Money Managers Expect Muted Year-end Tech Rally (
Page 1 of 2 )
This year, with high energy and food prices, the housing slump and credit market crisis muting consumer demand, Wall Street is bracing for a subdued performance from the technology industry--gadgets, devices, gaming consoles and computers--even during its busiest manufacturing season for the Christmas-spending holidays.NEW YORK (Reuters)
- As investors exchange their beach wear for business suits at the end
of summer every year, they usually prepare for a rally in technology
stocks in the run-up to the December gadget spending spree.
But this year, with high energy and food prices, the housing slump
and credit market crisis muting consumer demand, Wall Street is bracing
for a subdued performance from the technology industry even during its
busiest manufacturing season.
Dell Inc (DELL.O: Quote, Profile, Research, Stock Buzz),
the world's No. 2 maker of personal computers, sounded a warning bell
on Thursday when it reported a sharper-than-expected drop in quarterly
profit and said cutbacks in U.S. spending were spreading to other
countries.
While analysts say the results reflect weaknesses in Dell as much as
in the broader industry, even the most bullish forecasts call for only
a 10 percent to 15 percent rise in technology stocks this fall -- which
would barely take the sector back to where it was at the start of 2008.
"The tech rally into the back half of the year will probably be more
muted than other years," said Jim Grossman, an analyst for Thrivent
Asset Management, which manages $73.2 billion of investments.
However, if holiday sales outpace the worst expectations, investors
would revisit the sector since the shares already reflect deep
pessimism, he said.
The S&P Information Technology 45 index has fallen about 13
percent so far this year and the Merrill Lynch Technology 100 index has
lost about 14 percent.
Tech stocks in the S&P 500 index are trading at about 16 times
estimates of earnings for the next 12 months, compared with almost a
multiple of 19 this time last year, according to Thomson Reuters
Proprietary Research.
Kevin Landis, chief investment officer of Firsthand Capital
Management, which manages about $600 million worth of investments, said
high-growth tech firms will look cheap when the economy starts to
improve. "What could be better than buying growth stocks at a no-growth
multiple?" he said.
Landis likes the growth prospects of solar technology companies, such as SunPower Corp (SPWR.O: Quote, Profile, Research, Stock Buzz), and cell phone makers like Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz) and Apple Inc (AAPL.O: Quote, Profile, Research, Stock Buzz).
