while the $ is so low?
Do you mean "while the cost of DSL.net is cheap"? If so, I'd heartily disagree. Not that DSL.Net is cheap--I have no opinion on the company spceifically. My argument is at looking at a dollar amount, without looking at anything else, as being relevant. How many shares are there outstanding? What's the market cap? What are their projected sales and profits going forward? What's the implied P/E? P/S? A stock selling at $60 may be just as likely to double as a stock selling at $3. With the $60 stock you may only be able to buy 20 shares. But they are worth just as much as the 400 shares you are able to buy at $3. [On this point: Some months ago, you could have bought DrCoop.com for $3.50 per share. Last I looked it was below $1, so any buyer back then has lost 3/4 of his investment.]
Looking at it another way: $3 is certainly expensive for a single rose. But, $60 would be really cheap for a greenhouse that would grow roses. Is the company you're looking at likely to wither away like a cut rose, or can it grow and make more and more money in the future?
My advice: Now that you've decided to buy some stocks, don't be in too much of a hurry. Really investigate some companies. Get to know their industries, their operations and their financials. This can take months, but it will be well worth the effort, in satisfaction at your own knowledge, in reducing the risk of that first investment, and ultimately, in picking out superior companies.
Some things I look for, off the top of my head:
1. Superior management.
2. Advantageous market position.
3. Barriers to entry from competitors.
4. Proprietary technology.
5. High growth markets
6. (Placed last, because in the long run it's least important) Low multiples.
I have a short list of candidates for you: CSCO CREE GMST QCOM RMBS SNDK I am NOT advising you to buy any of these, however. I merely suggest that they are worthy of investigation. They are all, I think, making money today, so they won't have to go back to the capital markets.
And also a challenge for you, since you seem to be in a learning kind of mode: Before buying any stock, while you do your due diligence on some companies, read at least one of the following. They're not too hard going:
Gorilla Game, by Geoffrey Moore
One Up on Wall Street, by Peter Lynch
The Innovator's Dilemma, by Clayton Christensen
Living on the Fault Line, by Geoffrey Moore
Best of luck, and pleasant reading.
PS--Oh, and you asked about interest rates: The prevailing wisdom seems to be that changes in interest rates have relatively less effect on the tech sector, in comparison with old line industrials. Techs tend to have less debt, and the rollout of their products would seem to be more time-critical, and less economy-dependent than most other products. For example, the development of the telecom/internet infrastructure will likely continue on its present course regardless of whether we see a recession. The telcos who are building the infrastructure simply cannot afford to stop their buildout, because to do so would risk their very existence. It's not just a matter of short term return for them. It's survival.
That's my thinking, anyway. |
