NEW YORK (MONEY Magazine) - Paul Wick has run the Seligman Communications & Information fund since he was 25. The fund manager now oversees the biggest tech-centric mutual fund in the country, with $3.5 billion in assets, and his tenure is one of the longest in the tech fund business.
The age of this grizzled industry veteran? He's a whopping 37 years old.
Wick moved his offices from New York City to Palo Alto in 1998. "Out here, you mix with the guy who audits Siebel's books or is in charge of Northern California for Intel or is a design engineer at Sun," he says. "You can't help picking up bits and pieces of information that help you understand the puzzle."
Proximity to the heartland of the tech industry hasn't left Wick devoid of skepticism, however. A stint as an assistant portfolio manager on a junk bond mutual fund keeps him focused on valuations and cash flow and helped him steer clear of many of the tech mania's worst disasters. Still, "the bust has been so pervasive that it has had a corrosive effect on the entire tech food chain," he laments.
Wick is particularly sour on one massive segment of tech: semiconductors. "The semiconductor industry's key end-markets during the 1990s -- PCs, mobile phones, data networking, wireless infrastructure and telecom equipment -- have all hit a wall," he says.
Another huge sector he's avoiding is telecom, in all of its forms -- service providers, equipment makers and component manufacturers. "There's more pain to come," he cautions.
But all is not lost...
So what does he like? Two of Wick's largest holdings are Synopsys and Symantec. Synopsys, which sells software used to create integrated circuits and electronic systems, trades for about six times the $500 million in free cash flow that Wick figures it will generate in 2003. Symantec sells security software, mainly for virus detection and protection.
Another area of tech where Wick sees promise is information technology services. Favorites include SunGard Data Systems, which specializes in IT disaster recovery, First Data, a vendor of data processing services, and Amdocs, which provides billing software for the cable and telecom industry. "It's not an ultrahigh-growth industry, but they're very lucrative businesses," he notes.
The fund manager is also expanding his definition of tech. One field he's moved into recently is medical devices. "The industry has none of the saturation issues that big chunks of the IT industry suffer from, and it sports huge amounts of intellectual property, high profit margins, high competitive barriers and no debt," Wick explains.
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Stocks to watch: Wick
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His picks: Varian Medical Systems, the leader in design and production of equipment for treating cancer with radiation, Medtronic, Steris and Millipore.
All four stocks look cheap and have very solid fundamentals, both in the near and long term. Another favorite that's not a typical tech stock: printer maker Lexmark International. Wick calls the industry leader a steal at 18 times estimated 2003 earnings.
And the titans?
What about onetime giants like Sun Microsystems, Intel, Oracle and JDS Uniphase? Wick gives a "no bid" (trader slang for pass) on nearly all of them.
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Sun? Too dependent on telecom, finance and dotcom companies, and Linux is a competitive threat. Intel? Still wedded to the fortunes of the PC and facing strong competition from Advanced Micro Devices. Oracle? The database market is saturated, pricing is under pressure and its applications business isn't helping. And JDS Uniphase? Wick calculates fair value at between $1.20 and $1.74. Recent price: $2.30.
Cisco, which Wick thinks is well run and well positioned, is the only tech megacap he still owns besides Microsoft.
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