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Thursday, 15 March, 2001, 10:21 GMT
Tech stocks: Is now the time to buy?
A year ago it seemed that a company merely had to put dot.com after its name to see its stock market value soar.
Millions got rich quick as the share prices of companies such as Amazon, Yahoo, Vodafone, EToys and QXL soared. Lastminute, the UK's highest profile internet company, floated a year ago where disappointed people were given just over £150 worth of its shares priced at 380p.
But then the bubble burst. Those same Lastminute shares are now worth about 57p. Dozens of other technology firms in the US, Europe and Asia have lost more than 90% of their value.
Amazon's founder Jeff Bezos says that individual investors should steer clear of buying shares in technology firms. But is he right?
Do you think the value of tech firms can go any lower? Is the decline in their stock market value being overdone, in a reversal of the herd mentality which pushed their values so far during the bubble.
This debate is now closed. Read a selection of your comments below.
Robert C, UK
As a small investor I look everyday with dismay at my growing paper loss.
But the new economy is the future and it is transforming our life every day. Because of this I can write this message.
This is just a market adjustment and the small investor is reaping their rewards for buying stock at three times its actual value just to say they have it. Now they are getting what they deserve and we are all paying for it.
Anil Vadgama, Watford, UK
Tech stocks will undoubtedly make
a rebound. Market wisdom holds that
you buy low and sell high. So with
tech stocks so low, now is the time
to buy and sell later when they're
high. What goes down must go up.
Every time you think the market has reached the bottom, it goes down yet another notch. I don't feel that this is the right time to buy back into techno stocks - there's more blood to be shed yet!!!!!!!!
Internet stocks are like Alice and the looking glass. The only thing worth money is the frame in which it sits.
Simon Eaton, UK
I would wait for a good few months
and see how the markets react.
The best strategy would be to
invest in decent tech/ telecom
stocks for the future i.e. Cisco
Systems, Microsoft, Vodafone,
Orange etc, not the smaller ones
liable to go bust.
I work in the IT industry - all the Cassandras that wring their hands and predict the long-term failure of dot.coms and e-business are missing a trick. Sure we've seen many failures, but this is only to be expected at the beginning of a new business paradigm. Give the industry time to shake out, and don't assume it's a flash in the pan. The internet is a Pandora's box which we can't - and shouldn't be trying to close.
Ade Cole, UK
In 1996, the NASDAQ stood at approximately 1000, and now it is around 2000. That's equivalent to an interest rate of almost 15%, which is a lot better than any cash account. Looking from the long term perspective, buying into a Nasdaq tracker will give you a better rate of return than an FTSE-100 tracker, which has averaged approximately 12% since its inception. The market instability is making a lot of people uneasy, but the long term view is still sound.
Now is the time to have cash. Don't touch the sector for at least six months.
Take a look at the big Crash of '29. Share prices, even in gilt-edged companies collapsed. As the small investors escaped with what they could the big investors, with the odd million or two to spare were snapping up huge chunks of shares in companies that they knew would weather the storm. Result? Within 5 years stocks that had traded as low as 5 cents were hitting 15 dollars and the big investors reaped the benefit.
Today of course 5 years is "long-term" and modern investors judge performance in months...
Andrew Herd, England
"Is Tech Stock worth buying?"
That depends on what you define as
"Tech Stocks".... If you are thinking
only of internet-related stocks, then
the answer is "NO WAY". The failure
of these internet businesses is that
they had no "offline" capabilities, and
therefore lost out when established
companies in the same business
However, there are other "High-
Tech" stocks that have nothing to
do with the Internet. These stocks
should have a good number of "good"
products that could succeed in the
market and bring fruits to their
The important lesson here is that
the companies that survive and
succeed in the end are those that
provide real service to real customers,
and have real knowledge of the
market it is in.
Being a US based investor who stayed out of the tech market for so long, I ask to those who invested in it....what exactly did you think you were buying when you paid 110x earnings for a company that was just a name?
This is only scene one of a three act collapse.
Noah Smith, United States
Only the greedy and stupid will back the so - called new economy tech stocks. The old economy stocks may not be sexy but represent far better value.
The purpose of a public company is to make a profit for its share-holders..FULL-STOP! The vast majority of dot com companies never had a single profitable year to date. Is it any surprise now that the bubble has burst? And there is little customer loyalty online, so don't even talk about gaining a large market share, (as some of the excuses made).
Derek Wong, Hong Kong
Technology is the future whether we like it or not. I would say now is a great time to buy.
The same rules apply here as with any stock - look at the underlying fundamentals. The concept of no-one investing in high tech is as sheep-like as everyone leaping in. Use your brains!
The recent crash in dot.com shares can be seen as a good thing. Since not only does it bring business down to more realistic levels, it also flushes the weaker internet companies from the market. Recent reports of "Bricks and Mortar" companies buying dot.coms at rock bottom prices show that there is a wide belief in the internet. After all, it is here to stay! And it is these companies that will ultimately win.
I wouldn't trust any stock which
depends on on-line advertising for
revenues. I don't look at the adverts,
so why should anyone else? Oh, and I
wouldn't trust any UK registered
company which is making a profit - it
may get stung with a windfall tax!
Whilst the tech market will undoubtedly recover, we must expect a period of consolidation.
Many of the 'dot.coms' will disappear, their markets absorbed by major e-players like IBM and EDS.
Thus the IPO focussed market will fade away, and the internet will become a commodity, dominated
by global companies who can generate economies of scale.
In short, good technology isn't enough anymore - it takes solid business sense to succeed.
Richard Robertson, UK
Unfortunately I am of the opinion that one day we won't have dot.com enterprises listed at all. Its a bit of a flash in the evolutionary pan. They will be overtaken by a new breed of integrated e-commerce stock that will have in-built stability from the lessons learned previously. Goodnight lastminute, good morning well-planned.
I do not believe that the tech sector is in terminal decline. The tech sector has merely done what is termed a 'retracement' and is still going up, if you are a long-run investor. If one understands that the tech sector is merely coming down from levels that resulted from irrational exuberance and rampant speculation, back to levels that are a better depiction of fair value, then you will recognise that the current period is one of unquestionable bargains. To make the analogy clearer, its currently like being in the post-Christmas sales period.
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