Melancholy was palpable last week among investors who reminisced on the
five-year anniversary of their doomed love affair with the Nasdaq. The
tech-rich index remains down over 50% from its record close, and is also down
for the year. As often the case on Wall Street, there is little consensus on
where tech stocks are headed. In the bullish camp, Standard & Poor's Sam
Stovall told Dow Jones that 55% of techs in the S&P 500 have fallen on the
value side of the index, rather than the growth side. UBS' Pip Coburn agrees,
saying in The Wall Street Journal that "tech stocks are at their cheapest
since 1997. I'm not going to suggest that on a long-term basis these stocks
are cheap. They are just less expensive than they have been in a long while."
Another positive for the sector is investors' hard-to-shed habit of
automatically associating "growth" with "techs," adds Mr. Coburn. However, the
analyst also notes that the next area of innovation, or growth, may not come
from the tech sector at all, but possibly energy or life sciences. He also
worries that while foreign analysts have become more cautious in their
outlooks for techs, U.S. analysts' projections remain high. Further, even
though the sector has made little progress lately, worldwide large tech stocks
are trading at around 21 times expected earnings, whereas large stocks in
general trade at only about 15 times expected earnings. High oil prices are
also fuelling worries that corporations and individuals will curb their
spending. In addition, techs remain volatile, being the first ones to jump in
good times, and the first ones to be dumped in bad times. A further sign of
uncertainty is that Wall Street prognosticators are no longer forecasting new
highs for the Nasdaq any time soon. Mr. Coburn, Harris Private Bank's Jack
Ablin and Smith Barney's James Tobias Levkovich do not see another peak until
15 years, a dozen years and at least seven years from now, respectively. A lot
can happen from here to eternity ...
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
back to top
