Companies Like VMware (VMW) And Salesforce.com (CRM) Seen To Benefit From Tailwind Trends Toward Cloud Computing According To Industry Analyst

67 WALL STREET, New York - July 13, 2010 - The Wall Street Transcript has just published its Investing in Energy and Other Investing Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Oil Service and Equipment Providers - Canadian Energy Market - E&P Companies - Large Cap Equities and many more.

Companies include: Aeropostale (ARO); Citigroup ©; Intuitive Surgical (ISRG); JPMorgan (JPM); Microsoft (MSFT);

In the following brief excerpt from the Investing in Energy and Other Investing Strategies Report, analysts discuss the outlook for the sector and for investors.

McLane Cover is the Founder, President and Chief Investment Officer of Mistral Capital Partners, LLC, and he has more than 25 years of investment experience. Before founding Mistral, Mr. Cover served as an Associate Portfolio Manager and Analyst at The Hartford Investment Management Company. While at HIMCO, he was the lead analyst for health care, energy and financial sector research, and he assisted in all phases of HIMCO's mutual fund startup and in managing four small- and mid-cap equity portfolios. Prior to joining HIMCO, Mr. Cover served in a variety of positions on the equity sell side. He was a partner at Think Equity Partners, LLC, where he was Head of institutional sales and served on the firm's operating committee.

TWST: You invest in companies that experience what you call "strong fundamental tailwinds." Would you explain that to us and give us a couple of examples?

Mr. Cover: We take a bottom-up and top-down approach. What that means is we start with a set of global and domestic macroeconomic assumptions to determine which industries are best positioned and alternatively, which industries are poorly positioned. We take into account not just the economic factors, but regulatory and legislative factors. And that particularly has become important in recent years, with the change in administration. Once we've determined the industry positioning given a set of macroeconomic and regulatory factors, we drill down into the specific industry groups. A specific example would be the PC area. We think that there is going to be a significant PC replacement cycle. So if you look at the average corporate PCs, they are almost 6 years old and getting older by the day. Also they use a relatively outdated operating system in Microsoft XP. Microsoft recently released its Windows 7 operating system, which is very enterprise and corporate friendly, and consequently we think that's going to drive adoption, leading corporations to upgrade their installed base of PCs. Based on our channel check discussions with a number of very large companies - Citigroup © would be an example - they are starting to replace their PCs. That creates a tailwind for a variety of companies that have exposure to the PC market. It creates a tailwind for a company like Microsoft (MSFT), since they are providing the operating system; it creates tailwind for a company like Dell Computer (DELL) or Hewlett-Packard (HPQ), which are selling the PCs to these large enterprise customers; and it creates an opportunity for the component suppliers like Intel (INTC) or Western Digital (WDC), or some of the other component suppliers. That would be a perfect example of an industry that's experiencing a fundamental tailwind and an example of the companies that are likely to benefit.

Another area or theme that we like is cloud computing - software applications that are delivering "through the cloud" or "over the cloud," or applications that are accessed via the Internet from servers as opposed to pulling that application from your desktop computer. This really is the wave of the future, and it's very early in this general trend. Companies like VMware (VMW) and Salesforce.com (CRM) are perfect examples of companies that are going to benefit from that tailwind trend towards cloud computing.

TWST: Are there sectors you are weighing more heavily right now and why?

Mr. Cover: Yes, technology is our single largest overweight, and the reason is to take advantage of what we think will be a strong PC replacement cycle. Cloud computing is also an important trend, and the reason we think that that's going to be a sustainable trend is that companies are very focused on improving their overall productivity without necessarily investing heavily into the business. And the best way to do that is through investment in technology. Health care is another area that we think is a great area to be invested in. One, it tends to be counter-cyclical in terms of the economy; it doesn't tend to go up and down a lot with changes in economic momentum. We prefer to focus on innovators in the medical technology area. A great example of that would be a company like Intuitive Surgical (ISRG), which is the market leader. It's really the only company in the robotic surgery market - very high gross margins and virtual monopoly in the business, and it addresses a very large market. In the financial services area, we are really focused on the leading companies, like JPMorgan (JPM).

We also think that you'll see a trend develop, as we exit 2010 and head into 2011, with tax rates likely to head higher. We think life insurance companies will start to see growth again, as life insurance is one of the few tax-protected investments left. And consequently, we think the life insurance companies will start to see improving volumes and business in late 2010, and into 2011 and beyond. Consumer is an area we think is interesting. We are currently underweight consumer, but we do have positions in companies that are very focused on value. Aeropostale (ARO) in the apparel retail area tends to have lower price points, and they are seeing consistent growth despite the downturn in the economy during 2008 and the early part of 2009. We think that companies in the retail area that sell very high-priced goods are going to have a little bit more of a headwind as the economy starts to slow down a little bit.

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 special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

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