San Francisco's Montgomery Securities, known in the 1970s as the mecca for the then-hot high-techs, is starting to push hard again for technology stocks. On Sept. 21, when it welcomes some 600 influential money managers--who shepherd about $1 trillion--to its yearly investment powwow, Montgomery will once again focus on the group that made it a star in the industry years ago.
"Our stock picks are now based mainly on product cycles, rather than on economic cycles," says Montgomery's Senior Managing Director John Skeen, who is also its research director. "We favor companies that have the technology and products that respond well to the needs of the marketplace." Montgomery has been an unwavering bull since October, 1990, notes Skeen, with a widely diversified portfolio. He now sees high-techs as the best growth-stock bets in the current low-inflation environment.
CASH AND CHIPS. Montgomery feels that companies whose products--hardware or software--are specifically tailored to desktop computing will be even bigger winners than the market is projecting. Montgomery's top choices: Chipcom, Proteon, and Novell. They are among the strong beneficiaries of the switch to desktop computing, Skeen notes, along with specialized-software system makers such as Sybase, which makes data-base management systems for computer networks.
Also high on Montgomery's high-tech picks are companies such as Intel, a maker of microprocessors as well as microcomputers, and Conner Peripherals, producer of high-performance Winchester disk drives for notebook, laptop, and desktop microcomputers and high-performance workstations.
Besides technology, Montgomery is bullish on another out-of-favor industry: savings and loans. "We favor the survivors of the big S&L scandal," says Skeen. He points out that the mania in the 1980s to bag big deposits and give out loans is over, and the industry is now consolidating.
Skeen's S&L picks: FirstFed Financial, a California S&L in which Goldman Sachs has taken a 7.3% stake; Collective Bancorp, parent of Collective Federal Savings Bank, which operates 58 full-service thrifts in New Jersey; and SFFed, the holding company for San Francisco Federal Savings & Loan Assn. It has assets of $3.2 billion and operates 35 offices and 10 loan centers in Northern and Central California.
Another financial stock that Skeen believes will be a smart winner: Student Loan Marketing Assn., otherwise known as Sallie Mae. He thinks it will be a big force in the student-loan business in years to come. The company has made a bid to acquire Citibank's entire portfolio of guaranteed student loans. Its stock has been on the rise, up from 60 a share in June to 73.