From The National post today (Canadian)
nationalpost.com
«Volatility in emerging growth stocks will continue and investors have to do their homework not to be caught offside, says Richard Groome,
president of Groome Capital. com Inc. in Montreal.
"The flow of funds into these high-growth tech stocks is fickle; if a company disappoints, money exits rapidly and the stock takes a beating,"
says Groome.
The increasing number of day traders and momentum players in these stocks is heightening the volatility, he says.
Groome Capital, a full-service Internet brokerage firm, focuses on growth stocks in such areas as health sciences, information and
communications technology, retailing, and consumer and industrial products. Its recommendations are aimed at investors with above
average risk tolerance and diversified investment portfolios.
Groome remains bullish on these emerging growth companies over the long haul "as many are pioneering new ways to do business." The
growth is certainly there, he says. "The question is what price do you pay for that growth?"
In the column of March 23, Groome suggested, in what turned out to be excellent timing, that investors continue to take profits selectively in
tech and biotech companies that had experienced high gains. These stocks subsequently corrected sharply. For example, in that column, he
identified BCE Emergis Inc. (IFM/TSE), an Internet software company, as a "sell" candidate. At the time the stock -- which closed recently at
$89.45 and trades in a 52-week range of $189.50 to $26 -- was trading at $121.
He stresses that it is important not to buy the right stock at the wrong time and suffer losses. His brokerage looks to technical analysis to
help with timing entry and exit points. This analysis is combined with fundamental financial analysis of the company "to get a comprehensive
reading on the stocks," says Groome.
Its technical test looks at the stock's 50-day and 200-day moving averages. If the price breaks through each of these averages on the
upside, it is taken to be a "buy" signal; if it falls through each of these averages, it is considered to be a "sell" signal.
For the column, Groome has selected:
Mitel Corp. (MLT/TSE) $27.60 ($48.25-$10). Based in Kanata, Ont., this company designs and makes semiconductors, systems and
subsystems. It has 20 years' experience in traditional telephony technology and is now building on that to develop next generation
components, says Groome.
"Mitel is well positioned to become a leading provider of semiconductor components and systems for the telecommunications industry."
Groome's 12-month price target on the stock is $58.»
When you look the rest of the tech stocks a drop of less than three Canadian dollars in a week it is not so bad....
Bye
Jacques |
