Technology's rise from ruin: when?

The paint's really peeling on what used to be the market's flashiest new wing.

It's not a pretty sight: The technology-oriented Nasdaq Composite Index - for now at least - continues to fade.

That high-tech stock you bought at $90 a share is now worth $20. Most of the mighty firms - Oracle, Intel, Microsoft, Sun - are hitting the doldrums.

What's a small investor to do?

If you said "buy" - selectively - you are in good company. That's the argument of Mike Kwatinetz, a partner of Azure Capital Partners in San Francisco. Mr. Kwatinetz has just written a new book trumpeting the value of high-tech stocks called "The Big Tech Score" (Wiley).

"Technology companies give you a good return on your investment, and the sector is not going to go away," he says.

Kwatinetz is not alone in his assessment. Investment strategist Abby Joseph Cohen of Goldman Sachs, for example, has just issued a new outlook arguing that "long-term investors would be well served to rebuild some portfolio positions" in high tech.

In fact, the current high tech and telecom component of Goldman Sachs's model portfolio is 32 percent, down only 3 percent from the recommended weighting in place between fall of 1999 and February of this year.

Profit-taking in tech may take some patience. The first half of this year could pose additional weaknesses - and losses - in the tech sector. But Ms. Cohen's office sees the long-term potential of high tech (measured from six to 12 months out) as stemming from two factors: Spending on technology will be rapid in the months ahead. And the sharp compression in price-to-earnings ratios among high-tech firms will lead to many "compelling opportunities" for stock buyers.

Last week, the Philadelphia Semiconductor Index - a key index used to measure not only semiconductors stocks but also the underlying direction of tech stocks - hit new lows.

Still, the index has been showing some signs of stabilizing, according to Ralph Acampora, market technician for investment house Prudential Securities, Inc. And that may be the harbinger of a "turn to the upside" for other tech stocks, Mr. Acampora is now telling clients in a brief video update on Prudential's website (www.prudentialsecurities.com).

In his recent book, "The Fourth Mega-Market: Now Through 2011" (Hyperion), Acampora sees the technology revolution as one of the underlying continuities of this era, marked by new discoveries in health sciences, computers, and Internet technologies.

Discoveries in those sectors, he says, are still under way and will fuel additional advances in the tech sector.

Kwatinetz, for his part, likes carefully selected high-growth firm, such as those linked to the Internet infrastructure. One example: firms that make optical switches. Older blue-chip firms such as Microsoft, Dell, and Sun Microsystems are solid firms, he says, "but will not post the high growth rates that they did in the past few years." Still, Kwatinetz is wary of pure dotcoms, many of which have taken severe market hits in recent months.

And many analysts caution that the market's bottom has not been reached.

Bill Stevens, chief investment officer for Montgomery Asset Management, San Francisco, frets that the high-tech downturn may spread further into the broader market, as nontech firms continue job cutbacks. Whatever happens, the year 2001 will continue to be "dicey," he says, in terms of the stock market and technology.

(c) Copyright 2001. The Christian Science Monitor