Last week, techs barely budged, with investors apparently waiting for a
key catalyst other than the ongoing flow of mixed-to-positive earnings reports
and outlooks. Christopher Baggini, of the Gartmore U.S. Growth Leaders fund,
is looking out for firms consistently offering earnings-estimate increases.
"We believe in the cockroach theory. You never just see one earnings
revision," he told Dow Jones. Taking another approach, Piper Jaffray's Brian
Belski observes in The Wall Street Journal that hedge funds' relative
skepticism so far in the month may be a bullish signal for stocks, suggesting
that investors still are sitting on free money that they will be able to
invest if and when they turn more bullish. Skepticism may not be out of place,
though, in light of recent January retail sales data. While overall sales
declined less than expected, thanks to strength in most sectors, demand
dropped 0.6% at electronic stores. Another source of uncertainty, albeit for
the medium term, is the impeding application of the stock option expensing
rule in June 2005. According to studies, expensing could have reduced
operating income by 44% among the Nasdaq 100 companies in 2003, much more than
the 8% reduction that could have impacted income from S&P 500 firms. On the
bright side, companies have started to take steps toward curbing the offering
of options, using a variety of strategies, such as the granting of fewer
shares of restricted stock. Among the advantages, companies will incur no cost
for stock grants that never vest because an employee quits or a company fails
to hit its performance targets, explains BusinessWeek. Also, unlike options,
stock can never become completely worthless. Further, since stock is worth
more than options when it is granted, companies can award fewer shares,
allowing them to reduce dilution rates, a problem that has bugged
institutional investors, especially tech investors, for years.
High-Tech Monday Update is provided courtesy of Thomson Financial. This
information is believed to be true and accurate; we take no responsibility for
inaccurate information and reserve the right to update our reports. For more
information, please visit our web site at http://www.thomson.com/financial.
SOURCE Thomson Financial Corporate Group
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