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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 71.08+0.1%Nov 7 9:30 AM EST
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To: RetiredNow who wrote (24452)4/16/1999 4:38:00 PM
From: Mr.Fun  Read Replies (2) of 77397
 
There has been a rotation out of technology and into cyclical stocks, like basic materials, heavy equipment. Over the last couple years, and particularly in the last 12 months, a small population of growth-oriented stocks accounted for an astounding portion of the appreciation in the stock market. This new "nifty fifty" achieved multiples that value managers insist are unsustainable based on realistic earnings expectations. But for at least the last 3 years, valuation has had very little impact on price.

With the violent shift early in the week, momentum players noticed that XON and CAT had the mo and tech did not. They piled on, fueling the apparent change in market sentiment. This could be a significant change or a head fake.

If Asia rebounds and the cyclicals really show strong earnings, the change in sentiment will work against Cisco. Cisco trades on revenue growth, not earnings, and a value-oriented market will not pay 65 times for decelerating earnings. If it is a head fake, we may well return to the growth driven market, and Cisco may make new highs.

At the very least it is an argument for diversification for those who are narrowly invested only in tech or even more narrowly invested only in Cisco.
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