Five Spot: Stimpson Still Bullish on Tech

As 3G networks are rolled out in China, more telecommunications software and services will be needed to measure data usage, provide billing and additional services. Communication usage typically increases with economic development. This, combined with the rollout of 3G, consumer-directed economic stimulus and AsiaInfo's home-field advantage present a good opportunity. At 28 times forward earnings, the stock is trading below its 35% growth rate.

What is your top beneath-the-radar, or sleeper, stock pick?

Stimpson: International Gaming Technology(IGT Quote) is a great sleeper stock. The company makes slot machines for casinos. Its shares have been under pressure for several quarters due to slower spending from casinos during the recession, as well as on fears consumers would be making fewer trips to the casinos. Both are correct assumptions, but they are backward-looking. Not only will casinos start spending in preparation for an economic recovery, but recessions tend to expand the available marketplace for gaming-equipment suppliers. Put more simply, state governments approve more gaming locations when recessions crimp their budgets. Thus, they approve more racetracks, riverboats and Indian casinos, which need slot machines to boost state coffers.

Finally, the slot-machine industry is moving toward a newer server-based technology that will be more efficient and profitable for the casinos. Helping other companies make more money and be more efficient is an attractive value proposition.

What is your favorite sector?

Stimpson: Technology is my favorite sector due to the attractive valuations, high exposure to international markets and strong balance sheets. Given their strong balance sheets and cash flow, they typically don't depend on capital markets to finance their working capital needs or can act opportunistically on growth opportunities or acquisitions. This is a nice characteristic in a post-credit bubble environment.