COMMENT
How To Find New Tech Winners

By Maynard Paton (TMFMayn)
November 29, 2005

Three of the most successful flotations last year were techs. They were CSR (LSE: CSR), a developer of Bluetooth microchips, Neteller (LSE: NLR), a provider of 'e-wallets' to the online gaming industry, and Google (Nasdaq: GOOG), an Internet search engine.

This table summarises the profits you could have made:

Share	Flotation	Price on first day of dealings	Recent price	Profit
CSR	February 2004	246p	871p	250%
Neteller	April 2004	197p	665p	237%
Google	August 2004	$100	$429	329%

With the potential for such superb gains, I'm busy tracking down new tech winners for the Fool's Champion Shares service. And I'm using CSR, Neteller and Google as a guide. You see, these three shares had five common characteristics when they went public:

1. Rapid sales growth: No pipedreams here. New tech winners are already selling something -- and fast. In the two years prior to listing, CSR's sales had jumped from $17m to $68m, Neteller's had surged from $2m to $25m and Google's had rocketed from $86m to $1.5b.

2. An ability to produce a profit: New tech winners are profitable before they obtain a listing. Prior to their floats in 2004, CSR moved into the black in the second half of 2003, Neteller first reported earnings in 2002 while Google scored its maiden profit in 2001.

3. A good market position: New tech winners compete effectively in their industry. When CSR joined the stock market, its share of the Bluetooth sector stood at 25%. Neteller's competitive position wasn't that clear on listing, but pre-flotation operating margins of 50% suggested the company had some sort of advantage. And Google? Well, most people had used its website prior to the IPO.

4. Cash-rich accounts: New tech winners don't come to the market with stretched balance sheets. Prior to listing, CSR carried net cash of $26m, Neteller had $36m while Google had $549m.

5. Founder management: New tech winners keep their founders on board. The creators of CSR, Neteller and Google all served as directors at the time of flotation and their guidance and talent undoubtedly led to the stellar earnings performances witnessed thereafter. Importantly, all the founders continued to own a stake in their businesses after flotation. At listing, the entrepreneurs behind CSR, Neteller and Google owned shares worth £10m, £140m and $6b respectively.

I'll do your research

As I've already mentioned, I'm busy tracking down new tech winners for the Fool's Champion Shares service. But in a crowded new issues market, I want to minimise the downside as much as possible. Therefore I'm focusing on the new techs with proof of good sales, profits, management and so on, rather than the numerous start-ups that appear to offer nothing but promise.

When I find a new tech winner at a share price that makes sense, readers of the Champion Shares service will be the first to know. To ensure you don't miss out, simply take advantage of this free 30-day trial and join the growing band of Fools already enjoying the Champion Shares experience.