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Tech Stocks at 18-Year Lows. Buy?

By Dan Weil   |   Monday, 26 Jul 2010 09:19 AM

Technology companies now represent an enticing opportunity for value investors.

The price-earnings ratio for tech companies in the Standard & Poor's 500 Index dropped to 15.1 recently, the lowest level since at least 1992, except for one brief period, according to Bloomberg data.

That period was the six months between Lehman Brothers' bankruptcy and the start of the bull market for stocks in March 2009.

If you calculate the PE ratio using analysts' estimates for this year’s earnings, the total drops to only 13.4.

So it’s not surprising that many strategists recommend snapping up tech stocks now.

"Tech fundamentals thus far have remained strong,” Chip Miller, an equity strategist for UBS, told Bloomberg.

“Given how cheap they are, if you take a little bit of a longer-term perspective, it's probably a good buying opportunity."

But opinions are mixed about many companies. For example, investors are cautious on Google, though it’s arguably the strongest player in the sector.

It recently reported a 24 percent increase in profit for the second quarter. But the stock has dropped 20 percent this year amid concern that advertising growth is slowing. Advertising accounts for almost all of Google’s revenue.

“It’s an incredibly talented pony, possibly the most talented pony we’ve ever seen, Jordan Rohan a technology analyst at Stifel Nicolaus, told The New York Times.

“But we’re waiting for that second trick.”

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Technology companies now represent an enticing opportunity for value investors. The price-earnings ratio for tech companies in the Standard Poor's 500 Index dropped to 15.1 recently, the lowest level since at least 1992, except for one brief period, according to...
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2010-19-26
 

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