Technology funds are up 36% year-to-date through last Tuesday, making them the best-performing equity category so far this year, according to Lipper. Thats great news, but it has some fund managers worrying that investors might think happy days are here again, Reuters reports. And according to Money magazine, some investors are again flocking to unprofitable technology firms.
Some managers viewed Hewlett-Packards recent disappointing results as an early indicator that the tech rally could soon falter. "Theres certainly some who feel that tech has gone too far, too fast, and this is an indication that things arent as good as the market believed," Rick Meckler, president of LibertyView Capital Management, told Reuters.
Valuations, particularly in the semiconductor sector, could also present a problem, Chris Traulsen, an analyst with Morningstar, told Reuters. Ken Smith, co-manager of the Munder Future Tech Fund, agreed, saying: "Some valuations are very high, and there really needs to be an acceleration [of profits] to justify these valuations."
Even more disturbing, Money magazine reports that 119 technology stocks of companies with market capitalizations of $500 million or more have more than doubled so far this year but a full 40% of them arent expected to post a profit this year. And among the companies And some of the increases are staggering. Ask Jeeves is up 570% in 2003. And the unprofitable XM Satellite Radio and ImClone are up 400% and 300%, respectively.
