Hot Stocks
Mon, 31 Aug 1998, 1:38pm EDT
Dell, Intel, Tech Shares Fall on Heightened Economic Concerns
New York, Aug. 31 (Bloomberg) -- Dell Computer Corp., Intel Corp., Cisco Systems Inc. and many other technology stocks tumbled today amid concern that slowing global economic growth could hurt sales of computers and related equipment.
Dell, the No. 1 direct seller of personal computers, tumbled 11 5/8 to 107 1/8 in early afternoon trading of 26.0 million, making it the most active stock in U.S. markets. Cisco, the top computer-networking company, fell 8 1/4 to 86 7/16, while Intel, the world's largest computer-chip maker, slipped 3 1/2 to 73 1/2.
Sales of computers and the hardware and software that go with them often slow when economic growth falters. Many investors are concerned that the crisis in Asia, where many economies are in recession for the first time in decades, will bring an end to the U.S. expansion. Given that possibility, many technology shares are too highly priced, investors said.
Growth in gross domestic product ''is weak, and these stocks are expensive,'' said Bill Fleckenstein, president of Fleckenstein Capital Inc. in Seattle, which manages $50 million. ''There is nothing more GDP-sensitive than technology.''
Fleckenstein said he's been expecting technology shares to fall for some time because investors had driven them to unrealistic heights. He's been selling short Intel, International Business Machines Corp., Micron Technology Inc. and others.
In a short sale, an investor borrows shares and sells them, betting that the price will fall. If it does, the investor is able to buy the shares back at the lower price, repay the loan and keep the difference in price as profit.
Technology shares fell along with the rest of the U.S. market. The Dow Jones Industrial Average tumbled 156.54 to 7895.14, wiping out in a matter of weeks all the gains it had made this year. The index is down about 15 percent since July 20, when it reached a record high of 9367.84. ''Investors are treating equities like nuclear waste,'' said Ashok Kumar, technology analyst at Piper Jaffray Inc.
Kumar said he still has a ''strong buy'' rating on both Intel and Dell. Still, he said slowing economic growth could change his outlook on the companies. Personal computer sales often slow when the economy weakens.
Other technology stocks also fell. The Philadelphia Stock Exchange's Semiconductor Index, an index of 16 chip companies, fell 10.06 to a 200.91, its lowest since November 1996.
Is Mr. Kumar about to change his mind !!!!!!! |
