Beltway Bet: Advanced Micro Devices

Washington, D.C. – Advanced Micro Devices, the Sunnyvale, Calif., semiconductor concern, is in town this week for FOSE, an annual public-sector technology trade show that attracts 20,000 buyers, sellers and hanger-ons to the nation’s capital. At exhibition booths, breakfast speeches and in its own sponsored meeting room, AMD is making its case before the Beltway crowd.

In doing so, AMD (nyse: AMD – news – people ) certainly can’t tout its recent stock market performance. The company’s shares have slumped 62% from a 52-week high, versus a 14% decline in the S&P 500 index. At six bucks, AMD goes for 0.6 times sales–less than one-fifth the 3.3 price-to-sales multiple for shares of bigger rival Intel (nasdaq: INTC – news – people ).

AMD shareholders have been suffering for some time; two years ago the stock stood at $43. Will it rebound to those heights? We haven’t a clue. But we can say that AMD’s success in the public sector provides some support for the case made by AMD bulls.

Full story at Forbes.com

Beltway Tech Stocks: Bottom’s Up?

Washington, D.C. – Working from BB&T Capital Markets’ northern Virginia office, stock analyst Michael Lewis has spent the last six years building up a network of government and defense contacts.

“I tell investors that, at the end of the day, it doesn’t matter what our ratings are, what our price targets are,” says Lewis. “Our value proposition to the investment community is what we’re hearing at the Pentagon and on [Capitol] Hill.”

At an event hosted last week by the National Defense Industrial Association, a trade group, Lewis heard from high-level budget personnel at the U.S. Army, Air Force, Navy and Marine Corps about their 2009 priorities. One conclusion Lewis drew from the event: Funding threats to information technology projects, which have dogged several big tech services stocks, may be diminishing.

Lewis tells us that none of the military’s budgeters on the panel explicitly said cuts to information technology projects were off the table, but at the same event a year ago, there was talk of scaling back on technology in favor of immediate concerns (like fighting two wars). Not this year.

“[Information technology] wasn’t even brought up,” says Lewis. “That was very surprising.”

Full story at Forbes.com

Fast Tech 25: Beltway Bets

To come up with the eight companies in the accompanying table, we applied a “Business in the Beltway” screen to our 2008 Fast Tech 25. In other words, we scanned the filings of the Fast Tech list to see which companies played up their business with the public sector, particularly the U.S. federal government.

Why do this? As we have often noted on Forbes.com, the fact that a company sells goods or services to the feds is no guarantee of its success. Nevertheless, it is not a bad idea to invest in technology companies that are going after government customers. Tech procurement has its flaws, but it can act as a seal of approval for vendors winning government contracts. That’s why you’ll often find smaller tech companies, for example, touting wins with a defense or civilian agency.

Consider also that tech buying cycles in the public and private sectors sometimes diverge, as they did dramatically after the dot-com bubble burst at the turn of the century.

A year ago, we zeroed in on MTC Technologies (nasdaq: MTCT – news – people ), touting the stock as a cheap government contracting situation on the Fast Tech list. For most of 2007, our call looked like a bad one, something we fessed up to in our year-end wrap up of 2007 Beltway bets.

Two days after our article about our 2007 Beltway picks appeared, BAE Systems (other-otc: BAESF.PK – news – people ) made a $450 million acquisition bid for MTC Technologies. The deal hasn’t closed yet, but MTC shares show a 6% gain since our 2007 Fast Tech story, vs. a 7% decline for the S&P 500.

Full story at F0rbes.com

Beltway Bet: Beaten-Down Detica

Thomas Black, chief executive of British tech consultancy Detica Group, has 200 employees tending to civilian government and military clients in the U.S. He wants to bring that number up to 1,000 in the next few years.

“That is our ambition,” says Black, Scottish of origin and 48 years of age.

But lately, such lofty ambitions haven’t been reflected in Detica Group’s share price. The London-listed stock has dropped 12% (in U.S. dollar terms) thus far in 2008 and 53% from a 52-week high of $8 last July.

With the sell-off, Detica shares look interesting.

Why the stock drop? Detica’s customer mix is one culprit. Founded in 1977 as a boutique providing information security services to U.K. defense customers, Detica specializes today in business intelligence–the analysis of huge amounts of data to weed out fraud, manage risk and gain competitive advantage.

Government clients still account for three-fifths of the company’s $307 million in revenues for the year ending last March. But 27% of Detica’s sales came from financial services clients. Given the grim parade of big banks posting subprime-induced losses, the concern here is that spending on things like business intelligence will freeze.

There are also doubts about the public sector side, notably Detica’s plans to push into the U.S. market. Last spring, the company created its DeticaDFI unit with the acquisition of DFI International, a 200-person Washington consulting group focused on budgets and counterterrorism. Building from there could be tough.

Full story at Forbes.com

Stocks For A Democratic White House

Just over a year ago, we presented perspective from Stuart Sweet, president of Washington research firm Capitol Analysts Network. He gave us several industries with a favorable political outlook, and we did some screening within them.

Those picks have posted an average return of 22% so far, versus a 0% gain for the S&P 500. Sweet, a former Hill staffer with a business degree, advises investors on sectors that could get rattled or revved up by politics and activity inside the Beltway.

