Starting in mid to late August this year, Gold made a significant jump in price. Though there are a many obvious reasons that have been batted around as to why this was the case, analyst Victor Flores of HSBC Securities has his own take on the jump in Gold price:

Mr. Flores: There has been a fair amount of discussion about the reasons for that big move that gold made, starting in mid- to late August from the levels close to $650 up to almost $850 in a very short period of time. There has been a lot of discussion about the subprime issues and banks taking write-downs and a number of other things, but I see it very simply. I think it is really a reflection of the weakness in the dollar. The rise in the gold price pretty closely matches a rather dramatic fall in the dollar to new lows. Gold has just moved in tandem with that decline. To me, it really is very much a dollar-driven move.

 For the full Gold & Precious Metals report, including interviews with over 25 CEOs and stock picks, click here.  

Speaking to analyst Tristan Gerra about Semiconductors this week, he recommended to us a high-quality Semiconductor company that has recently come upon an “attractive entry point” due to a Q4 that dissapointed expectations, Altera (ALTR):

Mr. Gerra: Altera is one of the higher-quality names in the semiconductor space. They have virtually no debt, they consistently generate gross margins north of 60%, and they have over $1 billion in cash….This is a company that has basically been growing the top line at double digits consistently since 2003. EPS has gone from $0.23 in 2002 to what we think will be over $1 in EPS for next year. It’s clearly a company where the compounded annual growth rate has outpaced the rest of the semiconductor industry, and it’s trading at about 18 times next year earnings at this point. It also has one of the best quality management teams in our space, in our view…Altera’s stock has corrected significantly recently because of a somewhat disappointing Q4 guidance, which in our view did not reflect on any changes in fundamentals at the company and which created an attractive entry point a few quarters out.

For the full Semiconductors interview, including a broad range of opinions on the state of this sector, and more stock picks, click here.

International markets- both developed and emerging- are becoming more and more of interest to investors in the US. David Heller of Advisory Research talked to us a little bit about the problem areas and potential challenges in international investing:

1. I think that the largest challenge is the trading of the stocks. This is not a frictionless market. Smaller companies can have bid/ask spreads that are 3% or 4% wide. So you are starting at a disadvantage of 300 or 400 basis points when you go to buy and sell.
2. Another challenge is the extent of cultural differences that are prevalent with management teams around the world. What could be an ideal investment decision in Hong Kong may be very different in Australia or vice versa. We spend a lot of time getting to know the qualitative aspects of
   management’s approach to their business as well as their capabilities and motivation.
3. Finally, when you research a US company, you are talking to a Chief Executive Officer in the same language. When you are conducting management interviews through an interpreter, a lot can be lost. Subtle nuances can be the key to an investment buy or sell decision. Because our team can converse effectively in many languages, we believe that these subtle nuances are not lost to us.

For the full investment strategy issue, including both domestic and international investment strategy tips and stock picks, click here.

In footwear, the big name today is Crocs (CROX). With over $825 million dollars in sales, and a growth of 35% to 40% expected next year, according to the company’s estitmates for 2008, Crocs seems to be here to stay.

What is that has made Crocs so popular and kept competition at bay? According to analyst James Maher of Thinkequity Partners, part of it is the actual material that the shoes are made of:

“I think the Croslite material that they make the shoes from has an advantage; it is very light. I don’t know if you wear a pair, but these are very light shoes, they clean up easily, they’re antimicrobial, and they’re very durable. “

In addition to the material, Maher points out that the pricepoint for crocs, in addition to numerous licensing agreements, is what really gives Crocs it’s edge:

“I think the biggest edge, especially with the children, is this tie-in with all of the license agreements they’ve got and the fact that the price point is not that high. So we’re not looking at people coming in with a generic model at $10 when you’re trying to retail at $50 or $60. We’ve got a shoe that for children is $25 and for adults $30 and they have agreements with over 100 universities. So if you can get your shoe with your alma mater or your mascot on it or something of that sort, it’s really not a very high price point.”

For the full interview with James Maher, including a complete overview of the apparel and footwear industry, an in depth look at where Crocs is going, and stock picks, click here.
 

One of our special focuses this year is on Semiconductors. We spoke with analyst Tristan Gerra of Robert W. Baird & Co. Inc., to give us a general outlook for Semiconductors. As the stocks have been pretty strong since June, Mr. Gerra gave us a sense of what was driving force behind this:

1. “Basically, the catalyst for technology and semiconductor stocks this year so far has been the prospect of faster than average revenue and profit growth. Particularly in an environment where potentially the economy is slowing, people tend to retrench into companies where profits can outpace GDP growth.”




2. “Another catalyst has been the fact that a lot of semiconductor companies are very international in nature, relying more than average on international demand. Clearly China, India and a lot of other developing economies have acted as a driver for consumer electronics items and that has benefited US-based semiconductor companies.”




3. “We’ve also seen a return to normal valuations. There has been a pretty consistent contraction in multiples for semiconductor stocks over the past few years, and we think that the risk/reward in terms of growth relative to valuation is now much more attractive.”

For the full interview with Mr. Gerra, including a complete overview of the Semiconductors area and stocks picks, click here.

Without a doubt, one of the hottest topics around today is the development of emerging markets- from China to India, emerging markets are presenting a wealth of new opportunities to investors.

