|
|
July 5, 2002/Tamuz 25 5762, Vol. 54, No. 42
Technology stocks may rebound
LEE C. EISINBERG
Special to Jewish News
During the peak period of the technology bull market, technology stocks made up a whopping 30 percent of the stock market's value. Now, more than two years after the technology bubble burst, this figure is down to 18 percent. Does that mean it's safe to get back into the technology market? Maybe - if you have realistic expectations and you look in the right areas.
What sort of expectations are "realistic"? No one can say for sure, but it's safe to say that returns on technology stocks won't be as astronomical as they were in the late 1990s. The conditions that led to those returns - in particular, the almost blind faith in the upside potential of unproven Internet firms and emerging telecommunications companies - are gone. Furthermore, the Enron debacle has spurred many investors to look for companies with solid balance sheets, real earnings and reasonable growth prospects.
You can find these types of companies in the technology sector. But they're clearly not the same businesses that were once so "hot." And it's not just the "dot-coms" that have cooled. Personal computer hardware and networking, two of the biggest winners of the 1990s, are going through tough times. Part of the reason for this is saturation - people simply don't need to buy as many new personal computers, because they've already got them. And, at the moment, there isn't a dominant new technology application that's spurring huge new investments.
So, where should you look for technology opportunities? You can start by considering the broad area of communications. For example, the long-term prospects are generally good for companies that manufacture cellular phones. Furthermore, we may not be far away from a reliable and affordable "all-in-one" device containing wireless phone and e-mail capabilities.
The heightened awareness of the need for security may provide another avenue for investing in technology. Many companies have boosted spending on computer security and storage products, including network firewalls to keep out intruders and virtual private networks (VPNs) to build secure, Internet-based environments for their employees. Businesses have also begun investing heavily in "dynamic data backup," a technology that allows information to be copied in a second location almost as soon as it is created.
Ultimately, the long-term outlook for communications and security could spearhead new momentum in technology investing. It won't be like the "go-go" 1990s - but these opportunities won't go away so quickly, either.
Eisinberg is a financial consultant at RBC Dain Rauscher in Phoenix. The opinions expressed are those of Eisinberg and do not necessarily reflect those of the firm. RBC Dain Rauscher is a member of the NYSE and SIPC. For further information please contact Eisinberg at 602-508-7863 or toll free at (888) 595-4166.
|
