Tech: Why nobody's buying
Date: 2015-10-07; view: 387.
Òåêñò 12
The fundamentals are getting better but fund managers are scared.
With the Nasdaq opening lower again Thursday and just 2.5 percent above its low point for the year, you might think this could be a tech stock buying opportunity. Well, if you're thinking of buying, be afraid.
Even long-term bulls aren't buying. Kevin Landis, chief investment officer for Firsthand Funds, a mutual fund family based in Palo Alto that focuses primarily on the technology sector, says that his funds are fully invested.
"Given that the whole world is not rushing to buy technology mutual funds right now, we'd have to sell something to buy something. For the most part our bets are down," says Landis.
Even though earnings growth for technology companies are expected to be fairly robust this year, fund managers are holding back.
"At some point we should be buying before the fourth quarter. But it's a long time to hold these stocks. Every little rally you get is a hope that the recovery has begun and every sell off is the market saying 'not yet'," says Morency.
Valuation is another issue. Zagunis and Millen say that a few tech blue chips, including Intel, Microsoft and Cisco pass rigorous tests when it comes to the fundamentals. But they haven't been buying because the stocks seem too pricey.
And the lack of positive news from technology companies will make it tough to sustain any rally. "Nobody is going to have the nerve to be aggressive," Rohrman says. "We're still in a momentum market -- it just happens to be downward momentum."
Rohrman says he thinks one problem is that -- surprisingly -- expectations are still too high. Novellus announced during its conference call that bookings should be $275 million for the second quarter, $25 million higher than guidance given on April 15. But Rohrman says some investors were expecting between $285 million and $300 million.
Zagunis says a major reason his fund has shied away from technology and continues to do so is because expectations are often vastly different than what winds up happening. "Most analysts project what the earnings growth rates are going to be and they tend to be too aggressive for our blood," he says.
Another problem, Morency says, is that the third quarter is traditionally weak. For this reason, she says Intel's mid-quarter update on June 6 is crucial. She says if the company doesn't provide any strong evidence of improvements in its PC business for the second quarter, it's probably safe to assume that the third quarter will be weak as well.
Interestingly though, one non-tech fund manager is taking advantage of the volatility and beginning to search for bargains. James McGlynn, manager of the large value fund Summit Everest, says he recently bought shares of Lucent and AT&T Wireless, which he calls a good value under $10 a share. (It is currently trading at about $8.)
Technology stocks are still a relatively small part of McGlynn's portfolio, accounting for just 7 percent of the fund's assets. But that's up from about a 5 percent weighting earlier in the year.
McGlynn says he's looking only at companies that have been really beaten up and could now be turnaround stories as opposed to stronger players whose stocks have plunged but are surviving and taking market share from weaker competitors. He points out that most technology companies have yet to benefit from stronger demand.
"I don't want to get wildly enthusiastic. So many firms are making their numbers only by cutting expenditures," he says.
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[1] American depository receipt – ïðîèçâîäíûå öåííûå áóìàãè, ñ ïîìîùüþ êîòîðûõ îñóùåñòâëÿþòñÿ îïåðàöèè ñ èíîñòðàííûìè àêöèÿìè íà àìåðèêàíñêèõ ðûíêàõ
[2] Áèðæåâîé èíäåêñ, îòðàæàþùèé ñòîèìîñòü àêöèé òàê íàçûâàåìûõ âûñîêîòåõíîëîãè÷íûõ êîìïàíèé (â îòëè÷èå îò èíäåêñà Äîó-Äæîíñà (Dow-Jones), îòðàæàþùåãî ñòîèìîñòü àêöèé ïðåäïðèÿòèé òðàäèöèîííîé ýêîíîìèêè).
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