Semiconductor sector set to surge, says WealthBuilder’s boss
Schreiber sees big overlay in undervalued chip-makers
The technology sector may well be one of the biggest growth stories of 2011, according to Donald Schreiber, chief executive of Wealth Builders Inc., which has $570 million under management.
“Companies didn’t spend money on technology for the past two years, and now they’re trying to catch up,” he said.
Mr. Schreiber, who expects technology to represent “one of the most exciting areas of 2011,” cited the semiconductor space as an example of the investment potential in technology.
At 12.3, the price-to-earnings ratio of the semiconductor category is currently more than 40% below the category’s “median normalized p/e,” he said.
As companies start spending on tech upgrades, Mr. Schreiber expects the price-to-earnings ratios to start reverting to historical levels.
For example, Intel Corporation Ticker:(INTC), a major semiconductor company, has a p/e of 10.7, compared to its historical average 18 p/e.
Adjusting Intel’s p/e upwards to its historical average level would mean a stock price spike of about 70% to $36 per share.
While Mr. Schreiber’s forecast is based largely on an economic outlook that expects a steadily improving economy and continued consumer spending, he is also basing it on his own experiences over the past year.
“Our investment in technology this year was double what we spent in 2009,” he said, estimating that the tech spending equaled 6% of the firm’s revenue.
“We had to upgrade all of our technology,” he said.
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