STEC, Inc - (formerly SimpleTech, Inc.) (STEC)

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SBAuer Funds, LLC Owns Solid State Drive Manufacturer STEC: Senior Manager Picks It As A Top Stock Buy
http://www.twst.com/yagoo/auer7.html

December 24, 2009 - The Wall Street Transcript has just published GARP And Other Investing Strategies Report offering a timely review of the General Investing sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.

Robert Auer is the Senior Portfolio Manager for the Auer Growth Fund at SBAuer Funds, LLC. He was previously Vice President of Investments for Morgan Stanley from 1986 through August of 2007, where assets under management were in excess of 100 million in 338 accounts. During his years at Morgan Stanley, Robert was awarded the National Sales director award, which is granted to the top 10% of Financial Advisors at Morgan Stanley.

Robert has a Bachelor of Science in Business Systems from Taylor University, where he graduated in 1983. Robert was the lead stock market columnist for the IBJ, (Indianapolis Business Journal), where he was responsible for a full page weekly column for 8 years from 1996 to 2004. The IBJ, has been recognized consistently as one of the top local weekly business publications in the United States.

TWST: What are the valuations of the stocks these days? Is the market overvalued? What is your outlook on the valuation side rather than the earnings and revenue side?

Mr. Auer: The valuation of the market is not our primary concern, individual security valuation is, and that is where we spend our time and research. However, since you posed the question, we do have an opinion on it, and we think that it's interesting that most of the money in at least just this last quarter has been chasing some real borrowings. And older investors would be familiar with the phrase "the Nifty Fifty." There is certainly a Nifty Fifty little group that has been emerging, and some of the poster children for this would be Amazon (AMZN), Google (GOOG), Apple (AAPL).

When you looked across some of these larger funds and some of the funds that are doing really good right now, they all hold these same stocks. I will tell you that Amazon is year-to-date up 156% as of last night; Google is up 93% as of last night; Apple Computer is up 130% as of last night (December 15), and it will continue because no one is going to fault anybody for window dressing their funds or a manager adding those. Those are probably one of the easiest things that you could add to a portfolio. In this we would like to own those stocks, too, because they meet our growth. Just as a perfect example, Google and Apple meet our growth requirements, but we can't buy them at 12 times earnings. A stock like Amazon is trading as we speak at 80.7 times trailing 12 months earnings, and we just won't pay 80 times earnings, we'll pay 12 times earnings. And we would go up to that figure on forward earnings if a consensus is available.

We have a discipline, we stick to it and this is what we have done for 22 years, and it's worked very well. I would think some of these Nifty Fifty stocks as we've seen in other market cycles when it ends, it's a rush for the exits and it can be pretty ugly, but while it's working, you can look very good. Google last week had a new 52-week high. And not that Google isn't a wonderful company, but to us it's not a good stock. We try to separate out the two - we want a good company and a good stock. Other people seem to like to just buy good companies, but they pay no attention to what they're paying.

TWST: What are some of the stocks you feel are representative of your active growth approach. Why do you find them attractive?

Mr. Auer: I'll give you three, and I'll try to be brief as possible. Cubist Pharmaceuticals (CBST) would be one that meets our criteria. They have an antibiotic that is for staph infections and it goes by the acronym MRSA. This is running rampant in hospitals, and it's a very tough skin infection bacteria to treat with regular antibiotics because it's mutated to the point that the other antibiotics are becoming less and less effective. And Cubist has a drug that is highly effective against it. It's actually kind of the last stop before maybe the patient's even heading for death. They will use this drug produced by Cubist, which has to be given intravenously but it's highly effective.

The sales of this product literally went to 100 million, 200 million, 400 million, and the company is now predicting that the potential is now to do at least a billion per year. Yet the stock is trading at about 10 times earnings, growing at 35% to 40% per year on earnings, and the sales have been going up even at a higher clip than that. That's the first idea that's in our portfolio.



The remainder of this 59 page GARP And Other Investing Strategies Report can be immediately viewed by purchasing online.




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The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 59 page special issue is available by calling [phone] or via The Wall Street Transcript Online.

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.