In our roundtable discussion on semi-conductor test equipment this week, we had a significant differing of opinions. Patrick Ho of Stifel Nicolaus and Co. felt that test equipment companies are showing weakness, while Nikolay Tishchenko feels the current situation is a buying opportunity.

TWST: Patrick, What is going on from your perpective?

Mr. Ho: I think on a fundamental basis, there is clearly a greater level of cautiousness out there in the markets right now, particularly on the semiconductor side of things. With that being said, I am not surprised that the equipment stocks, particularly on the test side have also retreated, quite a bit actually, given that there is uncertainty in the marketplace…No one knows if the semiconductor companies are going to be exiting the year with excess inventory. That is why I think the test companies and even the equipment companies are showing a bit of weakness right now.

TWST: Nikolay, what is your take on the current inventory situation?

Dr. Tishchenko: I am not worried about inventories right now, but my opinion on the space is quite the opposite of Patrick’s. The reason is very simple. When I want to buy semiconductor capital equipment stocks, whether I am talking about front-end or back-end equipment stocks, I want good valuation. I want to use the times of uncertainty and I want to have some indirect indications of the trough in the demand for the equipment. I believe all of these pieces are now in place. To me, the current situation is a buying opportunity.

For the full roundtable, including a complete overview of the sector from these varying perspectives, and stock picks, click here.

Our picks this week come from Lapdies Asset Management, a firm that specializes in smaller companies, in the $50 million to $10 billion range. For them, picking a smaller company can end up being a better invesment than any of the flashy big names out there:

• AptarGroup (ATR)- a packaging company. “Aptar earns 70% of its revenues from outside the United States and is particularly successful in Europe. European customers as well as Asian and Latin American are moving more and more towards their products, be it in the personal care and cosmetics packaging areas or in pharmaceutical packaging.”
• X-rite (XRIT)- “They are the leader by far in color measurement, using both hardware and software. Their products allow their costumers to print or manufacture to an exact color specification. The company has total sales of about $250 million…”
• DeVry (DV)- an eductional institution. “Over the lat year the company continued to put in a tremendous amount of owrk to make the core business more profitable and these efforts have really come to light in the last quarter. The stock has done extremely well, up about 150% in the last year.”

For the full investing strategies report, including the full Lapides interview, as well as interviews with money managers in a variety of sectors, click here.

Right now, according to analyst Dawn Simon Talbot, at the core of many office IT infrastrucutres, everything seems to be becoming a bit of a black hole- everything is shrinking and consolidation is the word of the day, as businesses find new ways to cut costs and raise processing power.

As a result of this, parallel processing in the computer hardware sector, has become an area of prime importance.

Whereas, in the past, a computer had one appilcation that started at point A and worked until it finished, with parallel processing, a computer is able to multi-task with the greatest of ease. “In a parallel environment, many different processes can be taking place in real-time and be constantly available with real-time reports for management, so it brings computing to a brand new level.”

For the full interview with Ms. Simon Talbot, including full analysis of the year in computer hardware, and stock picks, click here.  

One of our special focuses this week is on Test Equipment. We sat down with Timothy Arcuri of Citi Investments to get an idea of what’s coming up in next the Test Equipment space.

TWST: Is there anything on the horizon that is going to be generating demand?

Mr. Arcuri: Well, yes. I think that there are a number of applications coming out in 2008 and 2009 that are going to spur requirements for testers. I think you have 3G and wireless. There are going to be a lot of applications around 3G.
As you get handsets out there for that, Teradyne should be a beneficiary of that. I think also in the memory world, you are going to begin to see the transition to DDR3, although not significantly probably in 2008, but you are going to see early DDR3 production, so there will be a technology stimuli for
more purchases there as well.

For the full interview with Tim Arcuri, including a detailed overview of the Test Equipment sector and stock picks, click here.