Those charts are fabulous. Wonderful work. I can't wait to see the updated information. I believe that the semiconductor industry remains at the core of the technology sector itself. Future good times will lead to large gains based on past performance. I am hoping to properly time my entry into this cycle because I see conservative gains from the bottom at 5 times my money with the hope of seeing a factor of 10 return.
Here is a recent article out on what some fund managers are hoping for and what I also believe to be true. Although I am uncertain that the NASDAQ will hit new lows I do believe we have another couple weeks of selling before I would consider buying:
biz.yahoo.com
Some portfolio managers wait for techs to drop again
By Thi Nguyen
NEW YORK, April 26 (Reuters) - Three weeks ago, money manager Gregg Summerville was waiting for another 30 percent drop in the tech stocks he wanted to buy for his $500 million investment portfolio.
Now, after a 25 percent jump in the tech-laden Nasdaq Composite Index (^IXIC - news), those same stocks have moved even further away from prices Summerville and other fund managers find attractive. The surge is too much, too fast, Summerville, a portfolio manager with Columbus, Ohio-based Kirr, Marbach & Co., and others say.
``(This rally) is troubling me,'' said Mike Weiner, who manages about $6 billion at Banc One Investment Advisors. ``I would call it healthy'' if tech stocks had moved up in a gradual manner and then found their comfort level.
The stock market, which hit fresh two-year lows on April 4, hasn't bottomed yet, Summerville, Weiner and other pessimists say. Tech stocks have a long way to go down because earnings are unlikely to pick up in the slowing economy. And recent interest-rate cuts won't boost corporate spending on big-ticket technology items in the short term, they believe.
Instead of buying, these managers have been selling tech stocks during this month's rally. Weiner is selling RF Micro Devices (NasdaqNM:RFMD - news), a maker of radio-frequency products used in cell phones, and Novellus Systems (NasdaqNM:NVLS - news), a maker of equipment used in the production of microchips, after the stocks jumped 170 and 100 percent, respectively, in the last month.
The 60 tech stocks Summerville is watching, which include software makers Microsoft (NasdaqNM:MSFT - news) and Oracle (NasdaqNM:ORCL - news), and online auction site eBay Inc. (NasdaqNM:EBAY - news), on average will need to fall nearly 40 percent before they trigger his buy signals.
``We'll buy these stocks only when people throw them out,'' said Summerville, whose portfolio this year gained about 1 percent in the first quarter, compared with a 12 percent drop in the S&P 500 in the same period. ``I think as a group, they still have to come back down. New lows are still ahead of us.''
TECH STOCKS NEED MORE PRESSURE
The rally in the Nasdaq sent companies like networking giant Cisco Systems Inc. (NasdaqNM:CSCO - news), which warned third-quarter results would be far below expectations, up 40 percent in two weeks. Cisco also said last week it plans to cut 8,500 jobs and take a charge of as much as $3.7 billion.
``Once we've got through earning season, the market will start to be hostage to economic news and company outlook,'' Summerville said. ``Right now, we don't have any wonderful surprise -- companies keep laying off employees and cutting estimates.''
The market may turn around in the third quarter, as investors start anticipating a revival of economic growth spurred by lower interest rates, fund managers said.
``The market won't be smooth right up,'' said David Rolfe, a money manager at Wedgewood Partners, who oversees about $200 million in assets. ``We'll have a sustainable rally once we're in the third-quarter earning season and have much a better look to companies' outlook for the next year.''
``We haven't bought any tech stocks recently but there are a handful of them where we're waiting for a little pull-back,'' said Rolfe, who is preparing to buy individual telecom and data storage companies when these stocks fall another 10 to 15 percent. ``We prefer to take the risk of getting in early -- it'll be hard to catch up once they've moved.''
Nasdaq's 40 percent loss last year and the sudden downturn in tech earnings has made Summerville and others doubt the growth prospects for technology companies. Summerville now looks at a variety of valuation data of the last 20 years, including price to sale, price to cash flow and price to book to come up with what is historically a good price to buy at.
``We're not doing anything until a stock falls to that level,'' said Summerville, who now also cuts about 20 percent from consensus earnings and growth estimates when calculating stock valuations.
For instance, Cisco Systems, which has already dropped 80 percent in the last 12 months, still needs to drop by half to reach Summerville's buying target of $6 to $8 a share.
``If time passes, and we get some comfort with earnings and growth prospects and see a lot of upside leverage, we'll buy at these prices,'' said Summerville. ``But sitting here today, knowing what we know, there is no way.'' |
