Stock Smarts: A Tech Resurrection?
The tech sector has been a losing proposition in a big way since the Nasdaq bubble burst more than two years ago. But if you don’t know what to look for ahead of a comeback, it could pass you by.
So what are the early signs of a tech resurrection, and when are we likely to see them?
Jim Seymour of Realmoney.com does not think that tech is dead, but that it is dormant. He says that one of two things need to happen for a turnaround: either new and exciting uses for PCs have to be developed, so that people will want to upgrade their systems, and/or we need to see a return to corporate buying from IT (information technology departments).
Dagen McDowell from Fox Business News says that there was so much corporate spending on tech in the 1990s, companies now have more than they need. She says bankrupt companies are selling off a lot of their tech equipment.
Hilary Kramer of A&G Capital agrees that the build-up that occurred from heavy IT spending in the 1990s is weighing the sector down. Right now she believes many tech stocks are overvalued.
Jonas Max Ferris of Maxfunds.com says it boils down to job creation. When more jobs are added to the economy, more technology spending will have to occur (as new employees will need new computers). Until the economy fully turns around to the point of adding new jobs, the tech sector will struggle. When no one wants to be in tech, it might be the time to jump back in.
Jonathan Hoenig from Capitalistpig Asset Management says there is a difference between a company and a stock, and just because a company is successful does not mean the stock will do well. He doesn’t have much faith in the tech sector right now (especially big cap tech). He would rather investors focus on things that are doing well, like gold stocks and REITs.
The Right Price!
Microsoft, Cisco, Intel and Dell: tech’s four horsemen. They are all down more than 50% from their all-time highs. So what are they worth now?
All-Time High: $119.13
Hilary would buy MSFT at these levels. Jonathan does not like the stock, consistent with his disdain of big cap tech stocks. Jim thinks that MSFT is a “safe” place to hide within the tech sector, and anywhere below $50 is a good price to buy.
All-Time High: $80.06
Jim would not get into CSCO at this level. Hilary would buy it under $10. Jonathan says CSCO is a good play for traders and short term investors who should nibble around the $20 level. But this is not a play for long-term investing.
All-Time High: $74.88
Jim would stay away from INTC because it is dependent on resurgence in demand for PCs, and that’s not happening right now. Hilary says to stay away as well. Jonathan would think about taking a sniff at $10-$15, but it is still not a favorite of his.
All-Time High: $58.13
Jonathan likes this stock the most of the four, but still says it is a trader’s stock, and not an investor’s stock. Worth a look at $28-$32. Hilary says she’s annoyed by the Dell “dude” from the commercials, and she doesn’t like the stock. Jim says Dell is a trade play under $25, and not an investment play.
Mutual Fund Face-Off: Best Fund For Baby?
A renewed sense of appreciation for home and family following the events of September 11 is showing up in the form of a mini-baby boom. So for those preparing to welcome a new bundle of joy, there is no better time than right now to start investing in a mutual fund for the baby’s future.
Dagen and Jonas picked out a couple of funds they think makes sense for newborns.
Dagen: Vanguard Total Stock Market Index Fund (VSTMX)
Minimum Investment: $3,000
Expenses: for every $2.00 for every $1,000 invested
Year-to-date (through 5-31-02): DOWN 5.1%
Jonas: Fidelity Global Balanced Fund (FGLBX)
Minimum Investment: $2,500
Expenses: $12.70 for every $1,000 invested
Year-to-date (through 5-31-02): UP 3.3%
Dagen and Jonathan wrapped up the show by answering some e-mail questions
Question: “What is the true value of Oracle (ORCL) in your opinion? Is it near a buy level?”
Dagen: You do not need to buy this stock, as corporate spending on tech needs to comeback for ORCL to move up. And that’s not happening soon.
Jonathan: This is the kind of stock that will be sold off big time at the end of the year for tax losses. Just not a good stock.
Question: “I bought 1000 shares of Liberty Media (L) at $13.25 last March. What's your outlook for the stock over the next 12 months?”
Jonathan: Liberty is not setting me on fire right now. It’s this big conglomeration of companies – so why not just take a look at some of the specific companies that are under Liberty’s umbrella, like Motorola (MOT).
Dagen: This could be a $15 stock – they own QVC, and people are shopping.
Question: “Should I switch my grandchild's savings from Stein Roe Young Investor to Vanguard's Wellington fund, which has more bonds?”
Dagen: Lorinda has the strategy right. Move some of the money into bonds – and the Wellington Fund is a good choice.
Jonathan: Foreign bonds are worth a look.
Question: “I'm looking at Summit Properties (SMT)? What do you think, and could you recommend some other REITs?”
Jonathan: I still like the REITs, and Summit is pretty good.
Dagen: Summit lowered expectations recently, and the stock dropped off a bit. It probably won’t make much of a comeback.
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