Briefing.com report...
Bearish comments by 3Com's CEO fuelled the tech sell-off, sending the Nasdaq down by nearly 30 points at one point in Wednesday's session... The selling was not confined to the networking sector, as software, chip and computer systems stocks gave additional ground... That was the bad news... The good news,and there was some if you looked hard enough, was the fact that netowrking stocks rebounded smartly off their midday lows... What this suggests is that investors started to do some bargain hunting even in the face of bearish news... While such a move might be considered risky given the group's horrible performance so far this year (many of the stocks down by over 60%), the fact is that the fundamentals for this group remain very good... What has changed is investor psychology... Whereas investors clammored to own networking issues 6-months ago regardless of fundamentals (Cascade at $90, Shiva at $80), they now can't get rid of them fast enough... Again, regardless of fundamentals... Despite the cautionary comments by several companies within the sector the reality is that the market for networking products is projected to grow by anywhere from 30%-50% per year through the end of the decade... So though the group might be experiencing the pains of maturation at the moment, the outlook for the sector remains very promising going forward... That is why these stocks are among the market's most attractive, as most now trade at steep discounts to their projected long-term growth rates... That said, there is no reason to be a hero and buy before the group shows evidence of stabilizing... But patient, long-term investors with a high tolerance for risk are advised to closely monitor this group for (re)entry. |
