Bob McWhirter, president and portfolio manager of Selective Asset Management Inc., took your questions on the outlook for the tech sector, and which stocks may be best poised to outperform, in a live one-hour discussion on Thursday, March 17.
Mr. McWhirter has more than 30 years in the securities industry and is a top-ranked money manager in Canada. He manages Selective Asset Long-Biased Equity Hedge Fund using a 12-factor stock selection methodology that has both growth and value characteristics. Prior to establishing SAMI, Mr. McWhirter was vice-president and portfolio manager at First Asset Investment Management Inc. and RBC Global Investment Management Inc., where he worked for more than 20 years. During this period, Mr. McWhirter managed approximately $2.25-billion in the Canadian High-Technology sector of the Royal Bank’s Canadian Equity Mutual Funds.
The following is a transcript of the discussion:
11:58 Darcy Keith - Good day everyone, and welcome to this live discussion on the technology sector with Bob McWhirter, president and portfolio manager of Selective Asset Management Inc. I’m Darcy Keith, a web editor for Globe Investor and Report on Business. Good morning Bob.
11:59 [Comment From Bob McWhirter]/b>
Good morning Darcy.
12:01 Darcy Keith - Bob, just to start off this discussion, what are your feelings on the sell-off we’ve seen over the past few sessions? The technology sector has been hit pretty hard, just like the broader market. Is the sector particularly vulnerable to the Japan situation, given the numerous suppliers there?
12:04 [Comment From Bob McWhirter]/b>
Darcy, the recent pullback has been in stock markets around the world as they have declined below their 50 day moving averages. I believe this is a correction in the ongoing bull market. Japan is a significant supplier of components in handsets, smartphones and is 20% worldwide semi-conductor capacity and 50% semi-grade wafers. Most companies have second source suppliers to be able to makeup some of the expected supply shortfall.
12:05 [Comment From Bob McWhirter]/b>
We understand that 20% of Gennum's customers are in Japan, and about the same percentage for NeoMaterials.
12:06 [Comment From Pierre-Yves Charest ]/b>
I have been following Intel for 10 years or more. It is the first time that i see it trading below 10 times the earnings. What is you opinion on this company
12:08 [Comment From Bob McWhirter]/b>
Thanks for your question, Pierre-Yves. Intel's low P/E reflects virtually 0 earnings growth forecast by Analysts for 2011, $2.06 vs $2.05 last year. 2011's earnings growth is forecast to be a modest 8%. I think there are better opportunities in other tech stocks.
12:08 [Comment From Steve ]/b>
I have read many analyst opinions on how undervalued Cisco is. What is your opinion on Cisco both short term and longer term.
12:11 [Comment From Bob McWhirter]/b>
Steve: John Chambers of Cisco was asked about 7 years ago what keeps him up at night...His response was HUAWEI. A name that few people knew at the time. HUAWEI's business model is based on 15% profit margins, whereas Cisco's are based on 60% and Cisco's getting beat up by many competitors (like Intel, 10.3x P/E reflects 3% earnings growth forecast by Analysts for 2011. $1.65 vs. $1.61). Cisco generates significant free-cash flow at 10.6%, but little growth is expected. Longterm the company may come back as they focus on higher margin software solutions.
12:13 [Comment From Neil ]/b>
Bob..The Nasdaq and S&P both have had a small correction..I am overweight in the Canadian market with no exposure to Europe/Asia and a 10% in US comprised of S&P, NAsdaq and Russel 2000. Any suggestion?..I am looking a long term horizon of 10 years.. Thanks and wait for your reply
12:16 [Comment From Bob McWhirter]
Thanks, Neil: I believe your overweight in Canada makes sense, since the Canadian market has a significant weighting in energy and base-metal stocks which benefit from the above-average growth of developing countries. So you have an indirect investment in Asia. Canada's better economic outlook, lower budget deficits also will continue to support a strong Canadian dollar - another consideration when investing outside Canada. The advantage of the U.S. is diversification in industries like technology that aren't significantly represented in the Canadian market.
12:18 Darcy Keith - Bob, what are some of your best ideas for investments in the tech sector right now? Any companies especially looking undervalued?
12:22 [Comment From Bob McWhirter]/b>Report Typo/Error