Research behind teen's extraordinary stock expertise Matt Seto, 18, is investor, author, student

January 28, 1996|By KNIGHT-RIDDER NEWS SERVICE

Concerned about your technology stocks in 1996?

Not to worry. The technology sector is still a good place to be, long term, says Matt Seto.

Of course, he's only 18 -- so what does he know?

Quite a lot, as it turns out.

The Troy, Mich., teen-ager just wrote his first book on investing (more to come, he hints), published by large and respected William Morrow & Co. in New York.

In addition, he says the value of the mutual fund he runs for friends and family rose 33 percent in 1995, vs. 31 percent for the average fund.

In 1994, the value of his fund grew by 34 percent, he says.

Mr. Seto has been serious about stocks since he was in grade school, but his father, a structural engineer, wouldn't let him make an actual Wall Street trade until he was 14. Chick Michael Seto had to authorize every trade until his son turned 18 on Nov. 29.

By the time young Mr. Seto was 16, his savvy investments and dedication to thorough research had drawn the attention of professional brokers and made him the subject of a 1994 Wall Street Journal article. (The writer of that story was so impressed with the teen, he collaborated with him as editor of the book just published -- "The Whiz Kid of Wall Street's Investment Guide," $22).

While most of his peers were thinking about what they'd wear to the prom, Mr. Seto decided he was ready for college and skipped his senior year at Troy Athens High School. Last fall, he entered Babson College in Massachusetts, where he is majoring in economics.

The school offers a variety of business majors, including investment.

But Mr. Seto chose economics because he felt he had more to learn in that area.

What does his already considerable expertise in investment tell Mr. Seto about the technology sector, which has gone in recent months from darling to dog among Wall Street analysts?

For a well-balanced portfolio, "It's almost impossible to avoid technology stocks," says Mr. Seto. "If you look at the four major areas of technology -- telecommunications, software, semiconductors and computers -- that's the future."

Mr. Seto does believe some individual technology stocks have been overpriced. "People need to be very selective and do a lot of research," he says.

"You have to keep up with them on a daily basis and, as a student and author [now on a 10-city promotional tour], I haven't had time recently to do that," he says.

But he is willing to share his general criteria for choosing any stock:

* Product superiority.

* A low debt-to-equity ratio (corporate debt in relation to stockholder equity).

* A good growth record or potential for growth.

* Strong management.

He's also willing to share his views of some non-technology stocks he thinks will do well in 1996:

* Ultimate Electronics. Mr. Seto describes the Colorado company as a Western electronics retailer specializing in home theater and entertainment systems. "Earnings growth has been in the 40-50 percent range, which won't continue. But housing starts are strong, and this chain caters to middle- to high-end new home owners," he says. (NASDAQ trading range $6-$8.)

* American Express. "They just ended a turnaround and look like they'll grow at about a 15-percent rate for the next few years.

Also, the price/earnings ratio is down to about 14 now," says Mr. Seto. (NYSE trading range $40-$42.)

* Callaway Golf. Though Callaway stock took a hit recently when the company lowered prices on its Big Bertha drivers, Mr. Seto feels Callaway still is a product leader.

"Also, I think it's a possible merger target," he says. (NYSE trading range $19-$21.)

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