A Fan Of Hypergrowth – Brief Article

A Fan Of Hypergrowth – Brief Article – Statistical Data Included

Manuel Schiffres

He focuses on industry leaders.

The market’s shift away from growth and toward bargain-basement stocks doesn’t faze Tom Pence in the least. Pence, manager of Strong Enterprise fund (800-368-3863), invests in companies that he believes could become leaders in the fastest-growing industries. Still, Pence must feel that he’s paying a “fair price relative to the growth opportunity and relative to the risk.” Here are four rapid growers he favors:

* Gemstar-TV Guide International (GMST). Gemstar, says Pence, is the 800-pound gorilla of television guides. These guides include not just the famous print publication TV Guide, but also electronic guides used by cable-TV systems, satellite television and such services as WebTV and AOL TV. “This is a market whose growth can only accelerate because I think TV will become the portal of choice for the Internet,” says Pence. Using what he considers conservative assumptions about future revenues, Pence says the stock, recently at $52, is worth $80 to $100.

* Juniper Networks (JNPR). A serious rival to Cisco Systems? That is what Juniper, a maker of high-speed Internet Protocol (IP) routers, has turned out to be. In just five years, Juniper has captured 30% of the router market. Its products are geared toward telecommunications-services providers, which spend some $70 billion on capital equipment. An increasing proportion of those expenditures, says Pence, will be for the IP networks that Juniper serves. At $93, the stock sells at a lavish 44 times the past year’s (rapidly growing) revenues and 88 times estimated 2001 earnings of $1.06 per share. But Juniper could easily top earnings and revenue estimates for this year, and the stock could appreciate three- to fivefold over the coming year, says Pence.

* Waters Corp. (WAT). A supplier to the biotech industry, Waters is the world’s largest maker of high-performance liquid-chromatography (HPLC) and mass-spectrometry instruments, used to separate mixtures into their individual components. The technology is needed for manufacturing drugs, and Waters should benefit from the exponential increase in biotech products and the growing number of existing drugs that will soon be available to generic-drug makers, says Pence. At $72, Waters sells at a lofty 53 times Pence’s 2001 earnings estimate of $1.35 per share. That figure could exceed $2 next year, he says.

* XO Communications (XOXO). Formerly Nextlink Communications, XO is a competitive local-exchange carrier (CLEC), one of the market’s most bedraggled sectors. But unlike the CLECs that compete with the local phone company, XO seeks to become a full-service provider of local and long-distance voice, Internet and data services. Pence says XO, founded by wireless veteran Craig McCaw and headed now by alumni of MCI and Nextel, is one of only two CLECs that won’t need cash infusions through 2002. He expects it to deliver positive cash flow by the fourth quarter of this year. Recently at $20, the stock is worth $60, Pence says.

COPYRIGHT 2001 The Kiplinger Washington Editors, Inc.

COPYRIGHT 2001 Gale Group