Shares of Linear Technology (LLTC) have been stuck in a narrow band for several years. And new revenue warnings elicited downgrades from the Street. But Scott Armiger, fund manager at Christiana Bank & Trust in Greenville, Del., is a buyer. Linear, he says, has the highest profit margins in the semiconductor industry, and the company will soon be first on the market with a new series of signal-processing chips for high-growth markets, including PCs, cell phones, and MP3 players. He sees earnings growing at 20%, vs. a 15% average for the industry. The company is debt-free, and 70% of its business is outside the U.S., which bodes well in a falling-dollar environment, says Armiger. Plus, it has a "1.9% dividend yield that is rare in tech," says Armiger, who pegs the 30.30 stock at 36 in 12 months. On Dec. 12, Adam Parker of Sanford C. Bernstein rated the stock a "buy," with a 40 target.
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Gene Marcial's Inside Wall Street is posted at businessweek.com/investor at 5 p.m. EST on the magazine's publication day, usually Thursdays.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Mara Der Hovanesian