I think MarginMike makes some good points, such as the issue that the high multiples we have enjoyed in the recent past were based on an outlook for high growth, and that if the high growth fails to occur for a couple of years, then the high multiples will contract.
As he also notes, one counter-balance to this effect would be if interest rates were to remain very low for an extended period of time, since lower interest rates can justify a higher PE.
It is difficult to choose how to invest in this environment, when some signals look positive, and yet there are also some very serious negative elements. Although, perhaps this is just a new manifestation of the 'wall of worry' that Bull markets need in order to exist.
My approach is to remain invested in QCOM, since they have a good prospect to grow at a high rate over a long period of time, and the PE probably will fluctuate, but the growth trend will allow it to generally rise even in a difficult environment.
I don't think one can say this about many of the other tech stocks, such as sunw, jdsu, emc, ntap, lu, nt, csco, intc, dell. Their growth prospects may improve, but there certainly isn't much visibility on that growth, and it may be that when growth does return, these companies may not be well positioned to participate, either due to technology shifts or continuing weakness in their area of expertise.
Robin |
