Techs Bounce as Investors Capitalize on Bargains While They Can

Technology shares are making a hairpin turn as investors return to some familiar stocks. Asia seems half a world away.

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

rose 2 3/4 to 33 1/8 by 1:05 p.m.

Compaq

(CPQ)

was trading 4 3/4 higher at 65 1/4;

Novellus

(NVLS)

lifted 3 1/2 to 46 7/16; and

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

charged ahead 5 1/16 to 78. In short -- it is revenge of the big names.

The pros had to be fast with this bounce.

"The discounts are quickly dissipating," says analyst Timothy Kellis at

Rauscher Pierce Refsnes

. While Kellis declined to state what his firm is trading today, he asserts that the custom-chip makers

Xilinx

(XLNX) - Get Xilinx, Inc. (XLNX) Report

and

Altera

(ALTR) - Get Altair Engineering Inc. Class A Report

were unfairly battered by Asian worries. Those companies build products in the region, he says, and recent currency dips might actually help them with reduced costs of production.

A close-up look at the activities at one Toronto money management firm offered a window into the morning's buying. Early Tuesday morning Paul O'Neil huddled with his colleagues at

Knight, Bain, Seath & Holbrook

, a pension-management firm. In the past week they had built their cash from 6% to 15% of holdings - near the maximum allowed by company mandate - and they resolved to fill their shelves with some discounted favorites.

At the open Knight, Bain started buying AMAT. Asia-driven fears had helped lop 37% off the bellwether semiconductor-equipment stock since October 15.

"I think that sector was tarred with a very unfair brush," O'Neil says. He says investors misread AMAT's ties to Asia. An Oct. 24 downgrade on AMAT and similar stocks from

UBS Securities

didn't help matters. While a substantial percentage of its shipments hit Asia at some point in the production process, O'Neil maintains that most final AMAT units are sold to better-positioned customers in the United States and other western markets. AMAT realizes certain tax advantages by putting products together in Asia, O'Neil adds. AMAT peer

Novellus

(NVLS)

, which had been similarly pummeled in recent sessions, popped higher at midday Tuesday, while

KLA-Tencor

(KLAC) - Get KLA Corporation (KLAC) Report

was even.

Knight, Bain also returned to

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

, the premier builder of network equipment, and prominent boxmaker

Compaq

(CPQ)

. O'Neil says the firm had sold most of its Compaq position when it pushed 80 per share earlier this fall but was a buyer Tuesday morning. O'Neil says his firm will hold on to its favorite issues now, even if the

Dow

dips as low as 6800. At that point they would invest every dollar of cash in the market, he says.