PALO ALTO, Calif. (CNN/Money) -
Fortune's one and only Andy Serwer recently made such a good point in his CNN/Money StreetLife column that it's worth making again.
To quote: "STOP. LOOKING. AT. TECH!"
Here's what Andy's getting at. Investors -- Serwer included -- fell in love with tech stocks throughout the last part of the 1990s. First the love affair was with the Four Horsemen: Microsoft, Intel, Cisco and Sun. Then other riders intruded, including Oracle, EMC, Yahoo and a host of others.
But those days are gone. We know that. And yet, look at the names investors still love. Pretty much any day you check, the most actively traded stocks on the Nasdaq are Worldcom, Sun, Cisco, Intel, JDS Uniphase, Oracle and Microsoft. Over on the Big Board, the most actives also included plenty of technology: Lucent, AOL Time Warner, EMC, Solectron and Nortel. (Click to see the most actives from the Nasdaq and the New York Stock Exchange.)
As Serwer pointed out, those aren't the big gainers. a list dominated lately by a lot of Old Economy names. (Click to see the big gainers from the Nasdaq and the New York Stock Exchange.) To put a finer point on things, since the beginning of 2001 the Dow Jones industrial average is down about 4 percent and the Nasdaq composite is down 22 percent. And yet, tech stocks -- the meat and potatoes of the Nasdaq listings -- continue to win the hearts and wallets of investors.
Enough already
Why is this? One big reason is that Wall Street put together this huge infrastructure to pump high-tech stocks. That meant lots of analysts, many of them in Silicon Valley, hyping as many stocks as they could. Many of those analysts are gone now, but more than a few remain. And they're still not getting it right. Shares of EMC are down 17 percent in this short year and off 38 percent from their high in 2002. But of the 30 analysts who follow EMC, 14 rate the stock a buy or a strong buy.
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Related stories: Non-tech value
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Ultimately investors themselves are to blame, of course. "Normally the last cycle's winners don't win in the next cycle," says David Shulman, a real-estate analyst for Lehman Brothers and a former market strategist. "But people want to play them because they look cheap compared to the previous boom."
But they aren't cheap. And even if they were, it takes a long time for fallen stars to return. As Wharton School of Business professor Jeremy J. Siegel noted in Stocks for the Long Run, it took nearly a decade for the stocks in the Nifty 50 to come back. And that analysis assumed you owned all 50 stocks, including stalwarts like Procter & Gamble. Many of the techs in that list of 1970s favorites -- like Xerox and Polaroid -- never returned to their former glories.
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RECENTLY BY ADAM LASHINSKY
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And yet, everyone keeps trading, waiting for Cisco's next run toward its March 2000 high of $80.06 (a mroe than 400 percent gain from recent levels!).
Will there still be good technology investments? You bet. Would it be a good idea to consider other sectors (airlines and energy have worked of late.)? Absolutely.
Send email to Adam at adam_lashinsky@timeinc.com.
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