Investment Gurus Rally For Uncle Sam

Technology and health care top the summer buy list, while retailing is shown the door.

Maybe it was patriotism that fueled the market last week. Despite poor unemployment numbers and bearish leanings, the top money managers at Marketocracy.com, known as the M100, bought heavily.

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This time, it was shares of technology companies. The top buy was Redmond, Wash.-based Microsoft, on news that the giant software vendor was considering a single $10 billion payout to shareholders--$1 per share--in the form of a dividend payment. Microsoft rose 89 cents to $27.34 and was one of the most heavily traded stocks last week.

The gurus also bought shares of Durham, N.C.-based Cree, which, among other things, manufactures compound semiconductor materials and electronic devices made from silicon carbide. Cree's stock price, which is up 41% over its 52-week low, dropped significantly to around $17 last week from $26 in May. Behind the drop were allegations that Cree and some of its officers had manipulated the company's financial results. Last week, a class action lawsuit was filed, causing the stock price to drop, which made the shares attractive to the M100.

Opportunity knocked at Candela, a Wayland Mass.-based developer of aesthetic laser systems that allow physicians to treat cosmetic and medical conditions, such as facial spider veins. Candela's revenue for the nine months ending in March rose 34% to $54.4 million; the company registered net income of $3.8 million, compared to a loss of $2.7 million in the year-ago period. The stock, which trades around $12, is near its 52-week high of $13.17, but its price-to-book ratio is just 2.63, compared to an average of 6.55 for the health care sector.

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Another buy was Perceptron, a Plymouth, Mich.-based developer of information-based measurement systems. Its technology uses 3-D image processing, along with software algorithms and laser light triangulation, to do things such as provide robot guidance sensing for automated assembly tasks. The stock, which is up more than 347% for the year, now trades around $6 per share.

Outside of the technology, the stock pickers bought shares of Rehabcare, a St. Louis-based provider of temporary health care staffing and therapy management for hospitals. The stock, which trade around $15, is down from its 52-week high of more than $26, giving it a price-to-book ratio of 1.17 and a price-to-earnings ratio of 10. The gurus believe the kind of services Rehabcare provides will be increasingly in demand.

The top sell of the week was URS, a company that the stock gurus aggressively bought early in the year as its stock slid to a 52-week low of $8.50. The M100 was especially motivated to pick up URS shares then because the company had won a number of new contracts, including one with the U.S. Army Communications-Electronics Command unit worth a potential $3.1 billion over the next eight years. Last week, the M100 took profits at $21 per share.

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The group took profits in shares of Denver-based equity manager Janus Capital Group as well. Janus' stock price is up 30% this year, to $17, as investors bet on better times ahead for money managers. The M100 also sold shares of Right Management Consultants, the Philadelphia-based provider of human-resource consulting services. The company's stock, which trades around $13, is still way off its 52-week high of $18.

The gurus pruned some of their retail holdings last week, continuing to unload shares of Elder-Beerman, the Dayton, Ohio-based retailer of moderately priced apparel, home furnishings and other consumer goods. Things are still uncertain at ESBC, as EB Acquisitions is considering making another takeover offer for the company. The stock pickers also sold Circuit City Stores, which has been hit by a weak retail sales environment. The Richmond, Va.-based retailer of electronic goods has a price-to-sales ratio of just 0.19--compared to 0.64 for competitor Best Buy--and the stock has done well, up to $9 per share from around $3 per share in March. But for the three months ending in May, Circuit City revenue fell 9% to $1.93 billion, and the company's net loss from continuing operations rose to $43.9 million from $1.3 million.

Top Buys (Net)

Microsoft Cree Rehabcare Group Candela Perceptron

Top Sells (Net)

URS Janus Capital Group Elder-Beerman Stores Right Management Consultants Circuit City Stores

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