subject: Technical school stocks sink because investors' cares of decelerate arise [print this page]
Technology stocks are landing somewhere they haven't been in former: on-duty the sell list.
Serious second-guessing from rosy predictions as the economic system and tech stocks in 2010 has turned among the hottest sectors earlier this year into among the worst.
While much was made about how bad August was for the broad market, things were particularly harsh for technology stocks. The tech sector of the Standard & Poor's 500 is down 11.5% this year, going far the worst of the 10 sectors. The tech-heavy Nasdaq composite is off 6.8% for 2010, lagging behind the 4.0% and 5.9% declines by the Dow Jones and S&P 500, respectively.
BAD MONTH: Stocks have worst August since 2001
Tech stocks country big reason for what was an August that investors would prefer forget. The S&P five hundred fell 4.7% for the month, arriving the worst August since 2001, says S&P. Roughly $700 billion in paper wealth was erased during the month, according to the broad Wilshire 5000 index.
"Investors are taking tech down a notch as these companies are affected the most incoming a slowdown," says Michael Sadoff at Sadoff Investment Management.
At first of the year, investors centered on tech's bright spots, including exposure to foreign markets and revenue growth. Now, though, investors are centring the sector's weaknesses, including:
Heavy dependence on a healthy economy. Investors who had bet the economy was improving and figured companies would upgrade their computers as a group this year have been disappointed, says Keith Goddard, manager of the Capital Advisors Growth fund.
Cautious guidance from several leading tech firms shows investors that companies are in no hurry to upgrade, he says. "Tech is a cyclical industry, although it didn't wont to be concocted that way," Goddard says.
Lack of traits investors seek during uncertain times. Investors overlook tech's relatively low dividend yield and costly stock-option plans for employees during bull markets, says Albert Meyer of the Mirzam Capital Appreciation fund. However, dividends and dilution from stock options become important when investors get defensive as it's now.
"These are hurdles for long-term investors regarding the tech industry," Meyer says.
Upheaval in the tech industry. Humming rise of raw computing machine*, such tablet computers, investors are re-evaluating the traditional ways they view tech stocks and are pulling back, says Kevin Landis, manager of the Firsthand Technology Value fund.
"Sometimes, product cycles really do matter, and this is among those times," he says.
