Still At A Crossroads
Despite the Nasdaq 100’s
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tech-rich index is still down more than 21% year-to-date and looks
pretty certain to book its second-straight
losing year. Sour comments this week from Ciena
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helped further cool the tech arena, as both companies
offered less-than-rosy outlooks for 2002.
While tech bears are quick to note that valuations are
still as overvalued as they were
during the peak of the bubble, the tech bulls are just as quick to
bring up the 11 Fed rate cuts we have had in the last year. The bulls
think the flood of liquidity should start
kicking in any time now to juice up
what has been a dead duck of an economy (and create a surge of E to
reduce those high PE ratios). So, here we are
again at a very important juncture
for tech, and once again, both sides make a pretty good case.
The bears point out that because of the rebound in tech,
the average PE of the Nasdaq
100, for example, has soared back up to about 75 on a trailing 12-month
basis and is at a level that simply cannot support share prices.
Keep in mind that this PE level is still that high despite
the Nasdaq 100 being down 66%
from its March 2000 peak. The intermediate-term picture, therefore,
depends on how rapidly earnings can improve.
So is this recent tech rally a house of cards, or is the
market telling us that an
earnings recovery is at hand? The recent price and volume action certainly
supports the bulls, and the big test now is whether the Nasdaq can hold up on a
technical basis. It would be very constructive if the Nasdaq can
get solidly back above its 200-day moving average and not break the nice
uptrend it has held since late September.
If the Nasdaq can’t hold at this level, then we could see
one of those heartbreaking
breakdowns like we saw several times last year. It has been a big
plus, though, that the Nasdaq retook its 200-day moving average and
(briefly) that psychological 2000 level. With
the economy showing signs of bottoming,
and with the wind of 11 Fed rate cuts at our back, it seems that it’s
just a matter of time until we see an impressive economic revival.
Winners Of 2001
So with all the carnage in tech this year, have there
actually been any winners? The answer is yes, and the following list includes
companies that have actual earnings and were
among the top performers in the Nasdaq
100 on a year-to-date basis. Obviously, if they held up well through
this incredibly rough year, they could
potentially be some of the new leaders
of the next bull market (which I think has already begun).
My top-ten tech standouts for 2001 include the following:
|
Company |
Symbol |
PE |
Percentage gain |
| Nvidia |
|
73 |
294% |
| eBay |
|
158 |
110% |
| Compuware |
|
25 |
107% |
| Microchip Tech. |
|
48 |
83% |
| Dell |
|
43 |
67% |
| KLA-Tencor |
|
26 |
67% |
| Microsoft |
|
38 |
56% |
| Novellus |
|
22 |
21% |
| Applied Materials |
|
42 |
17% |
| Intel |
|
44 |
16% |
This is a refreshing list to look at because it shows that
even in such a disastrous year
for technology, there were actually a few gems that stood out
from the rest and offered stellar returns.
On Deck
Next year promises to be another challenging year for tech
investing, and there actually is
a new bill that will make its way through Congress in early
2002 that is a worth keeping an eye on. It’s called the Internet Freedom
and Broadband Deployment Act of 2001 and is also known as the Tauzin-Dingell
Bill. It will be considered on the House Floor in March 2002, and
it could, like the Telecom Act of 1996, unleash a whole new wave of
deregulation and the tech madness that follows
— in other words, broadband for
the masses and A NEW BUBBLE! I can’t wait!
Have a great weekend.
Dan