Howard Ward has taken his lumps over the past year, but he's still swinging and thinks growth investors might finally be getting off the ropes.

Manager: Howard Ward

Fund: Gabelli Growth

Managed Since: Jan. 3, 1995

1- Year Return/Ranking vs. Peers: -22%/Trails 97% of Peers

5-Year Return/Ranking vs. Peers: 19%/Beats 96% of Peers

Expenses: No-load/1.37% expense ratio

Top-Three Holdings: Pfizer
State Street
AOL Time Warner

Sources: Gabelli and Morningstar. Returns through May 11.

The past 12 months have slightly marred Ward's sparkling record on the no-load

(GABGX) - Get Report

Gabelli Growth fund. A straight shooter, Ward says that he wisely sold tech at the start of 2000 and not-so-wisely sunk those profits back into the sagging sector. He thinks the

Nasdaq has bottomed, but still sees plenty of ways to lose money over the next 12 months.

Where's he putting his money and where does he see traps? What's his take on battered tech bellwethers and the Wall Street analysts who told you to buy them a year ago? Read on.

1. For growth investors, is the pain over or nearing an end?

Ward:

I think that the market hit bottom at the end of March and early April. February was the worst month in history for the Nasdaq. In March investors pulled $19 billion or thereabouts out of equity funds, which is a significant sum. April was the best month in history for the Nasdaq, a snap-back rally.

Since then we've seen a pretty material upward move for the major indices, not just the Nasdaq but also the

S&P and the

Dow.

Greenspan's last 50 basis-point interest-rate cut in mid-April was a real surprise, and I think that was a critical turning point in investors' psychology. Interestingly enough, the timing of that cut was the morning after

Cisco's

(CSCO) - Get Report

confession, when they first came clean on their $2.5 billion writedown

for gear they couldn't sell.

Taken together, I think those two events were important and the market was actually rallying when Greenspan cut. Of course, that added more fuel to a much more positive investor sentiment.

Now I suspect that Greenspan cuts rates again this week. I think Greenspan has the leeway to continue to cut, and I think he will. The more he cuts, the more people will have confidence that six months from now the economy will be doing better.

I predicate some of my interest in stocks today just on that notion that business is not good, but I think that it will be looking much better six months from now. I think 2002 is going to be a good year for a number of companies who will be looking at easy comparisons in 2001 against a weak year.

2. Given that view, what looks good to you today?

Ward:

(Laughs) A vacation!

In the second quarter so far, we've seen 30% moves in a number of technology stocks. I think that's reflecting this sense that we know that there's a cyclical downturn

in technology, but we believe that six, seven, eight months out things will be better and 2002 might very well be a good year for these companies.

That said, I think that people shouldn't get too excited about this group yet because it's going to be a three steps forward, two steps back; it's going to be a struggle between now and year-end. But I do think there's opportunity in a number of the technology names.

A company that I've consistently liked and it hasn't really helped me in the past year is

Tellabs

(TLAB)

. Granted, this year's earnings growth isn't going to be what people thought it was originally, but unlike a lot of companies -- Cisco included -- Tellabs will have an up year in revenue and earnings. Its profit margins remain among the best in the telecommunications industry.

It's a big holding of mine and it sells at about 25 times this year's estimate, which has been reduced from earlier expectations. It's still a pretty reasonable multiple, I think, for a company that's going to keep growing at a rate north of 20%.

Analog Devices

(ADI) - Get Report

is obviously a semiconductor company, but it's pretty well-diversified. I think that it represents good value. It's had more of a hiccup to current year earnings than Tellabs, but I think it will have a stronger 2002. A lot of its chips in one way or another find their way into various types of communication devices. It has a clean balance sheet, and I think that they will have a year of also 20%-plus growth next year and this year isn't going to be terrible.

A lot of these companies are not seeing their business go away. I think

networking equipment makers like Cisco,

Nortel Networks

(NT)

and

Lucent Technologies

(LU)

, these companies are looking at really disastrous years. But it's not that bad for everybody else.

Microsoft's

(MSFT) - Get Report

not having a terrible year, Intel's not having a super terrible year and those stocks have done very well this year.

3. There are a lot of folks out there that feel like they've gorged themselves at the Nasdaq buffet, and they've paid the price over the past year. How about other areas beyond tech? Where are you finding growth outside of tech?

Ward:

Well, I've got about 27%-28% of the portfolio in technology. Then about 22% of the portfolio is in the media names. I have about 22% of the portfolio in financial services stocks, mostly asset management companies because I like the asset management business and I think that you can get good growth in that sector, although like most of these areas, it's going to be a little bit lumpy.

Then I've got about 15% of the portfolio in health care, and only a couple of retailing names --

Home Depot

(HD) - Get Report

and

Tiffany

(TIF) - Get Report

.

Finding growth in other areas is hard because the consumers-staples sector of the market has not really exhibited what I would call growth.

Pepsi's

(PEP) - Get Report

doing OK, but I can't get excited about

Anheuser-Busch

(BUD) - Get Report

. One or two percent volume growth for beer is a big year. That's not really good organic growth.

A lot of growth funds charged into the energy sector last year, given high prices and solid demand. Any interest there?

Ward:

I think energy was last year's story. Energy stocks are not traditional growth stocks. That was sort of a manufactured pop in those stocks last year, so I don't think that is really a smart place to be this year.

Are utilities growth stocks again? I don't think so. Coal stocks? I don't think so. Basic industries like chemicals, paper, steel, aluminum and autos? No, I mean there are not that many places that I can go. I don't like growth-by-acquisition stories, the telephone companies -- you don't see a lot of organic growth there these days.

Retailing is plagued with excess capacity and virtually no barriers to entry, so I think you have to be very selective there as well, particularly if consumer spending starts to slow down there as well, which it might, given what's going on in the employment scene.

So, I find myself with essentially 85% of my portfolio in four sectors: technology, media, health care and financial services. And I don't think that's going to change.

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Hancock Technology's Marc Klee

4. Just about every "can't-miss" tech favorite looks a lot cheaper than a year ago, but lower stock prices don't mean they're bargains. What are a couple of names that look like values right now if you're willing to hang on for two or three years?

Ward:

I think you're right, it's a mistake to just assume that because the stock is down a lot, that it has good value and you'll make money over the next couple of years.

This next upward move in technology is going to be much more selective. You cannot assume that what looked like a great growth company 12 or 18 months ago still is. It's a good idea to look at companies that trade at low multiples of 2001 earnings and are still growing.

These are companies where I don't have to look to 2002 numbers to make the case for owning the stock today. In that camp, I've got Tellabs at 25 times this year's earnings and I've got

EMC

(EMC)

, even though it still sports a multiple that's not that low. It's around 53 times this year's number.

I do think it has more visibility to its growth than a lot of these other names, so I think EMC, which is now around $39-$40 stock, down from $102- $103, at 53 times this year's number, I think it's OK.

I have recommended throughout the year

Dell Computer

(DELL) - Get Report

; it is actually up about 40% year to date. Dell Computer at around $25 is not as good a value certainly as Dell Computer at $16. I don't think it has the kind of upside that an EMC or a Tellabs has in the near term, but I don't think there's much downside, either.

Want to know what Ward thinks of Brocade, Broadcom, Cisco, Intel, Microsoft and more? Click here to read on.

Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

imcdonald@thestreet.com, but he cannot give specific financial advice.