Experts Warn Over Tech Stocks

by Philip Morton, Investors Offshore.com

11 January 2002

Investment experts are warning bullish investors not to get caught up in another rash of irrational optimism, as rumours of an upturn in the technology markets abound.

Those who feel that the rebound in this notoriously volatile sector has already begun, point to the absence of pre-announcements as a very good sign. Last year, the numbers of tech companies making early predictions that they would fall short of earnings predictions were very high, whereas this year there have been relatively few.

Bullish analysts also argue that investors will need to be quick off the mark, as having streamlined themselves and cut costs massively during the past year, earnings may bounce back surprisingly quickly.

However, not everyone is so optimistic. Speaking to the Boston Globe earlier this week, Managing Director of the Navigation Asset Management hedge fund, Thomas O'Neill warned that: 'Technology stocks are still very expensive.'

He also noted that the technology sector is still flooded with excess capacity, as having stocked up during the rise of the technology bubble, American corporations are unlikely to need to load up on more.

Mr O'Neill predicted that although the markets would improve, the recovery would be 'W' shaped, faltering again as investors become disillusioned with the slow pace.

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