BETTER THAN BLUE CHIPS BUY TECH STOCKS - IF YOU CAN STOMACH ROCKETING MARKET.Byline: Jason Z. Cohen cohen or kohen (Hebrew: “priest”) Jewish priest descended from Zadok (a descendant of Aaron), priest at the First Temple of Jerusalem. The biblical priesthood was hereditary and male. Staff Writer CHATSWORTH - As old-guard industrial stocks chug (jargon) chug - To run slowly; to grind or grovel. "The disk is chugging like crazy." along, bringing investors less-than-stellar returns, one San Fernando Valley San Fernando Valley Valley, southern California, U.S. Northwest of central Los Angeles, the valley is bounded by the San Gabriel, Santa Susana, and Santa Monica mountains and the Simi Hills. company recently racked up an eye-poping 2,000 percent price increase. Chatsworth-based MRV Communications  OverviewMRV NASDAQ: MRVC is a company that designs, manufactures, sells, distributes, integrates and supports communication equipment and services, and optical components. Inc. soared after a fourth-quarter earnings report that exceeded analysts' estimates and the company's recent purchase of a Taiwan company whose products compliment its own fiber-optic components. ``We're finally getting recognition in terms of the various areas that we're addressing. Our fiber-optic division has always been a hidden gem,'' said Diana Hayden Diana Hayden (born 1973) is a model from Hyderabad, India. She first came to attention when she represented India at the 1997 Miss World pageant. She became a known face when at 24 she won the crown. She became the third Indian woman to win the Miss World pageant. , MRV's director of investor relations Investor relations The process by which the corporation communicates with its investors. . ``We still feel that we're undervalued Undervalued A stock or other security that is trading below its true value. Notes: The difficulty is knowing what the "true" value actually is. Analysts will usually recommend an undervalued stock with a strong buy rating. , given what we've been experiencing in the past couple of weeks.'' Welcome to the next industrial revolution. There is a new economy developing around technology, and the Valley area is emerging as one of its capitals, at least if stock price appreciation is any indicator. E-commerce, biomedical bi·o·med·i·cal adj. 1. Of or relating to biomedicine. 2. Of, relating to, or involving biological, medical, and physical sciences. and Internet infrastructure are the blue-chip players driving this new economy. ``It's the second industrial revolution,'' said Alfred Goldman, chief market strategist for St. Louis-based brokerage A.G. Edwards. The revolution is manifesting itself in the markets, Goldman said, with the disparity in the stock price increases of old-guard industrial firms and new-economy technology companies illustrating his point. While the Dow Jones industrial average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. - the bellwether measure of industrial stocks - has risen 6.48 percent from its year-ago level, the Nasdaq Composite Index Nasdaq Composite Index An index that indicates price movements of securities in the over-the-counter market. It includes all domestic common stocks in the Nasdaq System (approximately 5,000 stocks) and is weighted according to the market value of each listed - a measure more heavily influenced by technology stocks - is up 110 percent in the same period. A handful of Valley companies exemplify the phenomenon. Most notable is MRV MRV minute respiratory volume. , a maker of fiber-optic components for the telecommunications and computer networking industries. MRV, whose switches and routers are used by Internet giant Cisco Systems and compete against those built by JDS Uniphase, has seen an increase of 2,395 percent in its stock price over the past 12 months. The share price of MiniMed Inc., a Sylmar-based manufacturer of insulin pumps, has risen 155 percent in the same period. And Homestore.com, a Thousand Oaks-based online resource for home-related services, is up 183 percent since its August IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. . These gains came even as the Federal Reserve Board has gone on an interest rate-raising binge, which has caused the Dow to stumble a bit. Analysts say technology firms are immune to the Fed's interest rate hikes. In fact, they might be having the opposite effect that Federal Reserve Chairman Alan Greenspan Alan Greenspan Dr. Greenspan is Chairman of the Board of Governors of the Federal Reserve System. Dr. Greenspan also serves as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. intended as he tries to rein in to check the speed of, or cause to stop, by drawing the reins. to cause (a person) to slow down or cease some activity; - to rein in is used commonly of superiors in a chain of command, ordering a subordinate to moderate or cease some activity deemed excessive. See also: Rein Rein the ``irrational exuberance'' of the markets. The surge in technology valuations might, in fact, be the direct result of the interest rate hikes, one investment expert suggests. As money migrates away from the blue chips in