This dude has been reading you guys ... <g>
thestreet.com
Big-cap tech stocks are stretched. Ever-larger index funds, closet indexers (like
Fidelity Magellan, perhaps) and even value funds (the Legg Mason Value) keep
buying the S&P 50 and the Nasdaq 20. These are great companies, but multiples
of 50 to 75 times earnings mean they are stretched like a huge rubber band that
most people think is going to fly across the globe.
The risk, of course, is that when it snaps back, it is going to hurt a lot of fingers. In
other words, when index funds stop working, the unwinding is going to be nasty.
Fundamentals (except for Dell (DELL:Nasdaq)) seem fine -- just don't expect 25%
to 50% annual returns from large-cap tech stocks.
Speaking of Dell, it's funny that the Street still doesn't know what went wrong
there. But it's clear that the company's growth, which was in the 50% range, is
falling to a range of 30% -- and only 7% on a sequential basis. The former
supported a stock price of $110 -- the latter, maybe a price of $40 to $50 a share.
Don't get me wrong, Dell is a great company, and judging from the overflow crowds
at the Goldman Sachs technology conference, Michael Dell is a rock star for
people who wear ties. But when you are priced for 50% growth, there is zero room
for error. |
