-Times, London's Daily Telegraph and the Jerusalem Post. Its price-to-book is lower than competitors', and analysts expect double-digit earnings growth.

--Then there's Dollar Thrifty Automotive, which Browne calls a "perfect takeover candidate" because of its modest market cap ($400 million) and highly leverageable assets (cars).

--Looking for "hotbeds of inactivity," Robert Rodriguez of FPA Capital has been buying Fleetwood Enterprises, which manufactures housing and RVs. Down 46% on an earnings slump, it's selling for less than the value of its assets. Rodriguez expects 2001 to be much better and says the stock could double or even triple. --ERICA GARCIA