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Tech stocks - Monday, June 23, 2008

My Value Stock Neighbor, Autodesk

My kids were playing at the park down the street where I ran into a couple that was visiting the playground for the first time. They introduced themselves and when asked where they worked, he responded "Autodesk". Even though the company is headquartered one exit North on Highway 101, I had never met anyone who worked at Autodesk (ADSK:Nasdaq).

The father of my daughters' new play partner then revealed that he was looking to buy a house in my neighborhood. Nothing is available for under $1.3M and he wasn't an executive so I decided that this $8B neighbor needed a closer look.

I've probably avoided Autodesk as 2D and 3D design software is about as exciting as watching my oldest daughter's pre-k graduation video 10 times in-a-row (her record for watching the video is 21 times in-a-row which I'll never break). And yet, the company has demonstrated steady growth in the licensing of its software while keeping sales and marketing expenses in check.

Autodesk also knows what to do with its "Benjamins" as their return on equity is an attractive 50.16%. In addition, the current price of their stock is about 5 points away from their 52-week low and about 15 points away from its 52-week high. That leads us to believe that the folks at tech:stocker aren't the only ones who have overlooked this little gem.

What may cause some investors concern is how the U.S. non-residential construction market is about as hot as the interest in having Barry Bonds play for any major league team. Autodesk claims that this accounts for only a small part of their revenues and that their product lines have expanded into several profitable areas. We have no reason to doubt them as company's conservative public relations approach gives them credibility.

We at tech:stocker put a 12-month price of $50 per share on Autodesk. While Yahoo! Is keeping us up at night as to when the board will retire Jerry Yang, our conservative prediction of Autodesk will not leave us reaching for the Ambien after The Late Show With Craig Ferguson.
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