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How To Evaluate High-Technology Stocks
High technology is the last frontier in American business. Many
of the new businesses revolve around some type of technology,
whether it is directly computer-related, communications-related
or somehow tied in with the "Electronic Superhighway", whose
arrival we all eagerly anticipate. Although tech stocks have
declined sharply in during bear markets, they have proven to
have outperform other stocks, re-bounding more sharply in
subsequent recoveries.
There are three major advantages that point to small companies:
1.) They are generally free from government regulation because
their earnings are often in a new field.
2.) The company stands to gain a lot of ground if the come up
with a unique idea. The growing market will be theirs to
dominate.
3.) The impact their earnings will have on their financial
status will be considerable... therefore a success can increase
their profitability greatly.
There are several rules to follow if you choose to be an
investor in this high risk market. Firstly, do not be fooled by
the size of the company. It is important to investigate the
high-technology expertise of the firm and secure that it is a
meaningful part of the firm's business. Secondly, it is vital
that the company is serving a current social need in the
marketplace.
For example, cable was first introduced in the 1960's and
interested investors long before it could draw subscribers.
Look for companies that are operating in the black. Companies
that offer terrific scientific break-throughs but operate at a
deficit are just too risky. It is also important that you
ignore market indexes. Companies with technological superiority
are not tied to a stock market environment over time.
Lastly, keep current on all technological innovations. Buy
trade magazines and read scientific papers and investment guides
that deal with technology and technology-related fields.
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