Educate Yourself - Buy, Sell, Or Hold The Techs?

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Buy, Sell, Or Hold The Techs?
by Charles B. Carlson, CFA
Dow Theory Forecasts

As an investment newsletter editor and money manager, I receive lots of questions from individual investors. So I have a pretty good idea what's on your minds. And, judging from my letters and phone calls, the single biggest question troubling investors today is the following:

Should I sell my beaten-down technology stocks, or hold for a rebound?

Let me lay out for you very clearly my thinking on technology stocks:

1) Technology stocks will rebound, but it won't be tomorrow or the next day or the next week or the next month. I think a tech rebound - I mean a real rebound and not the rallies of late which are more about short sellers covering their positions than any improvement in the tech business - is a 2003 story at the earliest. Thus, if you are holding out hope that your tech stocks will soar in the second half of the year, you are probably going to be disappointed.

2) Most technology companies will never again see the growth they saw in the late '90s. Decades from now we'll look back and say that the second half of the '90s was a rare time to be a tech investor. Now I'm not saying that tech stocks won't make you money over the next decade. I am saying that tech stocks won't make you the kind of money they made investors in the late '90s. If you are still holding out hope that we will relive the '90s when it comes to those tech stocks, you will be disappointed.

So should you keep your tech stocks? Again, if you think they can make you money going forward, you should. If you don't, you should sell.

This point sounds obvious, but you'd be surprised how many tech investors can't let go of the past. They keep thinking about where those technology stocks used to trade and can't bring themselves to selling the stocks, even though they probably should.

Hear me on this point - It is irrelevant where a stock once traded. What matters is where the stock will trade one year, five years, and ten years from now. That's how you have to look at technology stocks. Yes, nobody wants to sell at a loss. But by holding on in hopes that you'll recoup all of your losses, you let time slip by - time that could be used to generate gains in other more attractive issues.

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