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The Coming Return Of Tech?By
Monday, June 12, 2006
Early this decade, when I first starting predicting a real estate and commodities boom, nobody wanted to hear about it... Back then, all anyone wanted was the latest hot tech story. Oil and gold were dead. Now, it seems, things have switched completely... All you hear about are real estate and commodities. Tech has been left for dead. The thing is, I like “left for dead assets.” That’s why I started recommending real estate and commodity plays starting in 2001. And that’s why I’ll no doubt be recommending tech plays some time in the future. Before I explain, take a look at this 10-year chart of Microsoft...
I don’t know about you, but the first thing I see is the tech boom of the late 1990s. It’s where the stock price of Microsoft “goes parabolic.” The next thing I see is the horrendous price action in the last six weeks (shaded red)... Yeesh! Microsoft is getting darn close to 8-year lows! It’s getting a bit absurd... Microsoft is a near-monopoly that earned an enormous 32% profit margin last year. Yet it’s trading at a forward P/E of 15... the cheapest it’s been in twenty years. You can’t find a business anywhere with that kind of long-term profit margin, for that cheap a price. Actually, you can... just look at the other old tech lions. Intel, for example, has a profit margin in excess of 20%, and a forward P/E of 14. Some day, investors will return to these tech shares and ones like them. The old kings of the dot-com era – which were so loved then, and so ignored now – will no doubt have their day again. Unfortunately, it surely doesn’t look like we’re there yet... The chart of Microsoft looks just like the charts of all the other old kings... a nasty downtrend approaching 8-year lows. Yet in general, these businesses have continued to grow year after year. If this isn’t a value now, it should be soon. Tech was once loved. Now it’s ignored. But with the disastrous looking charts and an investing public that has no interest in these things, there’s no hurry to buy just yet. Stick with us, and I’ll let you know when the time is finally here... Good investing, Steve Market NotesNEW HIGHS OF NOTE LAST WEEK Wells Fargo (WFC)… U.S. mortgage giant NEW LOWS OF NOTE LAST WEEK Home Depot (HD)… home improvement bellwether New Low of special note: Of all the foreign markets getting clobbered right now, Turkey may be the biggest loser…For example, let’s look at the Turkish Investment Fund (TKF). After racking up a big gain in the past year, this ETF of Turkish companies has declined a whopping 43% from its 2006 highs. Turkey: the leader in “submerging markets” (1-year chart):
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