Inside Wall Street
THE TECH STOCKS HE'S SWITCHING TO
Take note of "hot and not-so-hot" sectors in technology, warns Tom Thornhill of NationsBanc Montgomery Securities, as tech stocks rally again. One area he likes: suppliers of communications components to networking equipment makers. So Thornhill, who heads technology research, is placing big bets on what he describes as promising standouts in that area: Galileo Technology (GALTF), Level One Communications (LEVL), and CHS Electronics (CHSE), an overseas distributor of computer products.
With the price of electronic equipment, including PCs, ratcheting down, the companies that will benefit most are the makers of components that improve their performance, says Thornhill. Galileo, which supplies "system-on-a-chip" solutions to such networking outfits as Cisco Systems and Hewlett-Packard, has a full order book for the March quarter, he notes. Thornhill puts a 12-month target price of 50 for the stock, now at 38. Galileo is expected to earn 88 cents in 1998, vs. 50 cents in 1997.
Level One makes integrated circuits products for high-speed digital transmission. They improve the performance of digitized voice and data communications. Thornhill says the stock, now 41, is worth 60. He sees 1998 earnings of $1.24, up from 88 cents in 1997.
CHS is a play, says Thornhill, on the growing markets in Europe. CHS is the world's fastest-growing seller of computer products--and the third-largest such company. It's No.1 in Argentina, Brazil, Britain, and Germany. The arrival on the market of low-priced corporate PCs is a boon for CHS, says Thornhill, because it increases PC penetration. He sees CHS earning $1.65 in 1998, vs. an estimated $1.29 in 1997. Now at 23, the stock is worth 35, he says.BY GENE G. MARCIAL