Jim,
This article from the LA Times by Tom Petruno is a week old so the prices don't reflect this weeks trading. In case some Q* holders are getting nervous about the strong move up Sun Microsystems has been a momentum stock for the last five years and continues to outperform.
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Consider the case of Qualcomm Inc. (QCOM), the San Diego-based company that has developed what many analysts expect will be the future standard for wireless technology in cellular phones and other devices.
Investors didn't pay much attention in 1997 and 1998 as the company's sales and earnings mushroomed. At the start of this year Qualcomm's shares were priced at just $26 a share.
Now the stock is at a record $294.38. Momentum? And how! But when the price hit $62 by April, many investors surely thought, "That's too much." Others said the same thing when the stock hit $156 by August (and a price-to-earnings ratio of 126).
At nearly $300 a share now, who was the greater fool--the person who bought at $156, or the person who stayed away?
"Just wait!" Qualcomm's detractors will say. The company has only begun to feel competition from Motorola, Intel and other giants. The stock will never sustain these heights, they say.
They may finally be right. But if the momentum buyers today have taken Qualcomm too far, those who played the game in the spring were recognizing that the stock's potential was at that point greatly underappreciated by the market.
The same could be said about many other hot technology stocks this year--fiber-optics firm JDS Uniphase (JDSU), which has zoomed from $27 to $197 in 16 months; data-storage-management software firm Veritas Software (VRTS), which has risen from $25 to $108 in the same period; and computer networker Sun Microsystems (SUNW), up from $25 to $109 in that period.
Sun, in fact, has been a "momentum" stock for much of the last five years. Is this, finally, the peak? We'll know only in retrospect. But even if Sun's run is over, a horde of new tech stocks is certain to replace it in the momentum game.
The point is, when investors are hungry for growth stocks, what starts as a fundamental stock story can quickly become a momentum story--and continue for far longer than most investors can imagine. It takes guts to own such stocks--and to stay with them--but the rewards well explain why many investors are willing to take on the risks. <<<
cdaisey@readin-the-times-in-la-la-land.com |
