Bookham, Gilder: Telecosm Devotees Predict the Next Pick

Psst. George Gilder likes Bookham (BKHM Quote).

End of the Gilder Age?

Gilder's Guru Status Suffers as Tech Stocks Turn Sickly

Now that buying and holding has been replaced by crying and folding, some intrepid tech investors have managed to find a way to subvert one of the brightest minds in the telecosm for some quick cash.

The key, according to these shrewd practitioners, is obvious: Pick the stocks before Gilder does. The next newsletter is scheduled to come out early next week, the Gilder people say, though they won't be more specific.

This Is the Edge

Gilder's newsletter subscribers once had an edge. They were the first to find out which companies made the coveted Gilder list. Such companies, as TheStreet.com has detailed, were destined for market greatness. At least that was the premise behind the Gilder effect.

Letting the Chips Fall Following an optical chip maker

But that was before the Gilder Technology Report's subscriber rolls reached 60,000, and before he got on the Merrill Lynch payroll, and well before he was profiled in the New Yorker. Now that so many people follow his picks, predicting them is the next best thing.

Of course, trying to outthink a professional genius might not be the most reliable way to put food on the table, but some Gilderites feel they know how the man works, and what companies lie in his path. Others have even created computer models that rank a company based on the number of mentions they get in Gilder's writings.

Gilder keeps a roster of some 35 companies that he says have ascendant technologies. He lists the companies and his new picks on the last page, Page 8, of his monthly newsletter. Gilder says his picks are made without regard to market conditions and adds that he's guided by a half-spiritual, half-scientific belief that if the technology is cultivated properly, it will ultimately lead to the nirvana of free and abundant bandwidth, or communications capacity.

Gaming a visionary is, well, somewhat shortsighted, like being granted a wish and using it to pick a horse in the 10th race at Aqueduct. But the game is testament to how shabby today's market conditions have become. Now that momentum has taken away nearly everything it gave, predicting the Gilder effect offers a rare chance at an uptick.

Past Is Procom

For example, in June, SteveZ, an otherwise unidentified Gildertech subscriber, predicted network data storage device maker Procom (PRCM Quote) would make that month's list. His calculations even included an astonishingly accurate prediction of both the volume and percentage gain Procom would receive if listed.

Bull's Eye The Procom prediction; note June volume spike.

The report, released June 21, showcased Procom and its addition to the list. The company's stock jumped as much as 75% before closing up 35% for the day, on record volume of 8.7 million shares.

Psychic? Not really. Procom had scored highest on SteveZ's Gilder-mention model, which he posted on the Gildertech message board for his fellow subscribers to see.

For his part, Gilder seems by turns amused and perplexed by the sideshow surrounding his picks.

"Sometimes our subscribers predict what I'm going to do before I know what I'm going to do," Gilder says. "And that's embarrassing."

The Page 8 Girl

So what of optical component maker Bookham?

Speculation among several investors who attended Gilder's Telecosm 2000 conference in Lake Tahoe last month is that Bookham's ability to integrate optical fiber onto silicon chips makes it a certain-as-death-and-taxes Page 8 pick.

Gilder is a Bookham fan. "They are a semiconductor company in the optical space, which is an attractive thing to be," says Gilder, who nonetheless questions whether a market that can't get enough conventional chips is ready for Bookham's more sophisticated chip.

But, says Gilder, "There's going to be at least one big success in that field, and they are probably it."

So go ahead and take that to the bank. And by the way, that No. 3 horse is looking good in the 10th.