Tech Stocks No Bargain
That may be true.
Not that it surprises me one bit, but that article failed to cover the territory of technology value chains, dominant players, location of the technology adoption life cycle and used coined phrases like "The financial graveyard is littered with leading tech stocks of yesteryear that are no longer around. When the turn comes, it is usually a new group of stocks that leads the way." They listed a number of companies that, in spite of the location of the current business cycle, have yet to complete the full gamut of their TALC's. It is interesting to ponder the thought that sometimes at trough earnings when doubt is at peak levels, multiples reach new heights in anticipation of an earnings recovery. Maybe this time the market is dead wrong yet again and plenty of those multiples will be corrected. Time will tell. Microsoft, Intel, IBM, Oracle, Texas Instruments and many other large cap technology stocks certainly survived previous business cycles and marched on into the future only to face the current business cycle yet again.
I agree that there is no guarantee a former leader in a previous bull market will be a leader in the next bull market. Yet, within technology, we must study the TALC and value chain of each particular game before making blanket statements that they will all be litter in the financial graveyard. Yes, some will. And yes, some will not be as dynamic leaders in subsequent bull market activity in terms of share price appreciation. Yet, before making such blanket statements - I would take the time to research the current innovations and the horizon of what is on the map at the moment for unseating the technologies currently in their TALC's. How about the strength of certain value chains and category leaders? Will Dell, EMC, Microsoft, Intel, Applied Materials, Siebel, IBM, etc... survive?
Value players would have been focused on small-cap tech over the past three months where gains have far outpaced the large caps and market multiples were quite a "bargain" compared to the Cisco, Intel, Microsoft, Qualcomm, Siebel, Oracle, Sun, Dell, Micron, Texas Instruments, IBM, EMC, Nokia side of the equation. Yet, those 'values' were in many companies that most likely will be "litter in the graveyard of technology" in the future.
The larger question remains why the market pays a multiple premium for a large cap category leader including the companies we title gorillas on this thread? Although there were screaming bargains available in the small-cap tech arena - who is going to be left standing around years from now using the criteria we apply via the gorilla game? A Microsoft or a Marimba? A Siebel Systems or a Saba Software? An Intel or a Silicon Graphics? Is the premium worth the price? Or is owning those value plays off their lows a risk worth taking?
The Nifty Fifty in aggregate, purchased at their heyday multiple heights and held through to today have beaten the S&P. What is the possibility and the risk/reward scenario that a Microsoft, an Intel, a Cisco, a Siebel will be around over the longer haul and reward investors? How about the others they mentioned - Dell, Sun, Brocade, Veritas, Broadcom, PMC-Sierra? All unseated graveyard litter, or is there anything in their TALC's and value chains that suggest a future?
What really would have impressed me would have been for them to say they loaded up on shares of all of those near their lows as they saw value. Did they buy Microsoft at $40, Intel at $18, Cisco at $11, Dell at $16, Siebel at $12, Brocade at $12, IBM at $80, etc...? No way. They were simply too overpriced for them just as they have always been since these companies went public. There is a great difference in the valuations in today's prices from those low prices. I admit to that and remain curious about the move from then to now.
What's Mario Gabelli touting these days?
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