Some Foresee Tech Ceasing Its Run as a Four-Letter Word
Whether the bear has returned for hibernation, some are calling for technology to lead the way out of the woods in the upcoming year, while others think following tech in 2003 will just lead investors and money managers in circles.
Technology, which has almost become a four-letter word, may be poised to lead the market recovery, according to the likes of high-profile portfolio managers such as Gabelli Asset Management, Sanford C. Bernstein and Wellington Management. They all presented that point of view at the Enterprise Group of Funds' "Economic and Investment Outlook Conference for 2003 and Beyond," earlier this month.
Sounding somewhat like the days of the tech run up, Dan Chung, chief investment officer and director of research at Fred Alger Management, New York, and a number of others at the gathering quoted impressive Internet and technology forecasts and gave brazen outlooks.
Chung, manager of the Enterprise Technology Fund, said the shallow recession should be followed by a shallow recovery.
Some of the stocks the Enterprise managers talked up were ones that have taken a beating in the bear market--but then again, what tech stock hasn't? Speakers mentioned AOL Time Warner, Cisco, Hewlett-Packard, Intel, Qualcomm, 3M and Microsoft.
However, there is a contingent that feels tech, which is trading at multiples above the rest of the market, is still overvalued and is not the one to lead the charge to recovery.
Jeremy Lopez, a semiconductor analyst with Morningstar, Chicago, said that he doesn't anticipate much improvement for the technology sector in the upcoming year.
Lopez said word on the Street has called for a rebound in the tech sector for nearly two years and that it still hasn't happened, so he sees no reason why, in this climate, tech should react any differently. In fact, Lopez doesn't put much stock in those predicting a big tech rebound in 2003 since there has continually been talk of a rebound pretty much since the bear first came to town.
Sooner or later, Lopez reasons, those predicting a tech rebound are bound to be right. "Even a stopped clock is right twice a day," he quipped.
"Next year isn't really shaping up to be much better than 2002 in terms of IT budgets," Lopez continued. "I think there may be some pockets," noting such consumer gadgets as digital cameras, MP3 players and DVD burners may make headway in the new year.
"Corporations want to see a more tangible return on their investment," he said, noting a lot of what's available today may be "cool," but is more of a luxury and convenience rather than a necessity.
Additionally, Lopez said that there was such a spending binge during the tech boom, that a lot of companies don't necessarily need to upgrade their still-functional products.
"They're keeping the good old stuff they've had," Lopez said. However, the Morningstar analyst does anticipate some growth in the wireless networking area.