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Are there any safe bets in tech sector? Headlines
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03/14 12:27
By Timna Tanners
LOS ANGELES, March 14 (Reuters) - There are no guaranteed safe havens in the rough-and-tumble world of technology stocks, fund managers and analysts say, but some ships are sturdier than others in stormy Nasdaq waters.
With the Nasdaq down more than 60 percent from a year ago, many investors are eyeing downtrodden technology stocks and wondering whether to stay on the sidelines or look for some gems amid the ruin.
"No matter whether we're in a bull or a bear market, calling anything a safe haven in the tech sector doesn't really go together," said Jeffrey Van Harte, portfolio manager with Transamerica.
By definition, many technology issues are risky, as technology can become obsolete, he said, and often requires gambles on which standard or new consumer product will become popular with the mass market.
But technology companies have been especially battered by the recent economic downturn, which first hit hardware makers and spread quickly to the entire sector.
While Internet companies have been among the hardest hit, in recent weeks even some of the biggest names in technology -- Oracle Corp. (ORCL) and Cisco Systems Inc. (CSCO) -- said the slowdown was hurting their business and saw their stock prices fall to near 12-month lows.
To make matters worse, the market has continued to punish tech stocks in the absence of a clear path to recovery.
"We still suggest an underweight position in this sector until there is greater visibility," J.P. Morgan global equity market strategist Thomas Van Leuven said.
When pressed, analysts and fund managers recommended a few sectors they viewed as sturdier than most.
Some suggested buying strong companies that have been battered to attractive levels. But there was little agreement on stock or sector picks.
"It's not so much that I don't think you can make money at these levels. It's just, short term, who knows?" Van Harte said.
THINK LONG TERM
Computer data storage leader EMC Corp. (EMC) was a popular long-term pick, especially at its range this week in the mid-30s. Shares of EMC have fallen from highs last fall of over $100.
Analysts noted that even in a weaker economy, data will grow and companies will need to store it.
Also popular were contract manufacturers, which make everything from computer chips to mobile phones for the name brand companies and are becoming a popular option for companies looking to outsource components and hardware parts.
In January, Flextronics (FLEX) announced its largest deal ever, making mobile phone handsets for Ericsson <LMEb.ST>(ERICY).
Contract manufacturers such as Flextronics and Celestica Inc. <CLS.TO>(CLS) are seen benefitting, as companies increasingly look to cut costs in a weak economy by outsourcing.
A few software companies were mentioned as standouts. Wit SoundView chief technology investment strategist Arnold Berman mentioned companies that facilitate business over the Web. Among them are network security firm Check Point Software (CHKP); Web business software company BEA Systems Inc. (BEAS); inventory and purchasing software firm i2 Technologies Inc. (ITWO); and customer relationship management software company Siebel Inc. (SEBL).
Some fund managers were reluctant to endorse an entire sector, but preferred to recommend strong stocks that would survive the economic downturn and were priced at a discount.
"We're looking for companies whose price-to-earnings ratio on a growth rate basis has come back down to fair value levels," said Samuel Jones, senior vice president and portfolio manager of Trillium Asset Management in Boston.
Jones said EMC, Sun Microsystems (SUNW) and International Business Machines (IBM) (IBM) fell into that category.
"Three to four years from now we are going to say, What were we thinking, selling at these price levels?," Jones added. |
