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Out With the Old, in With the New

Posted at 12:37 p.m. EDT on Friday, March 8

Exploited vs. unexploited. New names vs. old names. Overheated and overowned sectors vs. underowned sectors that haven't heated up yet.

That's where I think we are in this market. Money managers all over the country are looking at the stocks of companies hitting all-time highs and they are saying, "OK, what's still behind the averages longer term that I can make a thesis for buying?" They want to know where there still might be value. Right now they are finding little value in the consumer packaged goods sector of the market, think Clorox ( CLX) or Colgate ( CLP), and a ton of value in the once-growth names in hardware and software, companies like Texas Instruments ( TXN) or Ciena ( CIEN) and JDS Uniphase ( JDSU) or even Compuware ( CPWR), BMC Software ( BMC) and Computer Sciences ( CSC).

Now before you jump up and down for these names, because I tell you that the hot money is flowing into them, let me first tell you how the money management business works.

You know how when you got to the supermarket and you see something labeled "new" you might be more likely to try it than not, or at least that's what all of the brand people I have ever talked to tell me. It's not that much different in the money management business. There is an insatiable desire to hear new ideas and to take action on them, even if they seem old hat to you.

Take Texas Instruments. When I first got in this business Texas Instruments, along with National Semiconductor and Motorola were the highfliers. At that point many businesses that were mechanical in nature where going digital. Don't understand? Think about all of the electronic instruments that are in your car now, vs. what used to be in it. If you ever get a look at a late-model Ford or Chevy you will be in shock at how little instrumentation there really is. Now, cars are chock full of semiconductors. That revolution is what drove the tremendous growth spurt of what was then called high technology.

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