As part of our Application Software Report we spoke with Aaron Schwartz, Senior Analyst, Ladenburg Thalmann & Co. thinks software stocks , have gotten a little ahead of fundamentals, and he expects the group to trade sideways into the fourth quarter . He does like Avocent (AVCT) on the long side:

Mr. Schwartz:”…It’s a company that’s a mix of hardware and software. To me, this is a company in sort of a turnaround story, it’s a non-consensus call. They’ve had a new CEO in there for about a year and he started to influence some change in the company, but they’re going to see their software mix increase as a percent of total. I think that they are a derivative play on the Windows 7 release – that’s the desktop operating system release that will be out in Octo­ber. They should see some pretty strong margin and earnings leverage into next year, and the valuation is at about a little less than 10 times earnings. To us, it is very attractive for a company that’s continuing to see things improve.”

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