Fast forward: Bill Welty, who runs the research side of San Francisco-based Volpe Welty & Co., rarely puts his name on research reports. When he does, it usually means he has hit on something that will become news sometime in the future. This time, it's the videographic industry. "Videographic" refers to a new generation of video hardware and software that is putting more pizzazz and realistic color into everything from corporate presentations and desktop corporate-training manuals to video
You haven't heard much about it yet -- annual industry sales are just $575 millionbut you will. Welty expects sales to soar to $4 billion by 1995. The rise in sales will be spurred by falling product prices, Welty says. The cost of a high-end system for corporate use was $500,000 a year ago; it can be bought today for about $30,000. Welty wouldn't be surprised to see the price dip to $10,000 within a year. "We're getting to a price point where I think we'll see a big boom in corporate videos and presentations," he says.
On the noncorporate side, which is just emerging, the new technology will make today's Nintendo technology "seem like stick figures," Welty says. Using compact or laser disks instead of tape cartridges, the new systems will be more versatile and provide photographic-quality color and sharper imagery.
So far there are hundreds of public and private companies -- mostly private -- jockeying for a piece of the action. Among the public companies, there are only a few pure plays. Welty's favorites are:
* Santa Clara, Ca.-based RasterOps, and Radius of San Jose; both are positioned to benefit from the corporate-video boom. They produce full-color videographics boards which are inserted into personal computers and are needed to create the newest, most-sophisticated videos.
* San Mateo, Ca.-based Electronic Arts and Sierra On-Line, based in Oakhurst, Ca., which are best known for their video games. Both are creating games and other products for use on compact and laser disks, rather than the video cartridges that have been commonly used until now.
CALL IN tHE PARAMEDICS: Meanwhile, back to reality: Don't expect to see health-care stocks continue their two-year hot streak. That's the word from Hambrecht & Quist health-care analyst Neal Bradsher. "Generally, if you look at large-capitalization medical stocks -- especially pharmaceutical stocks -- they've done well going into a recession, but have lagged coming out," he says.
The pre-recession strength of health-care stocks -- which continued this fall and winter while other industries were losing steam -- has to do with the well-known recession-resistance of the health-care industry; the need for health services and products often can't be postponed. Investors flock to health-care stocks as a safe haven during bad times. But when the economy improves, health-care companies -- since their earnings haven't suffered much -- don't generate the kind of dramatic earnings recoveries that attract investor attention.
Bradsher is especially cautious about the medical-products industry, but for a different reason, which for the most part has been overlooked by the investment community: the prospects of diminished Medicare reimbursements. Since 1987, hospitals have received from the government only 85 percent of the capital cost of providing care to Medicare patientssuch as leases, rents and equipmentand they get nothing from the patients themselves. Congress is expected to revise downward
the cost-reimbursement rules again by October. The threat of new regulations "will have a very negative effect on hospitals' equipment spending," Bradsher predicts.