“Buy and Hold”… for 17 years to turn a profit.
After a nine-day winning streak the S&P 500 Technology Sector has finaly surpassed its dotcom bubble peak. Today’s 992.29 close is above the previous record of 988.49 on March 27 2000.
As The FT notes, the S&P 500 technology index tumbled more than 80 per cent from its March 2000 peak as a wave of young Silicon Valley companies failed. Seventeen years ago, Cisco, Microsoft, Intel, Oracle and IBM were the largest US technology behemoths. While Microsoft remains, it has been usurped by Apple and Alphabet, and joined by Facebook and Visa.
But there’s no ned to worry this time…
“The business models of leading technology companies are some of the best we’ve ever seen,” said Rahul Narang, a portfolio manager with Columbia Threadneedle. “These platforms are asset light, grow fast from network effects and are durable as they scale.”
“It’s not your father’s market. This is not what it was in Y2K,” said Howard Silverblatt, senior index analyst with S&P Dow Jones Indices. “The make-up and characteristics are different. Earnings are a lot more solid now. There are price-to-earnings ratios now, compared to ‘I wasn’t making any money back in 2000’.”
“If valuations got to where they were back in 2000, would I get nervous? Yes, absolutely,” Mr Tierney added. “But we’re far from those valuations. Yes there are a few companies like Netflix and Amazon with nosebleed valuations — but most are not.”
“We want to remain in tech because it’s one of the sectors you are seeing such good earnings growth,” said Jim Tierney, chief investment officer of AllianceBernstein’s US concentrated growth fund. “Ultimately stock prices follow earnings. Growth is accelerating not decelerating so you need to be there.”
Of course, inflation adjusted, The Tech sector has a long way to go yet (still 30% off its highs)…
“it’s definitely different this time”
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