SAN FRANCISCO -- This week's Chase, Hambrecht & Quist 28th Annual Technology Conference will highlight the weirdest, even the stupidest, notion of the stock market. Here's the dichotomy: Companies evolve slowly, and yet volatile stock prices suggest that companies change instantly, to the tune of millions.

At

last year's conference, for example, shares of

InfoSpace

(INSP) - Get Report

jumped from 116 3/4 to 134 7/8 after a company presentation. The company didn't get 16% better that day, of course. But CEO Naveen Jain was able to convince Wall Street players to buy the stock, right away, and they did, driving up the price.

Such inexplicable moves are likely to dominate select technology stocks this week, and Internet stocks in particular. But the new theme, says Chase H&Q's head of research

Todd Bakar

, isn't going to be new, hot companies, but rather a search for dot-com survivors. Here are some of his thoughts:

Q:

The old saw is "Buy at AEA and sell at H&Q," suggesting that investors are wise to buy tech stocks around the time of the fall

American Electronics Association

conference, and sell at your conference in the spring. But it looks like the market wouldn't wait for you this year.

Bakar:

You're right, but the timing of that spring selloff has been changing. It seems like people were selling earlier and earlier... so our conference seems like it's been more of a buying opportunity. It certainly was last year.

Q:

But why do tech stocks, and Net stocks, drop every spring?

Bakar:

The thinking is that you didn't want to own tech stocks in the summer. And that's still true of companies that do a lot of business in Europe. Europe stills shuts down in August.

Q:

Is that going to afflict the dot-coms? Or more PC companies?

Bakar:

Traditionally, it's the PC-related computer business. They've had a little bit of a softer summer period and a much stronger fourth quarter.

Q:

And Internet stocks?

Bakar:

Well, what's an Internet stock? That umbrella is getting so big. But so many are in that hypergrowth mode, seasonality wasn't a factor.

Q:

Well it was for the online brokerages like

E*Trade

(EGRP)

and

Schwab

(SCH)

...

Bakar:

You're right, and as people spend more time outdoors and on the beach, we'll see some of the more mature Internet companies having softer summers. But that's not the big theme among Net stocks this year.

Q:

What is?

Bakar:

Valuation matters now.

Q:

Whoa, that's heavy.

Bakar:

You're still seeing some companies valued off revenues, but I think people are getting more valuation-relative. Investors are looking for profitability that's actually on the horizon, not just some distant notion. There's a much greater sensitivity to finding companies with positive cash flow. They're still looking for great companies and great management teams in high-growth segments and differentiated products with great technology. But you're going to see much more of a focus on valuation.

Q:

I think it might get a little depressing.

Bakar:

There's going to be more of a focus on viability and survivability. This won't be like last year: You're going to see a different tone of the questioning. Value investors are going to be coming out.

Q:

Value investors buying Net stocks? Yeah, right.

Bakar:

The market psychology has changed. I think you're going to see people kick the tires hard. There are companies that actually have created something of value and people are going to be looking for that.

Q:

I guess there are a lot of companies trading at or near their book values right now. It's almost as if these online companies have put in years of work and brand-building that has been deemed worthless. They have almost no enterprise value.

Bakar:

You had people that just didn't know what they were buying. A lot of the very naive people were buying these stocks. So they were just as naive selling them; indiscriminately.

Q:

How can you tell from a presentation that a company is toast? No CEO's going to get up to the podium and say, "We're not gonna make it, sell my stock 'cause I'm a moron and can't run my company." What are the code words?

Bakar:

I think companies will talk about their burn rates and options they have to reduce that. They'll talk about their hope for some strategic investments.

Q:

"Strategic investment." So that really means, "Somebody throw a life raft!"

Bakar:

There are a lot of guys who have been hurt. It's been a very tough six or eight weeks here. But for investors doing their homework, this could be a golden time to buy some good companies at a discount.

Q:

Are inflation worries going to be prominent?

Bakar:

A lot of companies are doing really well. I know that there are concerns about the overall economy, but historically for our companies...

Q:

Tech companies...

Bakar:

...historically, they've always been more driven by product cycles than economic cycles. And no one is talking about the release of

Windows 2000

, which is, the...

Q:

The grand daddy of all product cycles in computing, I suppose.

Bakar:

Yes.

Q:

What about other sectors?

Bakar:

The whole optical space has been doing so well.

PMC-Sierra

(PMCS)

,

JDS Uniphase

(JDSU)

,

SDL

(SDLI)

and communications silicon like

Broadcom

(BRCM)

. These stocks have all come down a full amount, but I think these are stocks you want to own fundamentally.

Q:

What does that mean? You want to own them but shouldn't at this price?

Bakar:

Each individual has to figure out the valuation at which to back up the truck on. Whenever

Cisco

(CSCO) - Get Report

pulls in, you buy the G--d--- stock.

Q:

But you sell-side guys, not to be harsh, but you're always saying "Buy, buy, buy."

Bakar:

There's a lot of hinting, the press doesn't see it, but there are gradations to the advise we give our clients. Investors want to get a feel for your enthusiasm on stocks. Look, the smart guys on the Street don't give a s--- if we say buy or sell, they want to see our research; they want to hear our thought process.

Q:

What about semiconductors? Shouldn't we be near the end of a cycle soon?

Bakar:

The semi space has been hot. I think the semi-equipment companies aren't off much from their all-time highs, but they're just blowing the numbers away.

Applied Materials

(AMAT) - Get Report

,

Novellus

(NVLS)

,

KLA-Tencor

(KLAC) - Get Report

and

Teradyne

(TER) - Get Report

-- they've all been reporting great bookings.

Q:

Of all those, Broadcom, Novellus and SDL are the only investment-banking clients, yes?

Bakar:

Yes, I think so.

Q:

Disclosure's big with us.

Bakar:

You know, part of me is almost happy to see the stocks off before our conference. It gives them a lower base to move from, a better buying opportunity for those stocks that are worth buying.

Q:

But what can money managers really find out at these presentations? I mean there are those old saws "Never buy a tech company in Florida" or "Never trust a fat CEO or a CFO in a blue shirt."

Bakar:

A lot of our companies just reported great first quarters. So I think people just want to hear that the second quarter continues apace.

Q:

They want incremental benchmarks.

Bakar:

Exactly.

Q:

To make instantaneous decisions?

Bakar:

That's the way it works.

Cory Johnson files weekly from TheStreet.com's San Francisco Bureau. In keeping with TSC's editorial policy, he neither owns nor shorts individual stocks, although he owns shares of TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Johnson welcomes your feedback at

cjohnson@thestreet.com.

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