Although a big believer in technology, investment manager Graham Tanaka has infused his portfolio with only the "enablers and beneficiaries of the digital revolution." He has shunned dot-coms and focused instead on techs engaged in helping to provide speedy wireless communications systems and networks for faster access to the Internet. The strategy has worked: His Tanaka Growth Fund is up 23% this year, through June 21, while market indexes have languished. In the past 18 months, the fund has gained 96.9% vs. the Russell 2000's 29% and 21.9% for the Standard & Poor's 500-stock index.
Among Tanaka's top current stock picks: Nextel Communications (NXTL), a major provider of mobile communications services, including two-way radio dispatch, paging, data transmission, and mobile telephony. Nextel was one of the high-flying tech stocks until the mid-March plunge, when high-tech and Internet shares got hammered. Nextel has been able to steadily climb back from its low of 38 a share, hitting 63 by June 21.
Tanaka says that based on Nextel's projected cash flow of $2.60 in 2001 and $3.40 in 2002, the stock should hit 85 to 100 in 12 months. The company is cash-flow positive but hasn't reported earnings because it continues to spend on infrastructure equipment and acquisitions.
Collette Fleming of Morgan Stanley Dean Witter is also high on Nextel: "Not only do we believe that Nextel is inexpensive on a discounted cash-flow basis, but it continues to trade at a discount to comparable companies," she says.
Tanaka says Nextel's subscriber count is rising in the U.S. and overseas. He figures its subscriber base of 5.6 million at the end of 1999 will jump to 7 million by yearend 2000 and add an additional 2.5 million in 2001. With such a huge subscriber count--and cash on hand of $5.8 billion--Nextel will have solid resources, he says, to increase its radio frequency spectrum to carry the awaited broadband for greater Net services.