Paul Wick: There's value in the Valley.

Nosebleed names." That's the phrase Paul Wick, manager of the $4.2 billion (assets) Columbia Seligman Communications & Information fund, uses to describe most of the stocks that are bubbling around tech today. He is talking about stocks like Salesforce.com ( CRM - news - people ), Success Factors and Concur Technologies ( CNQR - news - people ), all trading for upwards of 280 times earnings.

"We pay a lot of attention to value," says Wick, from his Menlo Park, Calif. office. Wick, 48, has spent the past 22 years investing in tech stocks and riding out their notorious peaks and valleys. During the past decade his fund has returned 10.3% annually, four percentage points a year better than its peer average, even after 1.36% in annual fees.

Wick's current favorites are semiconductor stocks where price/earnings ratios hover at 13, versus a historical 22. Volatility has plagued this sector, but Wick says an era of calm is ahead because the migration to a new generation of 18-inch wafers is at least four years away.

One industry metric Wick watches closely is capital intensity, defined as spending on wafer-fabrication equipment divided by chip industry sales. In 2010 semiconductor makers spent $30 billion on fab gear, or 9.7% of their $310 billion in revenues. Wick expects spending this year to reach $34 billion, or 10.6% of revenues. "The industry gets into trouble when the ratio hits 15%," says Wick. "It tells you that capacity has to be digested and people have to pause spending."

KLA-Tencor ( KLAC - news - people ) is a favorite. The company makes gear used to find defects in silicon wafers. It controls 70% of the world market in its main businesses and is sitting on $6 per share in cash. Wick figures the Milpitas, Calif. firm will earn $5 per share in 2011. "After [deducting] the cash you're paying seven times earnings for a dominant franchise with 37% or 38% pretax profit margins," he says.

Wick is also keen on Novellus, whose primary products are machines that deposit chemical vapors on semiconductors. The company struggled in the first half of the decade but has since boosted gross margins to 50% and operating margins to roughly half that. Novellus is likely to benefit from Intel ( INTC - news - people )'s expected doubling of capital spending this year and is poised to earn at least $3.80 a share, giving it a value stock P/E of nine. Wick thinks Novellus could get acquired by Lam Research or Tokyo Electron.

Among chipmakers, Wick likes AMD best. He figures the company "is going from famine to feast with respect to its portfolio" after bad moves, like its 2006 acquisition of graphics chip maker ATI, which crippled AMD's balance sheet. The good news for AMD is that it's begun shipping its Llano family of processors for notebooks and desktop PCs. Wick believes The Street's consensus for AMD's net income is 35% too low and that it will earn well over a dollar per share in 2012. At a recent $8.24 AMD trades at 11 times Wick's projected 2011 earnings. Compared to those nosebleed software stocks, it's a steal.

#### Chip industry Cheapies

Wick's menu of tech buys--hold the inflated multiples.
| Price |  |
Company | Recent | 52-week high | PE | Market value ($MIL)
Advanced Micro Devices | $8.24 | $9.58 | 9 | $5,662
ASML Holding | 38.39 | 45.92 | 9 | 16,761
KLA-Tencor | 41.72 | 51.83 | 11 | 7,005
Novellus Systems | 36.05 | 41.82 | 11 | 3,220
Synopsys | 27.19 | 29.35 | 21 | 3,988
Prices as of June 2. Source: Interactive Data and Thomson Reuters Fundamentals via FactSet Research Systems.