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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Stephen who wrote (31772)	10/2/2000 9:31:23 PM
From: PMG	Read Replies (2) \| Respond to of 42787

<Message #31775 from Stephen at Oct 2, 2000 6:31 PM Don, or, I guess, anyone who can remember (given that my memory's so bad ...), previously there have been a few discussions about the 'tech generals' needing to undergo correction, before a new tech bull run can continue. Isn't that the case now and if so ... perhaps its not such a negative thing for the market as a whole ??. Secondly, in recent decades there has been a new sector which led the market forward. If that is the case and technology was the sector for the '90's ... perhaps the historical lesson is to reduce tech & head elsewhere. I know biotech, the financials, utilities & alternative power stocks have been top performers ... but is it possible that these have the fundamentals to fuel a prolonged bull market if tech falls by the wayside ??. If anyone has any thoughts I'd appreciate them. I've been vacationing/taking a break from the markets for a couple of months ... and, mentally, am still groping around for some kind of footing that doesn't threaten to swallow me up !!. TIA Stephen >> I think it's not very helpful to say that before a new bull run the old leaders have to be slaughtered. Why? Great companies great products. I think it is more the fact that the greatest % growth in a companies life is when it is very young or just founded. In an early stage growth can be 10-fold or a hundred times e.g. when the founder becomes CEO of a 100-people payroll firm. I think the problem is just that the once young dynamic companies CSCO, YHOO, AOL etc. have reached a size that does no more allow the same % growth. Another natural effect is that all these once first movers have got competitors now which limits profit potential. As growth of these WILL slow down so will the stock prices of them if this has not be discounted by the market. In the long run a stock will have an expected return that is very close to its true profits. An the older a company is and the more mature it is the easier future profits are to predict. So every stock will and up at more or less the sectors typical p/e. So what can the bulls do? Look for young companies that are just about to start their high growth period. The problem is that they have become less visible, much harder to indentify. I think tech, networks will still be the topic for the next decade (like new fields like alternative energy, biotech, etc.). The difficulty is now that when the internet mania started there were like 50-100 firms that were 'hot' just because they were in the internet biz... These are the "generals" that are slaughtered today not because they don't do good anymore but because of maturity. Now we have thousands of tech companies which we have to examine to find the new stars. So, the perception for the market is that they are not there, there is now future and there is fear of a bear market. I think the next bull market will start when enough of these new stars are indentified and maybe this is the reason why the old ones have to be forgotten first. What would be very helpful was if e.g. some new indexes would be set up. These new indexes would indeed double, triple again very quickly because of the high visibility. one possible conclusion: cash in on the old stars, do very good -fundamental- research to discover the new ones. Maybe it helps to look at stocks where IPO is not too long ago, market cap is still small, potential is great an the best minds are engaged in management, venture capital etc. But beware of "marketing"-stocks which are just styled to look good. So the chart should be upwards stable but better a little boring... E.g the younger iix performs much better than the dot... This is my guess at least... Regards PMG