Betting on tech takes a strong stomach these days. But the investment team behind Harbor Capital Appreciation seems to have confidence in the future success of Applied Materials (AMAT) and has recently added shares to its fund.
Applied Materials manufactures the equipment that's used to make semiconductors and semiconductor parts that go into PCs and other electronics. Not surprisingly, the company saw revenues and profits shrivel over the past two years as businesses put the brakes on technology spending.
But that hasn't put off long-time fund manager Spiros Segalas, who gravitates toward firms that are growing twice as fast as the S&P 500. The fund also looks for companies that demonstrate superior sales growth, a high return on equity, a strong balance sheet and great management.
Applied Materials' five-year average return on equity is a robust 17%. The company has been paying off debt and has preserved close to $5 billion in cash on its books. Profits are coming back nicely and are expected to more than double by 2004. The stock trades at just under 29 times next year's consensus earnings estimate of 50 cents per share.