So, sticking with what works, we’re consulting with Sweet again. Broadly speaking, Sweet is bracing his clients for a Democrat in the White House and expanded Democratic majorities in both chambers of Congress.

“It’s a Democratic year,” he says. “A 60% chance of a Democratic president sounds reasonable to me.”

Why reasonable? In terms of the executive branch, one reason is history. Since 1960, Sweet points out, the party holding the White House has managed only once to hang on for three consecutive terms. That was Republican George Herbert Walker Bush, succeeding a two-term Reagan presidency that finished up with high approval ratings.

Things look different today. “If George W. Bush was facing voters,” says Sweet, “he would be a sure loser.”

Full story at Forbes.com

Scorecard: 2007 Beltway Stock Bets

Washington, D.C. – Investing is a focus of our Business in the Beltway coverage on Forbes.com. The proposition is straightforward–what goes on in Washington has ramifications on Wall Street, for good or ill. So we regularly serve up ideas on publicly traded companies that could get a lift from policy action, procurement or crack lobbying squads.

In 2007, this author wrote 23 stories with a view toward the Beltway-minded investor. On average, stocks highlighted in those stories show an average total return of 11%, using prices from the date of publication through market close on Dec. 13, vs. a return of 3% for the S&P 500 during equivalent time periods.

The usual caveats apply. That 11% return for these Beltway stocks is overstated by at least a couple of percentage points, since it doesn’t factor in trading expenses. Also, we’ll note that most folks should think about owning individual stocks for longer than one year.

Nevertheless, December is a time for retrospectives. It’s also a chance for active investors to think about either taking profits or dumping stinkers to harvest a capital loss.

Full story at Forbes.com

True Believer Stocks

We call it love only one, our contest pitting 17 financial pros against the S&P 500 on a single stock call. We have a dozen bulls and five bears.

The 12 months ended Oct. 31 were great for both sets. Our 12 long picks delivered an average price increase of 30%, 18 percentage points ahead of the S&P 500. Four of the five short recommendations finished the period deep in the red; the five averaged a 21% loss.

Paul Noglows, research director at Lazard (nyse: LAZ – news – people ) Capital Markets, smacked a home run for last year’s bulls. A Love Only One newcomer in 2006, he went for Deckers Outdoor (nasdaq: DECK – news – people ), an idea supplied to Noglows by Lazard retail analyst Todd Slater. Deckers, which makes footwear (Teva, Ugg) and keeps beating earnings forecasts, rose 163%.

For 2008 Noglows goes with another Slater recommendation and picks Endeavor Acquisition (amex: EDA – news – people ), a holding company poised to acquire American Apparel of Los Angeles. Noglows believes the deal will close and that American Apparel, whose name Endeavor will assume once the acquisition is complete, is a company worth buying. A vertically integrated purveyor of casual wear like T shirts and underwear, American Apparel had 2006 sales of $265 million. Noglows expects revenues to hit $340 million this year and $1 billion by 2010.

Full story at Forbes.com

New Investing Metric: Red Tape

Washington, D.C. – Just over a year ago, as we’ve done for the past several years, we did a stock search with the aid of an annual World Bank survey on the best countries to do business. Stocks featured in that story averaged a 48% total return through Monday’s market close, versus gains of 19% and 27%, respectively, for the S&P 500 and an exchange-traded fund tracking Morgan Stanley Capital International’s Europe, Australasia, and Far East index.

The idea here is simple: Investors looking to place bets abroad should stick to countries that don’t tie up business folk with red tape. Past performance doesn’t guarantee anything, but given the results from last year’s story, we’re giving this screen another go.

Full story at Forbes.com

Sensors, Spooks And Titanium

As with all Forbes company lists, our 2007 list of the 100 Best Mid-Cap Stocks In America has its share of outfits that should interest investors or others looking at Washington, D.C., from a business perspective. The table below lists seven.

Bargain hunters, don’t get too excited. These companies hail from the defense and aerospace sector, which has enjoyed a terrific run over the past four years. Thus, the stocks look expensive relative to valuation history and, with two exceptions, projected growth rates.

That will not stop us, however, from sticking our necks out and tagging a couple of these stocks as attractive.

Full story at Forbes.com

Beltway Bet: RightNow Technologies

Washington, D.C. – RightNow Technologies went public in August 2004. Within months, its shares rose 174%, to $21, carried upward by investor enthusiasm for the Bozeman, Mont., company’s business model. Like Salesforce.com, RightNow aimed to sell its customer relationship management (CRM) software as a low-maintenance, Web-based service, not a shrink-wrapped product.

That enthusiasm has since cooled; RightNow Technologies (nasdaq: RNOW – news – people ) stock is off 30% from its 2004 high. But Chief Executive Greg R. Gianforte still relishes tossing rocks at the way the software has been traditionally sold to big business and government.

“The traditional model of enterprise software has failed the customer,” he declares. “It has involved somebody writing a really big check up front, then a truck backing up and dumping a bunch of software, then somebody showing up with a busload of consultants who camp in your parking lot for two years.”

Gianforte says RightNow gets the job done faster. “Our typical deployment takes about 60 days to stand up,” he says.

One place Gianforte’s approach seems to be gaining traction: the U.S. federal government.

Full story at Forbes.com