UPDATE 3-Maverick’s Ainslie says tech stocks "cheap"

* Adobe, IBM and Microsoft have high free-cash-flow yield

* Ainslie says weak dollar helpful for tech companies

* He adds: Fundamentals haven’t played role in stocks
(Adds background on Ainslie and Maverick)

By Svea Herbst-Bayliss and Emily Chasan

NEW YORK, Oct 12 (BestGrowthStock) – Technology stocks are at their
cheapest in 20 years and the weaker dollar will likely benefit
the entire sector, hedge fund industry pioneer Lee Ainslie said
on Tuesday.

Ainslie, whose Maverick Capital Management oversees $11.4
billion in assets, said a pool of value tech stocks including
Adobe Systems (ADBE.O: ), Cisco Systems (CSCO.O: ), Dell Inc.
(DELL.O: ), Hewlett-Packard (HPQ.N: ), International Business
Machine (IBM.N: ) Intel Corp. (INTC.O: ) and Microsoft (MSFT.O: )
provide a free-cash-flow yield of 12 percent this year and 13
percent in 2011.

Free-cash-flow yield is one of the best indicators used by
fundamental analysts to select and assess companies. The higher
the number, the more free cash per share is being generated by
the company.

Ainslie, who got his start with hedge fund industry legend
Julian Robertson of Tiger Management and served as Tiger’s
technology analyst, said technology stocks are Maverick’s
“largest exposure of any sector, any year” in his firm’s
history.

Maverick, one of the world’s biggest hedge funds which is
located in Dallas and New York, had about a third of its stock
portfolio invested in technology companies — more than any
other sector — at the end of June, according to regulatory
filings.

The tech sector (.GSPT: ) of the Standard & Poor’s 500 is
down 11.5 percent so far this year as of the end of August,
making it the worst of the 10 sectors. For the same period, the
tech-heavy Nasdaq composite is off 6.8 percent, lagging behind
the S&P 500’s 5.9 percent declines for the year as of the end
of August.

Ainslie, speaking at the annual Value Investing Congress in
New York, said tech stocks are attractive also because of the
weaker dollar, which can help U.S. companies that export. Many
U.S. tech companies earn half or more of their revenues
overseas. “The weak dollar is helpful for technology
companies,” he said.

Ainslie said technology companies are now holding more cash
on their balance sheets than they have since the 1950s. “This
is especially true for technology companies,” he said. “It is
sitting there and not being used.

“We want to make sure these companies are using cash in
productive ways like buybacks, dividend payments or
acquisitions.”

He worried that technology companies are not spending
enough on capital expenditures. He also said innovations are
more important than elasticity. “Most people can’t name the
processor running their iPads,” he added.

Ainslie said fundamentals have not played an important role
in stocks this year against the backdrop of aggressive monetary
stimulus by the Federal Reserve.

Similar to the phenomenon last year, the lowest quality
stocks, many of which carry so-called “junk” credit ratings,
have been the best performers in 2010.
(Reporting by Emily Chasan and Svea Herbst-Bayliss; editing by
Andre Grenon, Dave Zimmerman)

UPDATE 3-Maverick’s Ainslie says tech stocks "cheap"