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Markets

The Joys of Focusing

Opportunities in ignored stocks.

Thornburg Core Growth makes big bets on a small number of stocks. The fund (symbol THCGX; 800-847-0200; 4.50% sales charge for the A shares) holds just 35 to 40 companies that manager Alexander Motola thinks have been ignored despite rapid growth. The concentrated approach, he says, makes it easier for him to know each of his holdings thoroughly. Over the past three years to March 1, the fund gained an annualized 33%. Among Motola's favorite stocks:

Amdocs (DOX). With a market value of $6.8 billion, Amdocs is "one of the bigger companies no one has ever heard of," says Motola. The Chesterfield, Mo., company sells software that assists cable and phone companies with billing and customer service. Motola thinks demand for Amdocs software will grow as competition heats up and cable and phone monopolies disappear. Recently $35, the stock trades at 20 times the $1.76 per share that analysts expect Amdocs to earn in the 2006 calendar year, according to Thomson First Call.

Las Vegas Sands (LVS). The company that owns the Venetian Resort Hotel Casino in Las Vegas has its sights on Asia. China prohibits gambling on the mainland, but it's legal in the island region of Macau. The Sands Macao, which opened in 2004, "essentially paid for itself in ten months," Motola says. Las Vegas Sands now wants to replicate the Strip on another part of the island. The stock, at $53, sells for 43 times estimated 2006 earnings of $1.21 per share. The price-earnings ratio is high because the company carries a lot of debt, and interest payments depress reported profits.

Microsoft (MSFT). The empire is getting ready to strike back. Thanks to its Windows operating system and Office productivity software, Microsoft already has "two of the best monopolies in the world," says Motola. Later this year it plans to roll out Vista (the next version of Windows) and Office 2007, which should fuel sales growth. A less-noticed but still important source of business for Microsoft, Motola says, is software that enables telecom companies to offer TV services through phone lines. At $27, the stock trades at 19 times estimated profits of $1.41 per share for the 2006 calendar year. It is still 49% off its 1999 high.

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PeopleSupport (PSPT). This small Los Angeles-based company has established call centers in Manila and Cebu, in the Philippines, staffed by thousands of accent-free, Americanized workers. "Companies that are sensitive to language and cultural issues feel that using Filipinos gives them an edge" over firms that rely on call centers located in India, says Motola. In an effort to court the Hispanic market, PeopleSupport is reportedly in talks with Washington Mutual to provide Spanish speakers at a call center in Costa Rica. The stock, at $9, sports a market value of just $172 million. It sells for 20 times this year's estimated profits of 48 cents per share.