response to rising interest rates, it is finding a home in new economy technology firms instead, Goldman said. Goldman said Greenspan's continued worries about the threat of inflation are misguided since technology is creating efficiency. ``Wage costs were actually down last year - not up; even Greenspan recognizes this. It's one of the dominant reasons we have such a good economy,'' he said. Technology has advanced to the point where gains in productivity are outpacing the increase in labor costs, effectively reducing the cost of labor, he said. When the business-to-business initiatives now in development are put into place, efficiency will improve even more, he predicts. Manufacturers will be able to choose the most cost-effective supplier for each part they need, he said. ``B-to-b is going to knock the socks off of people,'' Goldman said. ``If you're not competitive and available, forget it. (A customer) can just click onto another supplier.'' So it's little surprise that companies such as MRV Communications have so vastly outperformed the Dow Jones industrial average, Goldman said. ``When you're in the new economy, a new world that's growing like Topsy, your growth levels are going to be good,'' he said. That's what is happening at Sylmar-based insulin pump maker MiniMed, said Phillip Nalbone, medical devices analyst with Salomon Smith Barney. ``In terms of the performance of MiniMed stock, generally speaking, the health care names are considered to be pretty much impervious to the interest rate environment,'' Nalbone said. ``The need for lifesaving health care products does not wax or wane with the interest rate market.'' Investors are noticing the strength of both the company and the sector, driving MiniMed's stock price to new highs in the past few weeks. As large amounts of money continue to flow into mutual funds and the stock market in general, it increasingly is being put into other categories. For example, there has been a broadening in the definition of technology to include biotechnology recently, Nalbone said. ``Now we're seeing a further spillover spill·o·ver n. 1. The act or an instance of spilling over. 2. An amount or quantity spilled over. 3. A side effect arising from or as if from an unpredicted source: into the medical device arena,'' he said. Money also is finding its way into communication and wireless stocks, said Doug Christopher, researcher with Los Angeles-based brokerage firm Crowell Weedon & Co. ``Interest rate cuts have been effective, and they have been effective in the traditional ways. Current policy has clearly hurt traditional stocks,'' he said. ``(Tech) stocks are immune to interest rate increases. They're not relying on traditional forms of financing.'' Fat with market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. and venture capital, technology firms simply don't need old-fashioned bank loans anymore, he said. Just last year, MiniMed went back to the market with a follow-on stock offering that raised several million dollars. With backers like that, who needs a bank? So what's an investor to do who wants to find the next MRV? The next MiniMed? Analysts say that today's stock markets are consumer-driven and have a shopping-mall atmosphere. People want to own stocks that are trendy, like a purse or a cologne. The market's Estee Lauders and Ralph Laurens are the companies involved in biotechnology, the Internet, telecommunications and wireless communications, Goldman said. But their values, largely based on speculation, will swing wildly. ``In the next two, three, five years, technology is the place to be for people who have the emotional makeup and a strong stomach,'' he said. ``If I had to own only one sector, it would be technology.'' Christopher recommends a more broad investment approach. Investors should mix their holdings to include about 30 percent technology stock, some value stocks Value stocks Stocks with low price/book ratios or price/earnings ratios. Historically, value stocks have enjoyed higher average returns than growth stocks (stocks with high price/book or P/E ratios) in a variety of countries. that have low price-earnings ratios and solid industry leaders, Christopher said. ``You've got to accept that technology is real,'' he said. HOW THEY STACK UP MRV Communications, Chatsworth Ticker Symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors : MRVC MRVC Multiple Rate Voice Card Friday's Close: $169.94 52-Week Low: $5.87 Increase: 2,795 percent MiniMed Inc., Sylmar Ticker Symbol: MNMD Friday's Close: $113.66 52-Week Low: $42.46 Increase: 167 percent Homestore.com Inc., Thousand Oaks Ticker Symbol: HOMS Friday's Close: $62 52-Week Low: $19.75 Increase: 214 percent Xircom Inc., Thousand Oaks Ticker Symbol: XIRC Friday's Close: $51.72 52-Week Low: 15.75 Increase: 228 percent Tekelec Inc., Calabasas Ticker Symbol: TKLC Friday's Close: $52.19 52-Week Low: $6.50 Increase: 703 percent Amgen Inc., Thousand Oaks Ticker Symbol: AMGN Friday's Close: $66.31 52-Week Low: $26.06 Increase: 154 percent CAPTION(S): Box Box: HOW THEY STACK UP (See text) |
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