In developing these emerging markets, one of the key components is developing infrastructure that can sustain them. While some may point to water and energy as key components of any emerging infrastructure, analyst Jim Kelleher points to communications are a fundamental building block:

There is nothing that quite gets the economy moving like the ability to take your cell phone off your hip and call your supplier in Mumbai and order two more truckloads of grain or two more truckloads of timber and to do so immediately. So I think the importance of communication infrastructure is right up there with water, power and energy.

In the long term, according to Mr. Kelleher, these opportunities in emerging markets are going to mean big business for telecommunications equipment companies.

For the full interview with Mr. Kelleher, including an overview of telecommunications in the short term and stock picks, click here.

One of our more interesting portfolio manager interviews in recent weeks was with Robert Leech and George Rue of the Presbytarian Church (USA) Foundation.  They talked to us a little bit about their investment style- socially responsible investing.

TWST: How would you describe the socially responsible nature of the portfolio investment and what does it entail?

Mr. Rue: There are two main approaches to our SRI strategy. The first approach and the most visible is negative screens. We screen companies that have a majority of their revenues in alcohol, gambling, tobacco and firearms, as well as a limited number of defense companies. We work together with the Presbyterian Church and a broad group of Presbyterians to develop a social witness policy that can also identify other companies we may want to preclude from investment. More important, as a socially responsible investor, we focus on corporate engagement, working ecumenically with other faith-based investors to engage corporations in dialogue concerning their practices on issues relating to the environment, access to capital, human rights policies, labor policies and workplace issues. Our corporate engagement takes a variety of forms from corporate dialogue to writing letters and sponsoring shareholder resolutions.

For the full interview with George Rue and Robert Leech, including a complete analysis of the market for a socially responsible perspective, click here.

One area of telecommunication technology that has been in development throughout 2007 is the area of mobile TV. Verizon (VZ) in conjunction with QUALCOMM (QCOM) launched mobile TV services earlier this year featuring eight different channels. However, it hasn’t quite caught on. Lawrence Harris, analyst with Oppenheimer & Co., explains why:

 TWST: Why hasn’t it caught on? Is it too expensive or there’s not enough programming? What seems to be the problem?

Mr. Harris: I think you have identified one of the issues. The MediaFLO service does have the capability, designed by Qualcomm, to have up to 20 channels. Right now it has eight, so part of it may actually deal with the viewing habits of younger consumers. There is a certain number of people who download videos onto their iPod. They certainly have the capability of downloading videos from the Apple iTunes store onto their iPhone. Live TV may not have the same cachet, frankly, as video downloads, but it is still early in the process.

For the full interview with Mr. Harris, including a complete overview of all aspects of the telecommunications equipment space and stock picks, click here.

Our special focus this week is on Telecommunications Equipment. We spoke to Raimundo Archibold, of Kaufman Brothers, who spoke to us a little bit about his disappointment in the space this year. He cited two reasons why the space had dissappointed: AT & T’s low capital spending and a decline in wireless spending in general.

Mr. Archibold: Generally, speaking we’ve seen disappointing results for the most part, largely as a consequence of two factors.

1. In North America in particular, AT&T (T) capital spending has been below plan through the first three quarters of the year, particularly in wireless as well as in their BellSouth franchise. AT&T is about 25% of the cap ex budget in North America. 
2. There has been some deceleration in wireless spending in general, largely because a significant part of 3G deployments have occurred.

 Now what you are seeing is generally incremental expansion of network coverage as well as capacity buying and that has caused some deceleration in growth. We’ve seen that also among many of the companies exposed to telecom equipment, actually wireless sectors such as Ericsson (ERIC), but in particular Tellabs (TLAB). From that perspective, it has been somewhat disappointing in the telecom space in general. On the cable side, it has been pretty much as expected with continued expansion of voice services benefiting some of the cable equipment vendors, especially Arris (ARRS).

For the full telecommunications equipment issue, including interviews CEO of top telecommunications equipment companies, and stock picks, click here.

This week’s portfolio managers run the gamut of styles and philosophies. Here’s an idea of how they are managing their clients money:

•  Jason Kiss, Bartlett & Co.: ” For most of our clients, we manage all or a vast majority of their assets and so our value methodology tends to be a bit more wide-ranging than any strict definition might allow. We look to have some sort of a discount on the typical valuation metrics that go along with value investing such as the p/e and a higher dividend yield; but we’re not going to be at an extremely steep discount to the S&P 500 or the Russell 1000. With the Index at a 15 p/e we’re not going to be at 10; we’re more likely to be at a 13.5 to 14.0 level simply because we don’t feel it’s prudent to take such a big style bet with our client
  assets.”
• Martin Anstee, Stone Asset Managemnt: “The overall philosophy is attuned toward looking for growth situations. I look for growth and the other portfolio managers also look for growth. We have a lot of income-based products as well, which are mainly my products, but they are based not totally on dividend yield; they are based on growth as well.”
• Steve Wilson, Lapides Asset Management: “We do research-differentiated value investing. I’d characterize our research as exceptionally deep. It’s also global; we travel around the world to understand our companies, even though all of our investments are domiciled in the US. We have one investment philosophy and process that drives three portfolios, which are segmented by concentration and capitalization. Our process is long-term oriented, opportunistic and contrarian. We focus exclusively on investing in smaller companies, those with capitalizations that range from $50 million to $10 billion. ”

For the full investment strategies issue, including complete interviews with all these portfolio managers, and more, click here.